How are people able to get 6-figure incomes & file Ch. 7?

[HHM]

Debtmonster:

Most of the your 6 figure income filiers and high debt amounts were business filiers because no mean test is required. I was double the mean for my state, $189,000/year income, mean around $79,000/year. But 97% of my debt was business, included one personal Chase card because a business JP Morgan line of credit was included. Had around 600K but it was all business lines.

If the debts weren't business the filier is going to have to really prove their case before the UST to get the Chapter 7 if their income is high. If the protection isn't their for the business debtor nobody would take the risks to start a business.

That tends to be the case. The few people who have posted on this forum regarding 6 figure BK-7's, were people who could bypass the means test because their debt was primarily business debt.

Also, some of it is geographic. As was mentioned earlier, if you live in San Fran, L.A. New York City etc, you may make $120K per year, but your buying power with that money is the equivelant of $50K in the midwest. The median income numbers reflect that reality as well (to some degree).

In a regular consumer case, it is rare for anyone who exceeds the median income by 10% or more to be able to stay in a chapter 7.

[Overmylimit]

This brings up a good question; I have about 500k in business debt, 900k in mortgages of which 140k is rental property. Do I still have to go thru the means test?

[BROKENN]

Our lawyer still did the means test though we had similar numbers as you. I saw it in the schedules. But I don't think it had much bearing as we looked pathetic on any of the schedules and C7 business was checked.

[Overmylimit]

But I don't think it had much bearing as we looked pathetic on any of the schedules and C7 business was checked.

LOL I can relate to that...

[biotechsolution]

This brings up a good question; I have about 500k in business debt, 900k in mortgages of which 140k is rental property. Do I still have to go thru the means test?

only if more than 50% of the total debt is business debt. If only 140K of the 900K is business rental prop then no you have to do the means tests. You also have to include any auto loans even if you're giving them up.

[banca rotta]

There's no logical reason for a six figure (like around 150k per year) person to file for bk with consumer debts such as credit cards unless they have many dependents and a very high mortgage.

They can simply just stop paying their bills for about six months to a year and use the credit card payment savings to put in the bank and when the banks start charging off the debt, the debtor can start negotiating and pay 10% of the debt and be done with it. There will still be a 1099 tax bill but all of this is better then bk in any chapter with that income.

It's what I would do (or would have done) if I had that high income.

[debtmonster]

I wish I could have a $150k income. I would be so rich as long as I lived in an $800/mo. apartment and had a car payment of like $249/mo.

[Overmylimit]

There's no logical reason for a six figure (like around 150k per year) person to file for bk with consumer debts such as credit cards unless they have many dependents and a very high mortgage.

You have a good point however it's all in how you spend. I 've know Millionaires who were broke and people who make 20k per year and have lots of $$ in the bank. When you think of it that way it sounds like they would be able to stash away all that cash during the months that they were waiting for the charge off but in reality for most it doesn't work like that. There is always something that comes up; car troubles, Dr. visits, Family problems, Mortgages etc. My mortgage is over 5k per month and I have 2 dependants but I was making it fine until my business lost some accounts. Looking back at it with your standpoint with all of the credit lines I used I could have bought a couple of Ferraris and stuck them in a garage somewhere then when they went to charge off I could have paid pennies on the dollar....but in the end even those with high earnings sometimes have it hard also theres just more to screw up...

[Scott50]

considering that almost half of the world's population (over three billion people) live on LESS than $2.50 a day.. people making six figures should feel blessed and I hope that they are giving back to this world...

[debtmonster]

You have a good point however it's all in how you spend. I 've know Millionaires who were broke and people who make 20k per year and have lots of $$ in the bank. When you think of it that way it sounds like they would be able to stash away all that cash during the months that they were waiting for the charge off but in reality for most it doesn't work like that. There is always something that comes up; car troubles, Dr. visits, Family problems, Mortgages etc. My mortgage is over 5k per month and I have 2 dependants but I was making it fine until my business lost some accounts. Looking back at it with your standpoint with all of the credit lines I used I could have bought a couple of Ferraris and stuck them in a garage somewhere then when they went to charge off I could have paid pennies on the dollar....but in the end even those with high earnings sometimes have it hard also theres just more to screw up...

What were you doing with a $5k/mo. mortgage?!?! Man, that is insane!
Even $1000-1500/mo. it way too much.

[Overmylimit]

You mean still paying...I am keeping the house even though I should walk from it. We rented it for about 20 years from a Family member and finally bought it in 2004 then renovated to no end. My wife won't give it up, it's where my kids grew up and after all the years of dreaming of what we would do to the house if it were ours...well we did.

