Debating on filing - would love input/opinions!!

[jenniferw75]

Hi all, I am so thankful I found this forum and have spent the better part of the day digging through the threads. Here is my situation, I would love any input and/or expertise available!

My husband and I are contemplating filing BK. I had the free consult with a local bankruptcy atty and he advised that we made too much for Ch 7. I should start off with a little info I guess...we are in Texas, family of 5, I'm a SAHM and he makes approx $90,000/yearly. We have two vehicles, both upside down. When he started his new job he was given a company truck so we are paying to have one car just sit in the driveway. Monthly payment on it is $400; the one I am going to keep is $420 (it's upside down but we plan on driving it into the ground). Our mortgage is also upside down, although not by a ton...we owe $129,000, the house is valued at approx $120,000 (however we owe $3000 in arrears). Other than those debts we have around $6000 in current credit card debt, $6500 in past due debt (medical, old accts) and about a gazillion $$s in student loans.

We are paying on our current credit cards, but are not paying on any of the past due stuff. Here's my fear with Ch 13...the trustee payments. Are we not going to have anything left over each month to save for emergencies and whatnot? The atty told me to list every. single. expense, no matter how minor, when we do the paperwork and I'm assuming that's so our disposable income (therefore our payment?) will be less??

Yes, I do actually have questions (sorry!): My first question is, if we surrender the one vehicle at the time we file, won't our trustee payment just go up by $400 (if we have an extra $400 from not having that car payment)? The next dilemma is our home. We are not in a position financially to move however we do want to move within the next 2 years (rent). Our town/neighborhood is going downhill fast and so is my daughter's school. I'm not comfortable with her starting intermediate school where we live so I'm wanting to move as soon as it's feasible. My thinking is that we should go ahead and find a rental in the town we would like to relocate to BEFORE filing BK so that our new potential landlord won't see that on our credit. Then after we secure the rental, surrender the house...am I thinking about that correctly? Or should we wait a couple more years to get out of the house and hope to find a willing landlord? We do not plan on reaffirming anything so we have an "out" when/if we need it. The town we will be moving to has a higher cost of living so my thinking is that we should probably go ahead and move before we file so our expenses will show the higher housing cost and our trustee payment will allow for that...then we can surrender our upside down home. Or am I completely backwards in that thinking??

Sorry for the long ramble...but I'm very apprehensive about all of this! I feel like we have found a very good attorney and I know he will answer our questions in depth, but I wanted to look for some other input before I shell out $300 for a retainer fee just to find out what our estimated payment would be.

thanks in advance!!!

[dmc-2008]

There are great mods here that will come along and give you a better answer, but my initial thought is you don't have much unsecured debt, about 12k right? You can't bk student loans and you don't want to keep you house. Maybe you should just short sale your house and do a chap 7? It might work??? Good luck.

[keepsmiling]

Jennifer, welcome to the forum! You have obviously done your homework and asked some very good and knowledgeable q's.
YES your $400 payment would just go to unsecured. YES your attorney is looking to get your dmi realistic-- a livable plan is the best thing for everyone involved. And if you really want to get out of there, maybe it is a good time to move now. Remember, however, the effect on your taxes... you may very well wind up owing a lot more if you rent vs. own, so you want to take that into account for your bk and adjust accordingly.


dmc, the OP makes too much money to get into a 7. Don't think it's an option really.
Agreed, 12K is a small amount to bk over. HOWEVER... adding in the current arrears and possible deficiency on the house brings the amount up by 12K+ , and they really don't want to keep the house.

The good news is that you could conceivably have this paid off in a relatively short time, since the money owed is not that much. The bad news is those bloody student loans . Depending on whom you owe, that could wind up being another issue. What does your attorney say about them? does your district allow them to be included in the plan? sometime they have to be deferred and wind up accumulating more interest....ugh.

[TXskyblue]

dmc, the OP makes too much money to get into a 7. Don't think it's an option really.

My atty told me people with 100K incomes get CH7's if they have high enough expenses, such as expensive houses and a new car.

I make a little than than OP and I'm a single-member household. I filed for 7 and my 341 is in a few weeks. I'm hoping everything goes well and the trustee (local or US) doesn't object.

[jenniferw75]

Thanks for your replies! Yes, I have tried to research as much info as possible but of course all these "what ifs" keep popping up!

Yes, the car being included plus the $3000 on the house arrears brings that total up quite a bit. TXskyblue, I was honestly surprised that the atty said we didn't qualify for a 7 - we make less than $100K and have 3 kids! Of course in my consultation I told him we would not be including the house, and since then I'm wondering if we should go ahead and lump it in...that might make a world of difference with that figured in.

