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The term “disposable income” means a variety of things when discussing debts and other issues.

In simple terms, “disposable income” is whatever money you have left after paying all required taxes and national insurances! Disposable income is after-tax income that is officially calculated as the difference between personal income and personal tax and nontax payments. In general terms, personal tax and nontax payments are about 15% of personal income, which makes disposable personal income about 85% of personal income.

When applying for certain state, federal and private benefits and protections, the term “disposable income” may change slightly. For instance, when applying for loans, mortgages, credit cards and veterans home loans, disposable income is that income left over after paying all required taxes, national insurances and all essentials such as food, clothing, and shelter.

Some state and federal assistance programs look at disposable income as “any income available for spending and saving” Generally, this means money left over after taxes and fixed costs such as rent/mortgage, food, car payments, insurance, etc.) Disposable income is also defined as the total income that can be used by a household for either consumption or saving during a given period of time, usually one year.

Another way to define disposable income is that portion of an individual’s income (wages and salaries, interest and dividend payments from financial assets, and rents and net profits from businesses as well as capital gains on real or financial assets) over which the recipient has complete discretion.

For the purposes of calculating whether you are entitled to federal, state and non-profit legal help and similar services; many states will deduct the following from your income:

a) Deduction of a certain amount depending on how many dependent children you have,

b) Tax and National Insurance.

c) Maintenance you are paying to your wife/husband of former wife/husband or a child or relative, (who are not members of your current household).

d) Housing costs, for example mortgage or rent, (less any housing benefit). This also includes council tax, water rates, insurance premiums and other costs associated with where you live. There is a maximum figure of £545 per month if you have no dependents. Otherwise the full value of your housing costs can be taken into account.

e) Employment related expenses, for example travel costs. This figure is a set of £45 per month.

f) Childminding charges, these are only deductible if you are receiving a wage or salary and actually pay private childminding charges. Deduction can only be made for children 15 or under, (unless they are disabled in which case there will be no limit on age).

g) If you are in receipt of certain state benefits on top of your income then these will be disregarded, (examples are disability living allowance, invalid care allowance, council tax benefit, housing benefit, payments out of the social fund etc.).

Disposable income was also known, in previous generations, as discretionary money. The bottom line is you should always ask how your disposable income is being figured.

If a debt collector is seeking to garnish more than your disposable income, or if you believe your wages are being garnished illegally, or you believe you are a victim of illegal or unfair debt collection practices, submit your information to a FREE* Fair Debt Lawyer by:

The debt collector may just be liable to you for statutory damages of up to $1,000, plus any actual damages suffered, plus attorney fees!

confidential informationThere may be instances where discussing your situation over a public forum could potentially compromise your interests. On these occasions we will contact you directly via email in order to answer your inquiry in a confidential manner.

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