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Why Online Bankruptcy Information Is A Starting Point, Not The End

Contrary to what some lawyers will tell you, your state of residence is a key factor in how your bankruptcy case plays out.

This past weekend I happened across an article written by a Kentucky bankruptcy lawyer named Nick Thompson wherein he states that, “most states have about the similar amounts,” when it comes to median income.  I had to read the sentence a few times to believe that an attorney had actually written it – but there it was, in black and white.

I don’t know this lawyer, so I can’t pass judgment on his overall expertise. But I can say that in this single sentence he blew it because it’s so wrong on so many levels.

Here’s the truth – and why it’s important.

Why Median Income Is Important

Median income is of critical importance in bankruptcy because those households earning below this magic number have a far easier time getting through a Chapter 7 filing.  In the context of a Chapter 13, those below median income filers are given a shorter Plan term of three years as opposed to the five years imposed on those who are above median income.

And here we have a bankruptcy lawyer telling the world that the median income for, say, a family of four in Kentucky is roughly the same as that of a family of four in Los Angeles or New York City.

So wrong.  So very, very wrong.

Median Income – Two States, Two Different Results

In New York, the median income numbers are as follows for bankruptcy cases filed between May 1, 2012 – October 31, 2012:

  • Household of 1 Person: $47,381
  • Household of 2 People: $57,884
  • Household of 3 People: $69,066
  • Household of 4 People: $83,775

In California, the median income numbers are as follows for bankruptcy cases filed between May 1, 2012 – October 31, 2012:

  • Household of 1 Person: $49,188
  • Household of 2 People: $63,481
  • Household of 3 People: $68,135
  • Household of 4 People: $77,167

As you can see, a household comprised of two parents and two children starts off in a better position when it comes to filing for bankruptcy in Los Angeles than if they moved to Brooklyn. If the parents split up and one of them, living alone, files for bankruptcy then he or she is in better shape in Pasadena than in Staten Island.

Median Income Is Just The Beginning Of The Inquiry

This is, of course, just a starting point in the analysis of whether someone’s going to be able to file for Chapter 7 bankruptcy or face only Chapter 13 as an option for debt relief through the court system. You’ve got deductions from your income for various expenses, other payments to factor into the mix, and a variety of real-world things to consider.

Precisely why you want to talk with a lawyer who knows what he or she is talking about.

On The Internet, Nobody Knows You’re A Dog

It’s an old cartoon, but the truth remains. Though publishing information online has never been easier, it’s up to you – the person whose life is going to be affected by the choices you make – to double-check the facts and ensure that you’re not being led down the garden path.

I hope people are going to read Nick’s article and make a final decision about their own bankruptcy case. Just because someone’s a lawyer doesn’t mean they know what they’re talking about. Maybe Nick’s a whiz-bang bankruptcy attorney who has a great grasp of Kentucky law. Maybe not.

Either way, don’t believe everything you see online. Get a second (or third) opinion. Spend a few bucks on a lawyer’s time to get a deep analysis of your situation and your options. The Internet’s a great starting point, but just that – a place to begin, not to end.

Attribution Some rights reserved by matt512

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By |October 15th, 2012|

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.