One must pass a Means Test when seeking to file Chapter 7 bankruptcy. If your income is above a certain level, you may not qualify to file Chapter 7, which can be a shocking realization for many. Chapter 7 is often seen as a fresh start, but not everyone qualifies.
Many individuals make a decent living yet find themselves overwhelmed by debt. The following story reflects the real challenges faced by many people who have sought my help. Let’s meet Earnest Hines.
Meet Earnest Hines: A Typical Case
Mr. Hines is a mid-level manager earning $100,000 annually. In early 2020, he broke his collarbone while playing basketball and was off work for six weeks. Unfortunately, the pandemic hit shortly after, and his employer had to shut down temporarily.
While out of work, Mr. Hines maxed out his credit cards to cover his expenses. When he returned to work, he tried to catch up, but the debt had become too much. Due to late payments, his credit card interest rates skyrocketed to 29%, and his debt ballooned to $40,000.
To stay current, Mr. Hines took out a $10,000 loan with an overwhelming 36% interest rate. He also owes $5,000 to the IRS, and his monthly car payment is $600. These debts have become too much for him to handle.
Breaking Down the Numbers
Mr. Hines earns $8,333 per month before taxes. After deductions for taxes ($2,192), health insurance ($300), and 401k contributions and loan repayment ($300), his take-home pay is $5,541. His monthly debt payments for a sixty month period include:
- Credit Cards: $1,292
- Personal Loan: $361
- IRS Debt: $100
- Student Loans: $500
- Car Loan: $600
Total monthly debt service is $2,853. Over half his take-home pay.
The Emotional Toll of Debt
The burden Mr. Hines faces is not only financial; it also takes an emotional toll. Constant worry about bills, collection calls, and feeling hopeless. Many in his position feel overwhelmed and unsure how to move forward. Mr. Hines knows his situation is unsustainable and that something must change.
The Light at the End of the Tunnel: Chapter 13 Bankruptcy
One solution that can provide real relief is Chapter 13 bankruptcy. Chapter 13 creates a manageable plan to restructure Mr. Hines’ debt, offering a way to move forward. Here’s how a Chapter 13 plan might help him over five years:
- Car Loan: Mr. Hines will continue paying $600 monthly.
- Student Loans: Payments would be deferred during Chapter 13.
- Chapter 13 Payment: The estimated monthly payment would be $1,260.
This puts more than $1,000 extra in his pocket every month
Why Chapter 13 May Be the Right Choice
- It is a realistic payment plan.
- One payment each month.
- No more juggling who to pay next and avoids “Late Payments.”
- Stops the high crushing interest rate.
- Finally, there is a light at the end of the tunnel.
Chapter 13 also protects assets, like a car or home, while reorganizing debts. If you have a good income but are a slave to credit cards Chapter 13 is your path to financial freedom.
If you are in a similar situation, know you are not alone. Chapter 13 is the light at the end of the tunnel. A structured, manageable path to recovery It’s not surviving—it’s thriving again.
Call Robert J. Adams (The Bill Slayer) at 312-804-194 and speak directly to a lawyer. The consultation Is free, and you speak to a lawyer
Two more thoughts
- A Chapter 13 case can be converted to Chapter 7 if need be.
- Any raise or bonus-You keep!