Many individuals trying to make ends meet take on extra work to pay off debt. In some cases the added income is enough to make a difference. In other cases the second job makes no difference, or can even make the financial situation worse.
Working a second job can often create additional unexpected expenses. Additional travel, food, and child care costs are a few added expenses that will eat away at any increased income. A second job can create more stress on the family when one spouse is working and the other spouse must increase his or her responsibilities at home.
For some people increasing the family’s income can have a big negative consequence on a future bankruptcy. The bankruptcy “means test” is a calculation that determines whether your income is low enough for you to file Chapter 7 bankruptcy. The means test is designed to prevent individuals with the ability to pay creditors from filing a Chapter 7 bankruptcy. Higher-income debtors must file Chapter 13 and repay their debts over five years.
When a family that would otherwise pass the bankruptcy means test increases its income, there is a danger that the increase will push the income over the threshold and force the debtors into Chapter 13 bankruptcy. Additionally, the trustee may flag the case for abuse when a debtor voluntarily quits a job and decreases the family income prior to filing bankruptcy. The debtor is demonstrating that he could afford to repay something, but has chosen to not pay creditors by quitting the second job.
If you are struggling with debt, consult with an experienced bankruptcy attorney before taking on a second job. It is important to have an understanding of the risks involved and a clear strategy for getting out of debt. As the saying goes, “Hope for the best, but plan for the worst.” Just make sure that your plan doesn’t leave you in a worse financial position.