Making Less or More Money?

[moe]

I work extra hours to pay down my credit cards. I also rent out rooms in my house. I board the people--I make them food so it is room and board. To pay down my credit cards of course...

Well, it turns out that working extra and renting out rooms isn't enough and I cannot pay down my credit cards. I don't make enough to live on, given how high my debt has gotten.

So I'm not sure what to do at this point. I looked at the Dave Ramsey thing but I honestly don't get how it works--if you do not have enough to pay down the cards and live then how do you pay down the cards?

I work as much as I can and there is nothing I can sell that would get me out of this enormous debt.

I got a readjustment on my mortgage thank goodness.

So are they going to make me keep working these extra hours in Chapter 13? And having two strangers in my house so it's 5 people and 1 bath?

I would like the flexibility to reduce the number of people who rent out rooms, etc.

Should I work less hours before I file?

I'm just so confused about the following issues

(1) What determines your payback amount? How can I find out what I would have to pay back before I file. I just really live in fear of them making me pay what I pay now--and then having something happen. Like all the lights went out on the car. I have no taillights.

What do you do? If I am paying $2,000 a month now and I have to keep paying $2,000 a month in Chapter 13 how do I fix my car?

For me to be able to handle emergencies like car/house repairs/medical bills, etc. I would have to pay much less each month than I do now.

What does one do there? More is going out than is coming in. If they reduced my payment on my debts I'd be at an even balance. Of course, it is scary because what do you do in emergencies?

I probably am not good with money. I look and I have lots of life and disability insurance and other things. Will they take all that away?

Also, how strict are they with what you provide to your children. I assume I cannot get my daughter any lessons, tutoring, etc. She is getting treated for some things. These all help her. I assume her therapeutic treatments are covered but none of the other things we do to help her are, yes?

How low do your grocery bills have to be?

(2) How do they determine your income. The housemates and the extra work are catch as catch can. I have no guarantee of continuing ability to get those. I am afraid they will count this in with my income and then I will not get the extra work and they'll make me pay a boatload of $$$ to my debtors but my income will decrease.

I can definitely stop working the extra hours and wait 6 months and file. Would that be a good idea? I.e., have my income be my normal guaranteed income in case I am not able to get tenants/extra work in the future.

(3) My mortgage just gets counted as is, yes? I pay 2200 in mortgage. This is not too far off what rent would be but it is slightly higher than rent would be. I do not know if they will simply say our housing costs should be X and our debt payments will therefore be beyond what we can pay.

(4) Is there any point in having 1 person in a marriage do Chapter 13 if both are indebted in order to preserve the credit of one person?

I am assuming the worst because I know that so few people can complete Chapter 13. There must be something wrong with it to make it so difficult. If it was only 50% of people, I'd be less worried. I assume that they must give you enormous debt payments and thus you are unable to make the payments because something happens to your house or your car or your health.

[moe]

PS: This is kind of an interesting paper: http://www.chicagofed.org/digital_as..._realities.pdf

It's depressing because I think it shows Ch 13 is so awful as a deterrent to filing. It's a kind of punishment model, it seems to me.

[justbroke]

So are they going to make me keep working these extra hours in Chapter 13? And having two strangers in my house so it's 5 people and 1 bath?

No. You don't need to work the extra hours, or those extra people... so long as your plan is feasible! (Example: if you can't afford your mortgage payments without the "extras", then the plan is infeasible.)

Should I work less hours before I file?

I can't answer that directly. You would need to decide if the extra income is actually necessary in order to maintain your household.

(1) What determines your payback amount? How can I find out what I would have to pay back before I file. I just really live in fear of them making me pay what I pay now--and then having something happen. Like all the lights went out on the car. I have no taillights.

It is a combination of payments to secured creditors, priority creditors (taxes), the Trustee payments, and your disposable income. The disposable income (DMI) is either calculated by a complex formula known as the Means Test or by your basic income less (allowable) expenses.

What do you do? If I am paying $2,000 a month now and I have to keep paying $2,000 a month in Chapter 13 how do I fix my car?

What are you paying $2,000/month on? If that amount includes unsecured debt (credit cards), then subtract the unsecured debt payment(s)!

I probably am not good with money. I look and I have lots of life and disability insurance and other things. Will they take all that away?

No they won't take it away in a Chapter 13.

Also, how strict are they with what you provide to your children. I assume I cannot get my daughter any lessons, tutoring, etc. She is getting treated for some things. These all help her. I assume her therapeutic treatments are covered but none of the other things we do to help her are, yes?

