One thing that can significantly alter the financial situation of someone considering Las Vegas bankruptcy is having a child. In a time of low wages, raising a family is much harder than it used to be. Consequently, people who have large debts must consider the ramifications of their growing families on their bankruptcies. Here are some things to consider:
- Unborn children are not counted in calculations of the chapter 7 means test. When debtors file in chapter 7, they must show that their incomes are less than the median income of the state in which they live. However, every child they have raises the threshold by some thousands of dollars. It’s conceivable that someone who is about to have a child might currently be below the state’s median income, but once the child is born they would be above it. Bankruptcy trustees do not allow expecting parents to count their unborn children towards the means test limit, so those who can wait until birth may benefit from a higher limit.
- Adoptions, obviously, only count once the paperwork is finalized.
- In chapter 13, the situation is slightly different. There is no means test for eligibility, but debtors are able to include child care expenses in their payment plans. The difference a new child makes can reduce monthly payments by a significant amount—perhaps hundreds of dollars a month. The solution in this circumstance is for expecting parents to delay the confirmation of the plan until the child is born, if the trustee refuses to accommodate the debtor. Otherwise, debtors can also request a modification to the repayment plan once the child is born.
- If an unborn child does become an issue in a chapter 7 bankruptcy, it might be possible to argue “special circumstances” to convince the bankruptcy court to set aside the trustee’s determination that a filing that fails the means test is abusive. A situation where this might work is when an expecting debtor is facing foreclosure and needs to discharge debt anyway but currently earns more than the means test allows.
Adapting to changing circumstances is something to look for when searching for an experienced Las Vegas bankruptcy lawyer, and mitigating the costs associated with having a child in a bankruptcy proceeding is one such circumstance.
For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Haines & Krieger Las Vegas bankruptcy attorney for a free initial consultation. Call us at 1-702-880-5554 to set up your free consultation.