Loan from a friend during Ch.13 and Debt to income ratio

[dgifta]

Hi. Thank you in advance for your help.

1.) I'm considering filing Ch.13. I understand I need to be current with my mortgage. In order to do that, I may need to borrow money from a friend.
Is that allowed? Will the trustee consider that income?

2.) I've taken the means test, and I pass it for Ch.7. However, my disposable
income is about 600 a month, despite my making less than the median income
for my location. Will I be forced to do ch.13 rather than ch.7 even though
I pass the means test?

Thank you
Dennis

[momofthree]

1. You do not need to be current with your mortgage to file a ch.13. If you want to keep your house, the arrears will simply be included in your ch.13 payment.
2. If you take a loan out from a friend for any purpose, that loan will need to be included in your bk filing and the debt will be discharged along with your other debt. You will not be allowed to choose to pay this debt over other debts. Further, if you pay your friend back before filing, it will be considered a "preferential" payment and can be taken back from the friend or create a minimum amount to be paid into your plan.
3. If you have disposable income over $182.50, then you can be denied a ch.7. You can then choose to convert to a ch.13 or choose to continue on as you are. Ch.13 is voluntary. You may want to look at your expenses and see if there are areas that you can increase to lower your disposable income. For example, decreasing insurance deductibles, increasing coverage (home, auto, life), obtain disability insurance if you don't already have it. Have you maxed out all living expense allowances? What about a car payment? Sometimes financing a new car can be just what you need to qualify for a ch.7 (as backwards as that seems!).

Here is a link to the IRS standards: http://www.justice.gov/ust/eo/bapcpa...anstesting.htm

[despritfreya]

As MO3 points out you do not need to be current in your mortgage payments to file a 13. Therefore, there is no need to borrow money from your friend. . . is there? You would simply put the mortgage arrears into the Plan and resume regular payments with the 1st payment that comes due after filing. If you are delinquent when you file, some districts require mortgage payments to be funneled through the Trustee. Others (like mine) do not.

As it relates to qualifying for a 7:

Yes, even if you are below median income you can be denied the ability to file a 7. If your Schedule I and J numbers show that you have the ability to pay the amount you mention then you will be forced into a 13. But, since you are below median, you can do a 36 month Plan.

Des.

[dgifta]

Hi, Thank you!
I've retained an attorney so he'll probably know of other deductions.

I'm trying really hard not to take on any more expenses. I've been in such a bad hole for the last year, and I'm starting to make ends meet.
I would not file bankruptcy at all, except I've got one creditor, an attorney who is being very aggressive.I'm making payments to him, but next
month, on July 7, my payments are scheduled to increase to him from $100 a mo. to $600 mo. That will put me back in debt each month.

In addition, I've got two other debts now coming due. Without the credit card debt I can make it. Even paying something each month would be manageable.
I'd like to do Ch.7 and be finished with these debts and move on with my life, but with $600 a mo. in disposable income I may not be eligible for
Ch.7 even though I pass the means test.

How does the trustee or BK court treat a loan from a friend during Bk? I don't mean in terms of repaying it, I mean is it allowed to be accepted?
Is it considered income and so would it make my debt to income ratio even worse?

Thank you for your ideas.

Dennis

[dgifta]

Despritfreya, I want to say thank you especially to you.

I've read many of your posts, both on this forum and others, and you've been an Angel. You've helped
so many people for a long time. Someone should make mention of how much you've done and
how much of your time you've given to us.

Thank you and God Bless you.
Sincerely
Dennis

[dgifta]

I have another question about expenses.
I'm self employed, and my office is in my home.
Can I take some part of my home mortgage payment and utility expenses as a business expense, like I do on my Schedule C tax return?
Thank you again.
Dennis

[momofthree]

debt is not considered income, it doesn't matter who the loan is from.

[despritfreya]

I'm self employed, and my office is in my home. Can I take some part of my home mortgage payment and utility expenses as a business expense. . .

First, thank you for the earlier post. Just remember that I get as much out of this forum as anyone. You have no idea how much I have learned over the past year.

IMO, you would not have any "added" expenses either for Form 22 or Schedule J since you are already deducting the mortgage payment and the utilities in both. Now, if the amount of the utilities is in excess of the standard for your district you would have an additional and necessary expense for Form 22. But as it relates to Schedule J you would have already listed your actual average utility costs. Does this make sense?

Des.

[dgifta]

It does make sense, thank you.
Best wishes.
Dennis

[helpmeout]

Would you care to post your budget? Maybe there are some expenses that you missed. We would also need to know the income and the household size.