Yes, so long as it is reasonable. If it's medically required, that is an exception and only requires documentation.

(2) How do they determine your income. The housemates and the extra work are catch as catch can. I have no guarantee of continuing ability to get those. I am afraid they will count this in with my income and then I will not get the extra work and they'll make me pay a boatload of $$$ to my debtors but my income will decrease.

It's everything that you receive on a regular basis, regardless of source or taxability. Yes, the other people helping, do count as your income; by something known as an offset. Say your rent is $1,000 month but you have 4 roommates that contribute $700 of that. Your rent is now $300/month, not $1,000/month.

(3) My mortgage just gets counted as is, yes? I pay 2200 in mortgage. This is not too far off what rent would be but it is slightly higher than rent would be. I do not know if they will simply say our housing costs should be X and our debt payments will therefore be beyond what we can pay.

If you have a mortgage -- and not "rent" as I implied above -- you get to treat the entire mortgage payment as an expense.

(4) Is there any point in having 1 person in a marriage do Chapter 13 if both are indebted in order to preserve the credit of one person?

That's a strategy question that I can't answer. Also, a lot depends on what State you reside in (due to community property rights). I can't remember if Mass is a community property state.

You really need to sit down and have a few consultations with attorneys. They will be better at looking at your WHOLE financial picture and circumstances. If you're under-the-median income... you may be able to do a Chapter 7 quite easily.

[moe]

Oh my, THANK YOU.

Here are some facts. I have to do Chapter 13.

--I can completely pay everything and have enough to live on my normal salary (no extra work, no student tenants) without the credit card payments. All my income problems are due to credit card payments. It takes half my monthly paycheck. It's funny--when I figure it out after working more, renting rooms it always seems to come to exactly the $2,000 in credit card payments. Everything I'm doing is to pay the credit cards, it seems.

But I never know if I am going to be able to get a tenant, etc. That's where all the fear comes in.

Also, it is not easy living in a 1500 square foot condo with 2 people you don't really know and cooking them dinner every night.

--I guess I am not understanding the unsecured debt thing. It's all unsecured debt that is the problem. But I have to pay back some portion of this each month, yes?

--It seems like MA is not a community property state.

--The tenants are not considered taxable or as income. They are considered compensation because they are exchange students and I feed them. But I assume it will count as income for Chapter 13.

--We are definitely not under the median income. It's pretty interesting how broke we are when we have a decent income. Of course, we got into debt when we WERE below median because of unemployment/underemployment. Now we have full employment and can't get out from under. This seems like a typical story.

--I did have a financial consultation with an attorney and we really blew it. Back then we could have qualified for Ch. 7 but we were so scared because my husband had a new job in financial services and we didn't want it to look bad. Damn, we really should have filed!!! Live and learn.

I'm so happy we have jobs! Don't get me wrong! It's just now we look bad because we have lots of income coming in. But we just can't make ends meet anyway. We got too far over our heads with debt.

I just found it so stressful that I really wanted to make up my mind before I did anything more with attorneys.

So 2 more questions

(1) What if I did not take the extra work/extra students for 6 months and then filed? Would that be how they decide our income?

(2) I assume I would never be able to take extra work for the 5 years I am doing this deal. Is that correct? Of course, my life will be easier.

(3) Since MA is a community property state does it make sense for one of us to file and the other one not to file? Won't they count my husband's income as my asset or something and I'll just have a huge payment to the trustee every month?

We have no secured debt. We have a house with a mortgage, 2 10 year old cars and no equity in our house. We were under water but we got a readjusted mortgage and now are just at the market rate.

[moe]

Sorry...Another question

My husband has a lower gross income than I do. His debt is slightly less than mine as well. But since our state is not a community property state would it make sense for him to file and for me to not file? Perhaps he would have to pay less back?

I am just confused by how they determine what you have to pay back of unsecured consumer debt in Chapter 13. I assume it is what is left over as income.

Is there a thread that lists EVERYTHING you could possible include as an allowable expense?

Is there a thread that gives you any sense of what you would have to pay back?

I'm sorry for asking all these questions but bankruptcy just doesn't make sense--Chapter 7 is easier to understand (for me).

It's really, really, really hard to decide what to do.

[justbroke]

This is, hopefully, what a free consultation will help you learn. No matter if your file jointly or only one of you file, both incomes are considered. However, if just one of you file, you get to claim a so-called "marital adjustment". That means that any debt which is solely the non-debtor spouses (the person who didn't file), can generally be deducted under the "marital adjustment".

