If you’re worried that declaring bankruptcy is going to put you in a situation where you don’t even make enough money to eat, think again. When you do declare bankruptcy, your trustee will have to look at your income and determine if you can afford to make some payments toward the debts that you owe during the bankruptcy process.
This isn’t about punishment. This is simply about fairness. Even though people who do declare bankruptcy are oftentimes in the middle of unavoidable financial situations that they had little hand in engineering, the people they owe money to actually do have an investment and do stand to lose on that investment if the person’s debt is discharged completely without those creditors ever getting any payment. This is where surplus income comes in and you’ll need to know about this if you’re considering declaring bankruptcy.
You will have to submit pay stubs and proof of any other income that you get to your trustee on a monthly basis. Using this information, your trustee will calculate how much income you have that can be regarded as surplus. Before that fills you with a feeling of dread, understand the following.
Surplus income is income that is above what you need to maintain a reasonable standard of living according to the guidelines determined by the government. Obviously, people have different ideas of what reasonable is but, legally speaking, it essentially means that you’ll have enough money to pay for food, your mortgage or rent, any secured debt that you have remaining and so forth. Having to pay your surplus income towards your creditors is most certainly not a punishment phase of the bankruptcy proceedings.
If you make a great deal of money, you’re going to have to pay more to make up to your creditors. If you’re not making much money at all, keep in mind that you’re not going to be on the hook for a huge amount of money every month. In fact, if your income is low enough that you are genuinely desperate, you probably won’t be required to pay anything at all. If you have more than $200 in surplus income every month, however, you’ll have to give 50% of that amount toward your creditors so that they can make up for the money that they are losing due to your declaring bankruptcy.
Dealing with the Worries
If you’re worried about what’s going to happen with your wages or any other aspect of declaring bankruptcy, the best thing you can do is talk to a financial counselor about the situation. They can help you to determine what is most likely to happen with your wages, your income and your assets and let you know whether declaring bankruptcy may be the best option for you. Be aware that there are other options out there and that declaring bankruptcy may not be the best thing for you and that an advisor can point you in the right direction if it is not.