Intensional Disposable Income Decrease?

[pcn]

Someone please steer me back on the right road, I've read and thought too much and confused myself. The 6 month period is to look back at income to determine qualification for a ch7 correct? What is the basis to determine the dispoosable income for a ch13? I see people talk about modifying payments based on a lose of income. Is there a waiting period after the lose to file that ammendment? I ask these questions because it looks like the bulk of our disposable income, and therefor BK payment is going to come from my wife's part time weekend job. She took it on to help keep us afloat, but if she is basically working to pay the bk payment, can she quit before we file? And if so, how much longer do we then need to wait to file? She has worked the PT job for about 8 months. Thanks.

[justbroke]

The basis for a Chapter 7 or a Chapter is always the Means Test (Form B22A or Form B22C, respectively). This is a special calculation that looks at the average of income in the 6 months immediately before the filing of the petition.

The Means Test is income and expense based. Not all expenses are allowed. If you are under the median income, and have no disposable income, Chapter 7 is an option. Otherwise, you can only do Chapter 13, if you can fund a Chapter 13 (based on a formula).

The magic is in working your expenses and/or waiting for certain lump sum payments (bonuses, overtime, etc) to fall off the six-month lookback period!

[pcn]

So are these people who want to modify their payments, through job loss or something else, are they requried to wait 6 months to modify? Maybe filing now, letting her job taper off and end, then filing for an ammemdment is someting to consider (?). Things were looking good to file, until atty reran the numbers and figured out that after the lien strip our disposable went up by the amount of the 2nd payment. That increase in payment is approx the same as what she brings in for the extra weekend job.

[justbroke]

So are these people who want to modify their payments, through job loss or something else, are they requried to wait 6 months to modify?

For Plan "modification", you can (technically) modify a confirmed plan the day after it's confirmed.

Maybe filing now, letting her job taper off and end, then filing for an ammemdment is someting to consider (?). Things were looking good to file, until atty reran the numbers and figured out that after the lien strip our disposable went up by the amount of the 2nd payment. That increase in payment is approx the same as what she brings in for the extra weekend job.

Yes, when you strip a lien off, that generates a lot more Disposable Monthly Income (DMI). However, that wouldn't really change how much money is in your budget, because the Trustee will generally just increase your payment by the same amount.

Now as for you lose your job or otherwise can't make the Plan payments, you can convert to a Chapter 7... if you qualify (and qualify means different things in different districts). Also, if you suffer a hardship, you could get a hardship discharge (early discharge in a Chapter 13).

[MommyMc]

PCN- Here is what I personally experienced....

My husband works a good full time job, I am a stay at home mom to 4 kids. I took a direct sales job 3 years ago to get out of the house and bring in money to cover my 3 boys sports expenses. The business grew and became good monthly income because I developed a team, making me about $2000 a month before taxes and business expenses (this was great, because I was only working about 15-20 hours a month!). Anyway.... life just got us in the butt, between starting the business and medical expenses, peter ran out of money to pay paul, so we filed in December '08.
During our meeting with our lawyer he kept asking me if I want to continue the business, I kept saying "yes", (because I wanted something "to do" to help the family financially and the way my business was growing I felt good things were coming down the road). He told us that everything I was making was going to go to the trustee's payment because it was our disposible income. But I wouldn't back down.. I had $ in my eyes thinking of the potential growth my business could have over the next 5 years.
On the final meet with the attorney, we were there to sign all the papers, he asked again if this is what I wanted. When I asked what if I quit, he said our payment would go down considerably. When I asked how would the trustee know I quit he said because you'll be under oath when you say you quit the business. I'm sorry, I can't lie, and I wanted to keep doing the business. So we've been paying this large payment since January. My business has tanked. After the holidays, with the economy the way it is, my team started sliding down hill.... to the point of making me zero for the month of March!
So now, I lost my manager status because my team didn't produce and I loss all income associated to that. I lost it in March, informed my lawyer at the beginning of April and now, today, have a 3:30 meeting with him to amend our 13. It's going to cost us $600 to amend it.
In the end... I should have left the business in the beginning!!

I'm sorry this was so long.
Good luck to you!!!

[justbroke]

Very nice summary MommyMc. I hope this addresses more of pcn's questions!

[aces67]

My dh was informed in December that as of January 1st he would get a permanent cut back of hours. Sure enough his pay in January was short, even shorter in February, and even worse in March. In April we had enough and went back to our lawyer. At that point our income had fallen below the median and we are now trying to convert to a 7. Dh also had to sign an affidavit saying that the cut back was done by his employer and not voluntary by us and that it was expected to last. We also provided his schedule for the next 6 months.