If you are struggling with debt, you may think bankruptcy is not an option because you have a steady income. You might have a good job, own a home or earn more than you expect someone in bankruptcy to earn.
That belief keeps many people from exploring their options. However, bankruptcy laws consider more than your paycheck. Your expenses, household size and financial obligations can also affect whether you qualify.
Why having a job does not automatically disqualify you
You do not need to be unemployed or have very little income to file for bankruptcy. Many people who consider bankruptcy work full time and still find themselves overwhelmed by debt. Some financial obligations that can make debt difficult to manage include:
- Paying large medical bills
- Carrying high credit card balances
- Making expensive mortgage payments
- Covering vehicle loans or repair costs
- Supporting children or dependent family members
These obligations can consume a substantial part of your monthly income. Even with a regular paycheck, you may struggle to keep up with debt payments while meeting your everyday expenses.
How the bankruptcy means test works
If you are considering Chapter 7 bankruptcy, you will likely complete a means test. The means test compares your household income to Louisiana’s median income for a household of the same size.
If your income falls below the median, qualifying for Chapter 7 may be more straightforward. If your income exceeds the median, that does not automatically prevent you from filing. The means test also evaluates certain living expenses and financial obligations before determining eligibility.
Why your expenses matter
Your income does not always reflect your financial circumstances. Two households can earn the same amount of money and still face very different financial demands because their expenses and obligations differ. Some expenses that the means test may consider include:
- Rent or mortgage payments
- Medical expenses
- Transportation costs for work and family needs
- Childcare expenses
- Child support obligations
These expenses can influence whether you qualify for Chapter 7 bankruptcy. As a result, some people whose income exceeds Louisiana’s median still qualify for bankruptcy relief.
What if you do not qualify for Chapter 7?
Chapter 7 is not the only form of bankruptcy available. Some people who do not qualify for Chapter 7 may still qualify for Chapter 13 bankruptcy.
Chapter 13 uses a court-approved repayment plan to address certain debts over time. It can provide an alternative for people who need additional time to catch up on mortgage payments or resolve past-due debts while retaining important property.
Why income alone does not answer the question
When debt becomes overwhelming, it is easy to assume that a steady income places bankruptcy out of reach. Bankruptcy eligibility usually depends on more than a single income figure.
Household size, necessary expenses and financial obligations can all affect whether you qualify. For many people in Louisiana, earning a steady income does not automatically mean they make too much money to file for bankruptcy.