[banca rotta]

You have a good point however it's all in how you spend. I 've know Millionaires who were broke and people who make 20k per year and have lots of $$ in the bank. When you think of it that way it sounds like they would be able to stash away all that cash during the months that they were waiting for the charge off but in reality for most it doesn't work like that. There is always something that comes up; car troubles, Dr. visits, Family problems, Mortgages etc. My mortgage is over 5k per month and I have 2 dependants but I was making it fine until my business lost some accounts. Looking back at it with your standpoint with all of the credit lines I used I could have bought a couple of Ferraris and stuck them in a garage somewhere then when they went to charge off I could have paid pennies on the dollar....but in the end even those with high earnings sometimes have it hard also theres just more to screw up...

That's why I mentioned it may depend on a high mortgage and dependents. Even with that said there is little excuse for this high income earner to be in this situation. If someone with that money lived the way debtmonster says and has a little financial self control they can really succeed. Too many of this bunch needs the water front property and the BMW so they wind up broke when the medical issue or another unpleasent surprise should arise.

I'm not the "class envy" type like some Obama supporters out to stick it to this group of earners, but I will say that I have no simpathy for this group of high income earners when they get into trouble, unless it's business related. Even if they have high medical costs they can afford insurance first over the BMW.

[Flamingo]

That's why I mentioned it may depend on a high mortgage and dependents. Even with that said there is little excuse for this high income earner to be in this situation. If someone with that money lived the way debtmonster says and has a little financial self control they can really succeed. Too many of this bunch needs the water front property and the BMW so they wind up broke when the medical issue or another unpleasent surprise should arise.

I'm not the "class envy" type like some Obama supporters out to stick it to this group of earners, but I will say that I have no simpathy for this group of high income earners when they get into trouble, unless it's business related. Even if they have high medical costs they can afford insurance first over the BMW.

As I always say, the more one makes, the more one spends and it is all due to the view of American society - "buy it now cause you have to have the new and updated model to upscale the Jones down the street." I very much agree with your post because my huband and I made a good six figure income for a few years before filing and all it took was his job loss to do us in. We thought the ride would last forever and did some planning but not enough. One needs to learn from filing BK and the consequences one can have from overspending and not trying to save. When the crisis hits, as it almost always certainly does, without being prepared you go right under and take everything and everyone close to you with you. Why line up for that situation when all you have to do is not use a credit card or live beyond one's means? It's very simple and just takes some common sense. As I explained in another thread started by DebtMonster, this economy and the mortgage bust is a good indication of that and a great teaching tool - mortgages given to people who really could not afford them made brokers and banks millions but the whole thing ended up making the rest of us in this country poorer after the meltdown hit and millions have lost their houses and had to file bankruptcy. And guess who pays for it all.

Americans need to learn to live within their means after what occurred with this economy, keep the debt low or non-existent and save as much as possible. With that mindset, BK and its consequences can be avoided. However, there are those with no credit card or crazy overbuying debt that end up having to file and those are the folks that have serious medical conditions that occur or require extensive treatment and end up owing thousands and thousands they just cannot pay due to bad insurance coverage or extremem deductables/copays. BK is the protection they absolutely need.

[Overmylimit]

Even with that said there is little excuse for this high income earner to be in this situation.

Even if they have high medical costs they can afford insurance first over the BMW.

Hmmmm how to respond to someone who has it all figured out. I don't have a BMW, I do pay for my own medical insurance which is a 1000 dollars a month for my family since I don't work for any company who will provide it for me. Everything that most who work for someone else take for granted in the way of benefits I have to bust my butt to have. In my last post I was just making a reference that looking back at the debt I could have bought expensive cars and then filed which I am sure some who abuse the system do.

Should I be in this mess, of course not but I think the same can be said for others who earn less as well.

Somehow you are implying that just because someone earns more that they are somehow better or should be more in control of their finances versus someone who earns less....no matter what the person earns we all have the same problems maybe for some the problems are just on a bigger scale.

And yes it was ALL business related but still even if it wasn't so what, I was brought up very poor and we worked for everything so I am really upset by having to go thru this, I swore I would never be this down.

"class envy" I don't have it, I have friends who are rich and I have friends who are poor. The bottom line is we are all just people and stuff happens. Like my Father In Law says about rich people..."they eat and s... just like everbody else"

[paintinrosesred]

1. Let's try and remember that a $800K house in CA is $300K in other states. So a $5K mortgage isn't abnormal in some places.

2. The self-employed do not have it easy... I would gladly take a desk job after what we've been through the last five years.

3. "Class Envy" will always exist.. the grass is always greener on the other side. But let's all remember that unless you've walked in someone else's shoes.. you can't and shouldn't judge a person on just numbers (how much they make).