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mmdesq, Attorney
Category: Bankruptcy Law
Satisfied Customers: 518
Experience:  Attorney with 13 years experience.
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I live in Michigan. A few months ago I went on short term

Customer Question

Hello, I live in Michigan. A few months ago I went on short term disability from my job. It is private disability insurance that pays 100% of my monthly income for 6 months and then 60% thereafter until either return to work or SS. My debts are extremely high, credit cards over $100K, plus students loans of about $60K. I am behind on everything varying from 30 days to 90 days. I have a mortgage that I plan on keeping and have worked out arrangements of the next 6 months. My salary is $95K. Am I still eligible to file bankruptcy with disability income? If not can creditors garnish my disability income?
Submitted: 1 year ago.
Category: Bankruptcy Law
Customer: replied 1 year ago.
Also if I can file, can I do a chapter 7 or will I have to file a 13?
Expert:  mmdesq replied 1 year ago.

Good Afternoon,

I will try to best answer your question.

I absolutely recommend you consider a chapter 7 bankruptcy. Anytime a debtor has $100,000 in credit cards with a sudden drop in income a chapter 7 bankruptcy should be considered. It may be difficult for you to qualify while you're receiving 100% of income through disability but you still may be able to. There is something called the chapter 7 means test. It takes into consideration your geographic area and household size income you are allowed to earn for the first part of a three-part test. One person is approximately $42,000 and for each additional individual added it's approximately another $9,000. If you are over the income limit then court will deduct your secured debt payments such as mortgage payments or car loans from your income to then see if you qualify. If you don't qualify right now you definitely will qualify as soon as your income is reduced to the 60% level.

Bankruptcy was made for honest but I was fortunate debtors facing hardships like yours. I truly hope you don't feel guilty utilizing legal options that exist. If the bankruptcy is done properly you should also be able to retain your home and vehicle.

I hope that this information is helpful and I wish you the best of luck going forward.

Customer: replied 1 year ago.
I am looking for more detailed information than that. What you told me is information that I can easily access from the internet. Secondly, in the 3rd paragraph and the first sentence, I have no idea what you're trying to say.Now, what I was asking is specific to disability income. Since I am now on a 3rd party disability, will the courts use this income in the means test in the state of Michigan? It is disability income and I thought it was treated differently. There is much information available on SS and SSDI, but my income is from a private 3rd party through my job. So I'm trying to understand howl 3rd party disability plays in a bankruptcy. And when I do go down to 60% that will be $57K and you stated $42K above (I will not have an additional person). So how will that work?
Expert:  mmdesq replied 1 year ago.

Private disability income will count on the means test. Monies that come in through the Social Security Act such as SSD would not count. Quint additional facts you would not meet the first part of the means test as your income will be over 43,000. However the second part of the means test allows you deduct secured debt payments so that's your mortgage or car payment 2 then see if you qualify. So the question is if you deduct your annual mortgage and car payments from your 57000 will that bring your income down to or below 43000. It probably will and you should qualify for a chapter 7. If I still have not answered your question please ask for further clarification. Thanks.

Expert:  mmdesq replied 1 year ago.

Quint= Under

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