Higher income levels can also lead to higher levels of debt
June 27, 2025

June 27, 2025

Many people inaccurately believe that only people with low income levels struggle with debt. Nothing could be further from the truth. Individuals with low income and bad credit typically can only receive a small amount of money on credit. Even if they secure multiple different forms of credit, from car loans to credit cards, their income will limit how much lenders are willing to give them.


Individuals with higher income levels are at risk of receiving far more credit, which can lead to substantially overextending themselves. Higher-income individuals are also more susceptible to the desire to keep up with the Joneses. In other words, when you work in a high-profile and high-paid position, you are more likely to spend money on expensive clothing and fancy vehicles.


People with higher incomes can easily find themselves in a financially precarious position as a result of spending on credit. Even people making well above the average wage in Wisconsin could still find themselves unable to handle their crippling debt load.


Higher overall income doesn’t preclude bankruptcy proceedings

Another assumption many people make is that bankruptcy is only available to those who have low income. While it is true that regulations limit the income of individuals who file for Chapter 7 bankruptcy, that is not your only option for discharging debt in the United States.


The cutoff for Chapter 7 bankruptcy is the state median income, which may be substantially lower than your income. However, that doesn’t mean you have to struggle indefinitely to pay your bills while sinking deeper and deeper into debt.

You can still qualify for Chapter 13 bankruptcy even if your income is multiple times the state median income. Chapter 13 bankruptcy, also known as a wage earner’s plan, is a viable option regardless of your level of income or how many assets you have accrued as an adult.


Chapter 13 bankruptcy allows you to restructure and reorganize debt

Unlike Chapter 7 bankruptcy, which allows for the discharge of all unsecured debts following a waiting period and a creditor hearing, Chapter 13 bankruptcy requires scheduled repayments for some time.


Typically, the repayment period lasts between three to five years. During this time, you will have to pay a specific amount to the courts every month, which the courts will determine in the early stages of the process. The courts will then distribute those payments to your creditors.


So long as you follow the repayment plan as written, at the end of that period, you will receive a discharge of the remaining balances on all of those unsecured accounts. Even if your income is substantially higher than the average in your state, Chapter 13 bankruptcy can allow you the opportunity to start over financially.

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