Girlfriend and I Live Together, Will Her Income be Counted?

[Naomanos]

I have been struggling to pay my lawyer for a chapter 7 bankruptcy for two years now and they have thankfully continued to work with me on the payments, stopping them when needed and lowering them as well. However, I have obtained a better job and will be able to afford to actually pay them more consistently now.

With that said, my girlfriend and I live together and with this new job, our incomes will be roughly the same. Alone, I would pass the means test easily, but with her income added, we wouldn't. So I am wondering if her income will be added?

She pays the rent, which includes the water, sewer, cable, and internet all in one payment. She also pays our cell phone bill which includes her teenage son and mom (she doesn't live with us). She also has her own bills to pay. I pay for the electric bill and gas bill for the apartment, as well as my car insurance. We do not have a shared bank account or shared debt. Not sure if that info helps, but I provided it in case it does.

Also, I am not sure if my children count as household members as I have shared custody of them, but get them two weekends a month. I do however claim them every year on my taxes for the purpose of a refund per my divorce decree as my ex-wife doesn't work.

Can they be counted in my household? If so, even with my girlfriend's income I would pass the means test.

Thank you for answering my questions in advance!

[justbroke]

Welcome to BKForum!

With that said, my girlfriend and I live together and with this new job, our incomes will be roughly the same. Alone, I would pass the means test easily, but with her income added, we wouldn't. So I am wondering if her income will be added?

So long as you're not counting her as a household member, this would be fine. Her income is not automatically included in your bankruptcy as it would if the two of you were married. But, alas, there is a caveat.

To the extent that she contributes to the household's expenses, you must offset your claimed expenses.

For example: if the rent is $2,000/month and she pays half, then you can only claim $1,000 as your rent expense. Likewise, if you have utility bills and she pays all or some portion of them, then you must reduce your claimed expense by that amount.

She pays the rent, which includes the water, sewer, cable, and internet all in one payment. She also pays our cell phone bill which includes her teenage son and mom (she doesn't live with us). She also has her own bills to pay. I pay for the electric bill and gas bill for the apartment, as well as my car insurance. We do not have a shared bank account or shared debt. Not sure if that info helps, but I provided it in case it does.

So you wouldn't be able to claim a rent expense, but that's where it gets interesting. She has no legal bound to you -- you are not married -- so it makes this a little more precarious... if you ask me. Your lawyer could put your expenses as if you paid half because you would have paid half. Or your lawyer could fashion an argument that if you weren't in debt, you could have your own place to live.

I just don't know and have not experienced this issue. In fact, I did have someone living with me as a girlfriend and filed Chapter 13. But I married her to avoid the issues.

Also, I am not sure if my children count as household members as I have shared custody of them, but get them two weekends a month. I do however claim them every year on my taxes for the purpose of a refund per my divorce decree as my ex-wife doesn't work.

That's a question for your attorney.

Can they be counted in my household? If so, even with my girlfriend's income I would pass the means test.

Another great question for your attorney. But look at this...

This is not a cut-and-dry case because you have multiple factors working for you and against you. You have children that are your dependents, but don't live with you 100%. You have a significant other (partner) with whom you live and that person has a child. The partner pays most of the large bills. What should the household size be?

I would guess that the attorney would likely treat you as a single household and pull in your girlfriend's income into the equation (to offset the expenses). But by doing this, the household now it you + her + her child + (potentially) your two children. Are you paying alimony or child support? That would further reduce your disposable income.

Keep in mind that this is just me thinking aloud. Your attorney will need to fashion a bankruptcy petition that shows your actual situation.

[Naomanos]

Welcome to BKForum!

So long as you're not counting her as a household member, this would be fine. Her income is not automatically included in your bankruptcy as it would if the two of you were married. But, alas, there is a caveat.

To the extent that she contributes to the household's expenses, you must offset your claimed expenses.

For example: if the rent is $2,000/month and she pays half, then you can only claim $1,000 as your rent expense. Likewise, if you have utility bills and she pays all or some portion of them, then you must reduce your claimed expense by that amount.

So you wouldn't be able to claim a rent expense, but that's where it gets interesting. She has no legal bound to you -- you are not married -- so it makes this a little more precarious... if you ask me. Your lawyer could put your expenses as if you paid half because you would have paid half. Or your lawyer could fashion an argument that if you weren't in debt, you could have your own place to live.

I just don't know and have not experienced this issue. In fact, I did have someone living with me as a girlfriend and filed Chapter 13. But I married her to avoid the issues.

That's a question for your attorney.

Another great question for your attorney. But look at this...

