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How Often You Get Paid Impacts Your Bankruptcy Case

pay period and bankruptcyHow can you know if bankruptcy is right for you if you don’t know how much you make?

An important part of the decision to file for bankruptcy involves your income, your expenses, your debts and your property.  You need to know what’s coming in on a monthly basis before you can determine whether paying your debts is outside your ability.

Beyond that, it may impact your ability to file for Chapter 7 bankruptcy or fund a plan in Chapter 13 bankruptcy.

Here’s the scoop.

How Much Do You Make?

If you get paid weekly, you need to take that weekly gross income and multiple it by 52 (that’s the number of weeks in a year).  From there, divide by 12 (the number of months in a year) to get your monthly income.  Why not take the weekly amount? Because some months have 4 weeks whereas others have 5 weeks.

If you get paid biweekly, that means you get paid every other week.  You don’t get paid the same date of each month, and a few times a year you get a magical third paycheck in a single month.  If that’s the case then you need to take the biweekly gross income and multiple it by 26 (that’s the number of weeks in a year).  From there, divide by 12 (the number of months in a year) to get your monthly income.

If you get paid semimonthly, that means you get paid twice per month.  You always get paid the same date of each month.  If that’s the case then you need to take the biweekly gross income and multiple it by 24.  From there, divide by 12 (the number of months in a year) to get your monthly income.

If you get paid monthly, that means you get paid once per month.  If that’s the case then your gross income is your monthly income.

Don’t Confuse The Numbers

If you have a gross salary of $1,976.25 and get paid semimonthly then your monthly income is $47,430 – below median income for a household of one person in California. All things being equal, you scoot through Chapter 7 bankruptcy without being subjected to the means test.

If, however, you have a gross salary of $1,976.25 and get paid biweekly then your monthly income is $51,382.50 – above median income for a household of one person in California. You may or may not be able to file for Chapter 7 bankruptcy, but it will depend on how your means test shakes out.

See how just a small difference in calculations can make a big difference?

Pay Frequency Can Make Or Break Your Bankruptcy Case

Your income is important not only to means testing and whether you fall above or below median income, but also in figuring out how much money you have left over at the end of each month for debt payment.

If you don’t know how much you make, how can you know the answer?

Simple – you can’t.

Image credit:  casperam

By |March 20th, 2013|

About the Author:

I've been a consumer protection lawyer since 1995, working to help people end their bill problems. I'm a faculty member at the Student Loan Law Workshop, a nationally recognized speaker, and a long-time member of both the National Association of Consumer Bankruptcy Attorneys and National Association of Consumer Advocates.
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