Chapter 13 budget questions

[girlgator95]

Hi All,
I haven't posted in quite a while. Our situation has changed some and I'm hoping you may have some advice. My husband and I thought we were going to be filing for chapter 7 in October. We are currently making payments to our attorney to do so. However, my husband just got a new job that puts us above the median income level for FL. Our attorney said the median is $54K+ and his new salary is $58K. In addition, I am getting a little freelance editing work, but there are no guarantees there. Even if we are looking back over six months, we'll still end up slightly above the median income. I've tried the numbers several ways and it looks like we'd end up in a 13 and that is fine with us. My concern is that when I try to estimate what a 13 budget might look like, there doesn't seem to be anything leftover to even make a creditor payment. We do tithe 10% to our church. I am worried that if we file CH13, we won't be able to make the payments. Here's a basic breakdown of the budget I figured. Figuring on approx. $3600 after taxes per month. He will be paid on 26 week payroll schedule (every other week). We have $100K+ in unsecured debt. Home already foreclosed and sold. 2 repos. We have one vehicle paid for (1997) and one from a buy here, pay here place (payment listed below).

Expenses Amount
Rent $900.00
Toyota $300.00
Auto Ins. $120.00
Tithe $360.00 10.00%
Util. $300.00
Phone/Cable/Internet $225.00
IRS $80.00
Health Insurance $500.00 (estimate not sure of the cost w/new job yet)
Groceries $400.00
Clothing $75.00
Medical $75.00
Gas $350.00
Auto Maintenance/Repairs $100.00
TOTAL: $3,785.00
Hair cuts ?
Pet Care/Food?

Thank you in advance for your wisdom!

[catleg]

Tithing to a church is a protected (i.e. written down in black letter law) bankruptcy expense, courtesy of Sen Orrin Hatch.

[Pandora]

Areas I see issues:

medical is low; IRS standard is $60 per person. Did you factor in all office visit copays, deductibles, monthly meds, OTC meds, etc?

Health ins: dont estimate it - you can call HR and ask exactly what the plan is, how much per PP, deductibles, etc. When factoring in deductibles, make sure you ask if there is an RX, vision, medical, dental deductible, respectively.

Insurance: do you not have renters insurance? How about factoring in (if applicable) any increases in auto ins. due to filing BK? Dont forget to factor in deductibles there as well.

Here are the IRS Standards: http://www.irs.gov/businesses/small/...104627,00.html scroll through all the allowance areas for your family size.

Dont know what year your Toyota is..but $300 is pretty high when you factor in the cost for other areas you listed that are close to it. Any kids? School lunches, school supplies, etc. How about Entertainment? You're allowed to claim something towards that...

If you look around the forum you will find all types of posts regarding what areas to ensure you dont miss for budget purposes.

ETA: forgot to mention - when you talk to HR, find out if health ins. is pre or post- tax. That will make a big difference in what your hubby's take home pay is.

[girlgator95]

Thanks Catleg and Pandora. These are definitely very preliminary estimates. I know there are definitely items I am missing. My concern is that I'm already at a point w/these amounts that there is no money left for a payment to creditors. Will the car be incorporated into the creditor payment? I have no way of changing the Toyota payment. We have 2 yrs left on the loan. It's a 2005.

[catleg]

If you only have 2 years left on the loan, you can put it into the plan for the trustee to make payments and he can reamortize it over 5 years (or however long your plan is). So that could release a little more money for you to live on. He might also be able to cram down the value depending on how long you've had it.

[mlsj2009]

In this case, wouldn't girlgator and husband still be eligible for a Chapter 7? If there is not enough disposable income you qualify. Has your attorney run the means test for you yet to see if you are eligible under your new income parameters? Worth a try.

[momofthree]

I agree with mlsj2009, the over/under median income is only the first step of the means test. If your allowable expenses exceed your income, then you qualify for a ch.7 regardless of whether you're over/under.

Couple things to consider:
1. Is your rent within the national standard for your county? This could be objected to if it's over, but if you're far enough negative, it will be a moot point.
2. same for utilities which will include your phone/cable/internet (this is listed as non-rent housing expense on the IRS standard page)
3. I'm guessing you're a family of 3 based on the median income you posted, your allowable living expenses (food, clothing, personal care items, household items, and misc. exp) are $1171/mo for a family of 3. You only have $475 listed, feel free to increase that amount.
4. Also out-of-pocket medical dental for family of 3 is $180/mo. Feel free to put the whole amount. Kids expenses add up FAST!
5. Like mentioned by another poster, tithing is protected up to 15%, but you must be able to show proof of a long-standing history of tithing (usually at least 1-2 years).
6. Are you having just enough taxes withheld so as to break even at tax time? If you normally receive a refund, you'll need to adjust your withholding so that you get that money each month rather than as a refund at tax time. That's an easy area for a trustee to "find" extra money. If you already plan for it, and find expenses to eat it up, you'll be more likely to get your ch.7.

[girlgator95]

Thank you everyone. This is very helpful. Our attorney has not done a means test yet (we thought we were def. in a CH7 until DH husband got a new job, so it's possible we might possibly qualify for ch7. We do have a history of tithing, so problem there. However, we did buy our car at a buy-here, pay-here place and I think they had us sign something that said we would not include the loan in a bankruptcy, so that may hurt us some.

Does anyone know how freelance income is treated? Is it just averaged like any other income?

[irishonyx33]

Freelance income is income, just like you'd get from going to a regular old 9-5. As far as the buy here pay here place, pretty sure it's just tough cookies for them.

[IamOld]

irishonyx is right - that "no bankruptcy" clause is unenforceable.

[girlgator95]

Thank you all for the advice. When the time comes, I'll ask our attorney to do the means test and see where we end up. I did a means calculator online that showed we could possibly still end up in a ch7, but I had to estimate some of the numbers until my husband starts his new job and we see what the deductions/insurance will actually be. Thanks again!