If you’re considering filing for bankruptcy, you likely have a lot of questions. A common question is whether having a high income can be seen as bad faith when filing chapter 7 bankruptcy. The Liviakis Law Firm aims to clarify this point in the following post.

The concept of bad faith generally means an intent to deceive or act dishonestly. In the context of bankruptcy, it can matter because bankruptcy courts are federal courts that require utmost honesty and full disclosure from filers. Bad faith can result in the bankruptcy case being dismissed.

To understand whether a high income can be seen as bad faith, it is first important to understand the conditions under which someone may file for Chapter 7 bankruptcy. An individual can only file for Chapter 7 bankruptcy if their income is low enough to pass the means test – a test to determine whether or not you have enough “disposable income” to pay back some or all of your debt.

If you’re someone with a high income, you might still pass the means test if your expenses are also substantial. However, if you’re trying to file for Chapter 7 bankruptcy and the courts believe you have enough money to repay your debts, they may view this as acting in bad faith.

This doesn’t mean that high income individuals cannot file for Chapter 7 bankruptcy. But it does mean that persons with substantial income will need to provide strong evidence showing that their debts are truly unmanageable in relation to their income.

In some instances, even if you pass the ‘means test’, the bankruptcy court may still examine your case for bad faith. Courts can consider different factors to decide if a Chapter 7 bankruptcy filing was made in bad faith. These factors may include your honesty in the documentation, your repayment efforts before filing, and your income and expenditure pattern.

The guiding principle here is honesty. In approaching a bankruptcy filing, both high income and low income individuals must strive to disclose every bit of their financial status. Responding honestly provides the best chance at reaching lasting debt relief through the bankruptcy process.

However, bankruptcy laws are complex, and what seems straightforward might have nuances that can affect your case. To help ensure you are making the best possible decisions to protect your financial future, it is wise to employ experienced legal counsel.

Liviakis Law Firm offers trusted legal guidance throughout the bankruptcy process. The surest way to avoid allegations of bad faith is to seek the counsel of a trusted attorney. Get a review with a Sacramento Bankruptcy Lawyer to analyze your options before filing a case.