Chap 13 - Loss of Income

[mathom1]

Good Day All,

We are 4 months into our Chap 13. Our trustee payment is $968. My wife was just given notice that she will be laid off in 2 weeks. Her income was $1000 per month (basically working to pay the trustee payment)

I called my attorney and he said call the trustee and ask for a 2 month extension. I guess that's 2 months to see if my wife can find another job? But given the current economic situation, what happens if she can't?

I believe with my income alone ...we make too much to file for Chap 7. Yet, now we can't pay the trustee payment...

So now what happens?

[justbroke]

I called my attorney and he said call the trustee and ask for a 2 month extension.

He told YOU to call the Trustee? Most Trustees absolutely HATE that. As a matter of fact, they will immediately think there is something wrong with you or your attorney or your case. Your attorney should be contacting the Trustee (period).

I guess that's 2 months to see if my wife can find another job? But given the current economic situation, what happens if she can't?

This is just to make sure that you can't find new work. They will temporarily suspend the payments. However, if you have secured debt in the plan, you really need to be still paying those... like your house and car.

I believe with my income alone ...we make too much to file for Chap 7. Yet, now we can't pay the trustee payment...

Have you even tried the Means Test with just your income?

What happens is that YOUR attorney contacts the Trustee and asks to have the payments suspended or reduced for a few months. Then you will find out if the situation is more permanent. Then you can convert if you qualify for a chapter 7. if you don't qualify, YOUR attorney files a Motion to Modify Confirmed Plan to reduce your payment to the Trustee. If you're saying that your wife's $1K/month income constitutes all your "disposable monthly income", then your payment would decrease. if you're saying that you can't pay all your bills without your wife's income, you're in trouble.

[mathom1]

Thank you Justbroke for the quick reply

Lol....yup, I haven't been very impressed with our attorney. When I spoke with him he asked how much I bring home without my wife's income, which is ~$5000 (my income +VA disability) Which according to him is too much to file Chap 7.
So if we make too much to file Chap 7 yet, according to the agreed upon budget with a disposable income (trustee payment) of $968.....which is now gone with the loss of my wife's job. I'm at a loss of what will happen next...?

[justbroke]

Lol....yup, I haven't been very impressed with our attorney. When I spoke with him he asked how much I bring home without my wife's income, which is ~$5000 (my income +VA disability) Which according to him is too much to file Chap 7.

Eligibility for a Chapter 7 is not based on your income. It's based on your disposable income after deducting allowable expenses from your gross income.

If you are at a disposable income of $968/month prior to your wife's income loss, that means you're at $-32/month after loss of that income. That, by definition, qualifies for a Chapter 7.

I would tell your attorney that you want your case evaluated for a Chapter 7. It may just be that you have a Chapter 13 attorney who only likes to do those. If you actually qualify after the loss of your wife's income, then you may want to consider converting.

I would also say that if he just looks at your income, without calculating expenses, then he is not working for you.

[dlinid]

I agree with Justbroke, but in our current condition, I speak with the trustees office before I contact my attorney. This is how the trustee and the attorney want it when it comes to asking about tax questions or skipping a payment.

Yes, you would have to redo your schedules to see if you have any disposable income left, so ask for a second look at the schedules. It should clearly show that you are under the means test and convert to a 7 if your wife cannot find a job within a few months.

[mathom1]

Thank you both for your assistance. I'll keep you posted on what transpires.

[mathom1]

Update:

Our attorney says he can't do anything until 2 things happen:
1) my wife works her final 2 weeks and is legally unemployed
2) she files for unemployment and the amount of unemployment insurance payment is set.

He say's after that...he can modify the plan. I asked about the disposable income....which by my calculations would be either:

-$32 (no unemployment insurance claim filed)
or
some unknown amount (if we file unemployment insurance)

It's frustrating to say the least. According to him, I make too much to convert to Chap 7....yet why file for unemployment if it's just going to the trustee anyway. Something doesn't add up. What am i missing ?

[dlinid]

Unemployment payout will keep you tied into a 13 until the benefits run out or your wife finds a job. The trustee will push you to take the benefits to keep you in a 13. This will be their argument for not letting you turn over to a 7, stating that there is income to be had that you are willfully not proffering up. At least that is the argument I would make as a trustee. That is why your attorney says he cannot help you until the other things happen.

Just my 2 cents, probably not worth a plugged nickel....Only opinions not to be relied on

[BuckeyeGuy13]

I'm in a situation where I make well over the median and my wife works, too. After our child is born in October, she will not be going back to work. I have notified my attorney about this change and the fact that her loss of income and expenses takes me to a DMI of roughly $30. If her (attorney) answer is anything OTHER than let's do a conversion, I'll find another attorney. I'm certainly not going to put my 2 month old child in daycare so my wife can go back to work to ONLY pay a trustee payment.

My point is, as JB said, Chapter 7 isn't only an income test. It's income minus allowable expenses that determine eligility. You paid the attorney, make them work for you. If they aren't willing, then find one that will.

[mathom1]

Dlinid & BuckeyeGuy;

Thanks for the info/advice. Frustrating to say the least.

[justbroke]

Yeah, the unemployment amount may put you back over. Unemployment is from about $200-300/week in most States. After tax, that would still put you over the magic $182.50/month maxium.

[mathom1]

Update: Wife will be working Fridays only. No unemployment claim. going to ask for a modification based on income change.

[BuckeyeGuy13]

Good luck to you both... I hope everything works out.