My goal is to save as much $$ as possible before (if) we file. I'm wondering if we should go ahead and give the car back and start saving those payments for a few months...or I figured if we just snowballed the debt and put that $400 car payment towards the debt we would have it paid off by the end of 2015. Then if we needed to get out of the house we could short sale i

As far as student loans, he told me they would be put on hold for 5 years while we were in the plan. There are so many different scenarios.

[Pandora]

You can be over median and still file Ch. 7 - its not just about your yearly income; its about your debt to income ratio as well.

Consult with a few more attorneys before pulling the trigger.

[jenniferw75]

You can be over median and still file Ch. 7 - its not just about your yearly income; its about your debt to income ratio as well.

Consult with a few more attorneys before pulling the trigger.

Thank you, I was just thinking that we needed to talk to some more attorneys for a 2nd (3rd, etc) opinion. That's why I'm thinking if we included the house we might qualify for a 7.

[keepsmiling]

Yes many over median filers can make a 7 happen. Your situation wasn't sounding like one of them, but a creative lawyer might be able to make it happen.
If you want to give us some more info about your expenses and income we might be able to make some suggestions.
Your snowball idea is another scenario that might make sense. BK is a pretty big gun and not always the best solution. You are wise to consider all of your options.
Keep reading, asking q's, and talking to a few different lawyers. Let us know what they say.

[keepsmiling]

My guess is that so much of the expense is student loans-- that a 7 is going to get ruled out.

[jenniferw75]

Here's a little more detail - we make about $4750 (net) a month and general expenses (house and car payments, utilities, groceries, etc) totals about $4350. Of course that is not accounting for things that come up like prescriptions for kids, etc...That's also no student loan payments, I make very sporadic payments as we have the money. On top of the $12-13K in consumer debt I have $50,000+ in student loan debt.
One of my main concerns is that if we let the car go back and use that payment towards a debt snow all we will get sued for the deficiency and end up back in the same position. And I was thinking BK would give us a good out for the mortgage, although we have not tried for a deed in lieu or something similar. I just figured with bankruptcy it would take care of it all (except student loans of course).

[keepsmiling]

So... you'd need to come up with 300 worth of new expenses to manage a 7. That's kind of a lot. Might be able to pull it off with a couple new cars plus the insurance increase. But since there is a third car, a tt might not buy that. You should be including those occasional prescriptions in the medical expense section.

When are your car payments going to end? That's another consideration as your payment could wind up increasing when the car is paid off. Another thought... you might be able to cram down the car payments. OR could be it is time to get another car.
Many things to think about while pre-planning You are being very smart. Be sure to write down all of these q's for the lawyers.
The house scenario is the biggie. Could be 13 is really your opportunity to start over in exactly the place you want to be.

Again, moving to a rental changes your tax scenario and could lower your take home significantly. Be sure to discuss that with the attorney.

[jenniferw75]

Thank you so much for all of your input and help! I've got a 2nd consultation set up with him for me to ask all of these additional questions...hopefully he can point me in the right direction. I'm really hoping he can give me a good estimate of a Ch 13 payment BEFORE I pay him the retainer! I sure would hate to pay $300 then realize that it would be more beneficial to try and pay off the consumer debt on our own. Heck, I've negotiated 4 BIG balance credit card settlements a few years ago for an average of 20 cents on the dollar...I know I could do the same with the medical debt.

I have just started seeing the term "cram down" which I knew nothing of before I came on the forum...I'm not sure how that works but hopefully he can discuss that with me. If only I could wave a magic wand and could wipe out student loans in BK!! I can dream, right??!

[Pjmax]

Jennifer, since you haven't retained your lawyer yet, you might consider consulting with a few more. See where the opinions are consistent and differ. It's not unusual to consult with 3-5 before deciding.

[dmc-2008]

Thank you Keepsmiing, I knew someone would correct me and help. To to OP, i have student loans and the are included in bk and i dont have to pay them but i do. The trustee does not consider them an expense so it just comes out of what I can squeeze. I dont want to go thru five years and have them sitting out there. It makes it hard but if i ever cant make the payment - i wont! You are going to get so much good info here! Good luck!

[momofthree]

IRS medical standard allowance is $60/person/month, which is $300.00 per month. Keep in mind that when renting, they can make you stick to the IRS standard rent allowance for your area. Mortgages you are allowed whatever your payment is, so renting may not help you out as far as expenses go.

Do you generally get a large tax refund? $4750 bring-home seems low for a $90k income with 5 dependents. And if you "overpay" into taxes each month, the tt will see that as income he can grab. Better to know about that ahead of time and come up with expenses to cover that discrepancy.

As far as "stuff that comes up occasionally" you need to have ALL of that listed on your budget plan. School supplies for the kids, hair cuts, clothes, car tags, etc. all need to be divided by 12 months to get your "monthly" budgeted amount. As far as medical, you should just be able to use the IRS medical allowance of $300. If it's over that, they may want documentation.

With a family of 5, you may be able to squeak into a 7.