Legal Question in Bankruptcy in Nevada

Do I qualify for bankruptcy

My husband and I saw a bankruptcy attorney for a consult.I feel we need to file for bankruptcy because between us we have 8 credit cards.We began w/ credit counseling a yr ago. Missed a payment one month,then the payment doubled the 2nd month,making it more difficult to pay.We haven't paid on the credit card accts in about a year.I am being threatened w/ being taken to court by various credit card companies.Now they demand large payments immediately. I didn't have minimum payments back then, and now they want like $400 each..I don't make enough to pay these companies large sums.Doesn't this seem to be a situation in which I need help?My lawyer only gave us 15 ''free'' minutes with him and he seemed to feel that we make too much money to not pay our bills.My point is that being so behind,certain companies won't work w/ me and say they'll take me to court if I don't pay large sums now.What do I do?Do you have to ''qualify'' for bankruptcy? If my wages get garnished we won't be able to live a normal life.We don't own a house and our only assets are our 2 cars we are still paying on/each are purchases,not leases).


Asked on 5/14/03, 11:01 pm

1 Answer from Attorneys
Dorothy Bunce

Qualifying for bankruptcy

The way you "qualify" to file Bankruptcy involves two steps - 1) Have you filed Bankruptcy in the past 6 years? 2) Are you financially able to pay your debts? If either answer is yes, you do NOT qualify to file bankruptcy.

As a Bankruptcy attorney, I help my clients make this decision by having them add up their earnings and calculate the total earnings & other income on a monthly basis. Then I add up the living expenses, rent, groceries, car payment, insurance, car expenses, etc. What is left over can be used to pay debt. Divide that amount into the total debt. The resulting number is the number of months you would need to pay off the debt IF NO INTEREST WAS CHARGED.

So as an example, if your total monthly income is $3,000, and your living expenses are $2,500, you would have $500/month for bills. If your total debt is $10,000, you could pay it off in 20 months if there was no interest. But there always is interest, so better add in 25%, or 5 more payments, to figure a payoff. If the amount of time you would need is more than 40 months, bankruptcy is probably a good idea.

Another way to see if bankruptcy is appropriate for you is to look at your bills (excluding car and home) as a ratio to your total yearly income. If you have a low annual income, below $25,000, any thing over 30% justifies bankruptcy. (So at $25,000, I would recommend bankruptcy with as little as $8,750 in debt because you would never realisticly be able to pay the debt) As the income gets higher, the percentage of debt can get higher.

But there are no hard & fast rules at this time about income to stop you from filing bankruptcy. The ratio and calculations I have described are simply a "rule of thumb" that I use based on my experience. Other attorneys can & do use different methods, which are no less valid.

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Answered on 5/15/03, 12:03 pm


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