What qualifies as disposable income in a bankruptcy case?

The concept of disposable income in bankruptcy becomes very important when you are trying to file for a chapter 7 bankruptcy. If you wish to file for a chapter 7, under rules set to amendments to the bankruptcy code in 2005, you must either:

• Make less than the median income in whatever state you live in OR
• Prove that you don't have sufficient disposable income to repay the debts that you owe in any form, such as under a chapter 13 repayment plan.

So, what are the rules for bankruptcy income and how is disposable income calculated? Disposable income is the amount of income you have left over after required expenses are paid each month. This means legitimate required expenses, like insurance or for a place to live (expenses like your cable and cell phone bill may not be considered "required" expenses, no matter how much you feel they are necessary). To determine the disposable income you have, the monthly income you make from all sources will be compared to the required monthly payments you have. Once the payments are subtracted from the income, the court will then look at what you have left over- this is the disposable income you have.

For help understanding this concept or help in determining what chapter of bankruptcy you might be eligible to file, it is important to consult with an experienced bankruptcy lawyer as soon as possible once you begin thinking about bankruptcy.