Re: Retroactive pay and chapter 13

[dinnyc]

Hey, everyone. I'm about to file for a chapter 13 and I had two big paychecks in the past six months that consisted of retroactive pay due to contract raises. One was for 7000 and another for 3000 after taxes. I usually bring home around 2000 a paycheck, so these definitely skew my average take home. Do they take that into consideration, since it's a one time thing?? Thanks!!

[StartingOver08]

No, they do not take that into account. That is why you see people waiting to file until the month with the large deposits "falls off" the 6 month period.

This is one of the good things about this forum - at least you know to wait until that income drops off!

[justbroke]

Yes and no. Here's why. As far as the means test is considered, it's a six month lookback no matter what. If you were above median income anyhow, then I wouldn't worry about. Most people waiting it out, are doing so to get under the median income.

If you are above median income... regardless of the extra income... here's where it may hurt.

Most Trustees use the Disposable Monthly Income (DMI) calculation found on Form B22C as what you must contribute to the plan... multiplied by the applicable commitment period (ACP). However, this is not how it's really supposed to work and was not the intent of the changes made by the BAPCPA of 2005. (In some cases, it is as simple as multiplying the DMI by the ACP... but that's besides the point.)

The BAPCPA added that a Chapter 13 debtor must pay his projected DMI to the plan. I would say that is a look forward and not a look backwards. I agree with most of the cases in which the Court held my same opinion. So, while the form (B22C) may read that you have... $1,000/month DMI, but your actual is $100/month, you would write you plan as if you have $100/month in DMI.

Now the Trustee may come along and object, stating that you're not contributing all of your DMI to the Plan. Your lawyer would come back with... right, because you're contributing your projected DMI, and that's all that you're supposed to contribute. Your lawyer would argue that the form is a starting point and not the end-all in deciding what your DMI is... especially your projected DMI, since the form looks back six months.

Hey, but that's just me.

[dinnyc]

Thanks, for the quick response. Yeah.. the 7000 dollar check won't fall off until May 22nd. So, I don't know what to do. I was hoping they would see that is not the norm I bring home and they would adjust around that. Oh well....

[StartingOver08]

If you are filing a Ch 13 - May 22 is not too long to wait to make sure that you have no issues.

JustBroke is very, very savvy - I think more so than many BK attorney's
So, although JustBroke knows the law inside and out - I would wait the extra time to be certain the Trustee has no leg to stand on. After all, you are going to be in your plan 36-60 months - best to have the right figures from the beginning.

[justbroke]

Thanks, for the quick response. Yeah.. the 7000 dollar check won't fall off until May 22nd. So, I don't know what to do. I was hoping they would see that is not the norm I bring home and they would adjust around that. Oh well....

Bankruptcy is a technical process and not "subjective". They do it for a reason... because of the abuse of the system prior to 2005 (or so, that's what they tell us).

In order to have uniformity -- I puke when I write that -- Congress implemented certain rules in the Bankruptcy Code (known as the BAPCPA amendments of 2005) to make it more technical and cut and dry. Therefore, the forms pretty much say look at the last six months for determining the income.

As I wrote, if you are above median income anyhow, and have a good lawyer, talk to that lawyer about when to actually file. The people who wait (postpone) are generally trying to be below median on the date of filing so that they qualify for Chapter 7 and/or don't use form B22C for calculating their DMI, and/or keeping to a 36-month Plan rather than a 60-month Plan.

Bankruptcy pre-planning is a good thing.

[dinnyc]

Thank you very much!

Very informative! I really appreciate the feedback. One more stupid question... is it possible to retain the attorney now to help with the calls from the creditors and still wait until May to file? Or is that too long of a period?

[StartingOver08]

No, its not too long! In fact, it will give you some peace of mind...at least a more quiet phone!

[dinnyc]

Lol, ok great! Thanks for the quick replies!!!

[liz417]

Very informative! I really appreciate the feedback. One more stupid question... is it possible to retain the attorney now to help with the calls from the creditors and still wait until May to file? Or is that too long of a period?

No that's not long at all. I retained my attorney last May (2008) and still haven't filed. He takes all my creditor calls, etc. This is your BK, so it is very important to plan everything, don't rush into anything that you'll regret 3-5 years down the line. Good Luck!

[kornellred]

Creditors do not call the attorney once the intention to file is established. There is no longer any point to calling, since there is no possibility of gaining an advantage. They may call if the filing is postponed for a long period of time, but generally - one call does it.

[lrprn]

Creditors do not call the attorney once the intention to file is established. There is no longer any point to calling, since there is no possibility of gaining an advantage. They may call if the filing is postponed for a long period of time, but generally - one call does it.

In truth original creditors and collectors can continue to call you right up until they receive notice of your filing and many do. Some creditors will reduce the number of calls if you tell them you are filing and give them a lawyer's name and contact information. But it isn't true that all you have to do is say you are filing and the calls stop - ours sure didn't and we told all our creditors we were filing and sent them our lawyer's way.

If all you had to say is "I'm filing and here's a lawyer's contact info" and all calls would stop was true, everyone in debt would say it even if they had no plans to file. The system just doesn't work that way.