Whether or not it makes sense to have only one spouse file, will certainly depend on what that adjustment is and a host of other numbers that need to be "baked" into the Means Test.

There will never be a thread that will tell you what you'll pay back in a Chapter 13. It's a complicated formula -- known as the Means Test -- and even when you get a number from the Means Test, it is only a starting point.

So I'm going to ask you to really, really get a free consultation from at least 3 attorneys. Please know that these may be rather superficial and even they may not go deep enough into your numbers to tell you EXACTLY what your payment would be in a hypothetical sole-spouse-debtor case.

[moe]

Hm...OK, 3 attorneys.

I don't know whether it would be worth it for one of us to file and not the other one. I'll probably be the one filing. I hope my husband doesn't divorce me and then go off with his fabulous credit to find some new hot babe! Heh.

God, I'm going nuts with questions. I have SO many questions!

[AngelinaCat]

God, I'm going nuts with questions. I have SO many questions!

This is normal--VERY normal--try to relax a little. Take a deep breath, exhale. Do again. Read through some of the stickies and look through your phone book over the long weekend, and you will be ready to start calling on Tuesday morning for your free consults.

Good luck to you!

[moe]

I am going to delay some. I have a bunch of things to figure out and deal with before I leap in.

I've been reading the stickies like crazy.

Thank you so much for your support. I am gradually gathering knowledge. I just don't want anything to come as a huge surprise. I wish I could poll everyone here to find out what they wish they'd known before they'd filed!!!

[justbroke]

I wish I had known, that it's not as bad as you think!

[AngelinaCat]

I wish we had found this Forum before we hired our attorney!!!!!!! But that is a whole 'nother can of worms.....

[moe]

Thanks justbroke!!!!

Wow, I hope you are right!!!

Is your attorney not good Angelinacat? What do you wish you'd known before that you know now? Any info you have will be welcome.

There are just so many questions I have to ask that I'm kind of worried about annoying the heck out of people. I will be cruising around and trying to find answers.

[AngelinaCat]

Our attorney was the first one we hired after 'Hub did an Internet search! Those were mistakes numbers 1 and 2. We knew nothing of getting free consultations, though this one did give a free consult. But we retained her then and there, so 'free consult' didn't matter.

We live in a very small community where everyone knows everyone else's business. We wanted to go to someone 'Out of Town' for that reason, even though there is a very reputable BK attorney in our community, who is also a trustee. We didn't know that at the time, though.

This attorney gave us very little guidance, and as a result we made almost every mistake possible, which cost us a lot more than it needed to. We did not find this forum until well after we filed, and after we were hit with an AP by our Enemy who had been hitting us with frivolous, harassing lawsuits since 2002.

She also dragged her feet in filing our paperwork until 4:30 PM of the very last business day of 2007. Each year in January we get a stipend from a Trust that is part of our Retirement. So in order to file, we had to wait six months for that to fall off the radar. So any time after July 2007, she could have filed our paperwork. Instead, we had to go and camp in her office on the very last day to make her file--and at that, it was an emergency petition. If we hadn't done so, here comes January 2008, the yearly stipend, and the wait begins all over again. We were fending off a couple of lawsuits from creditors by this time, and did not want any default Judgments against us.

[moe]

Wow, what a horror story. Eek!

I didn't realize a bankruptcy attorney could be a trustee...interesting.

I guess you can't just fire them and hire a new one because they get to keep all your money. What a drag.

[AngelinaCat]

Wow, what a horror story. Eek!

I didn't realize a bankruptcy attorney could be a trustee...interesting.

I guess you can't just fire them and hire a new one because they get to keep all your money. What a drag.

You CAN fire them, but it is a lot of trouble to do so. You have to make a Motion to the Court to Dismiss Attorney XX with Attorney YY, or in our case, file a Motion to Dismiss Attorney an go Pro Se. Then a Hearing has to be scheduled, and all of that, which we did.

However, our Judge-- a very nice, and patient fellow told us that for all intents and purposes, our case was done--that we were waiting out the 60 days, and that if he allowed this motion to go through, it would delay our case. So we withdrew it. But it cause the attorney to lose a day of work as she had to travel to the courthouse which was two hours one way from her office. And it caused her a little bit of embarrassment in front of her peers who were in the courtroom.

Another problem with trying to fie an attorney is that it is seldom that another attorney wants to step in and try to deal with all of the mistakes that are there. And you are right, it can be costly.