This is not a cut-and-dry case because you have multiple factors working for you and against you. You have children that are your dependents, but don't live with you 100%. You have a significant other (partner) with whom you live and that person has a child. The partner pays most of the large bills. What should the household size be?

I would guess that the attorney would likely treat you as a single household and pull in your girlfriend's income into the equation (to offset the expenses). But by doing this, the household now it you + her + her child + (potentially) your two children. Are you paying alimony or child support? That would further reduce your disposable income.

Keep in mind that this is just me thinking aloud. Your attorney will need to fashion a bankruptcy petition that shows your actual situation.

Thank you for the response!

I am just really trying to decide if at this point it is worth it to continue chapter 7 or just try to go for chapter 13 or even debt consolidation. My circumstances have changed a bit, especially with this new job, since I started this journey when debt consolidation said I didn't have enough disposable income to go that route and bankruptcy was my best bet.

It has been two and half years since I stopped paying my debt at this point.

[justbroke]

I would sit down with my attorney and discuss.

Debt consolidation fails most of the time and people end up in bankruptcy anyhow, having wasted time and money. If you lack even the amount of money necessary to negotiate with creditors and do debt consolidation, that's not a good sign. Many people also don't realize a potentially bad side of debt consolidation and that is the forgiveness of the debt. The portions forgiven by the creditor are taxable income at your ordinary tax rate. So if you're in the 22% bracket, or it pushes you into a new bracket (which is highly possible), you pay taxes on that forgiveness as it's considered regular income.

It also depends on the amount of debt. Filing a Chapter 7 for $10-15K of debt may not be worth using that option. We like to call Chapter 7 the nuclear option because it is all powerful, but can only be used once every 8 years. Filing a Chapter 13 could put you into a 3 to 5 year payment plan. A Chapter 13 is good when the debtor is trying to protect property or can't otherwise file a Chapter 7. A Chapter 13 also requires that the debtor has regular income.

What I just inferred from your writing is that even after you stopped paying debt 2.5 years ago, you still can't even afford to (or couldn't afford to for some time) pay your installments to a bankruptcy attorney. Depending on where you are in Florida, there are Pro Bono clinics where attorneys will help you file. I would only recommend that if you have no assets that could be taken in a Chapter 7.

This sounds like a good time to have a frank conversation with your bankruptcy attorney/firm and make a decision.

[Naomanos]

I would sit down with my attorney and discuss.

Debt consolidation fails most of the time and people end up in bankruptcy anyhow, having wasted time and money. If you lack even the amount of money necessary to negotiate with creditors and do debt consolidation, that's not a good sign. Many people also don't realize a potentially bad side of debt consolidation and that is the forgiveness of the debt. The portions forgiven by the creditor are taxable income at your ordinary tax rate. So if you're in the 22% bracket, or it pushes you into a new bracket (which is highly possible), you pay taxes on that forgiveness as it's considered regular income.

It also depends on the amount of debt. Filing a Chapter 7 for $10-15K of debt may not be worth using that option. We like to call Chapter 7 the nuclear option because it is all powerful, but can only be used once every 8 years. Filing a Chapter 13 could put you into a 3 to 5 year payment plan. A Chapter 13 is good when the debtor is trying to protect property or can't otherwise file a Chapter 7. A Chapter 13 also requires that the debtor has regular income.

What I just inferred from your writing is that even after you stopped paying debt 2.5 years ago, you still can't even afford to (or couldn't afford to for some time) pay your installments to a bankruptcy attorney. Depending on where you are in Florida, there are Pro Bono clinics where attorneys will help you file. I would only recommend that if you have no assets that could be taken in a Chapter 7.

This sounds like a good time to have a frank conversation with your bankruptcy attorney/firm and make a decision.

Again, thank you. I will have a talk with my bankruptcy attorney.

Edit: I wanted to add that I have no assets other than my 2012 Ford Focus.

[justbroke]

I have the same vehicle.

The question will be the value of your 2012 Ford Focus but I'm guessing it's less than $4-5K and there should be enough with the unused homestead exemption ($4K), car exemption ($1K), and wildcard exemption ($1K) to possibly protect the vehicle. That's the biggest concern, especially if you have other property that can't be covered in a Chapter 7.

[Naomanos]

I have the same vehicle.

The question will be the value of your 2012 Ford Focus but I'm guessing it's less than $4-5K and there should be enough with the unused homestead exemption ($4K), car exemption ($1K), and wildcard exemption ($1K) to possibly protect the vehicle. That's the biggest concern, especially if you have other property that can't be covered in a Chapter 7.

I have a couple of older game systems, last generation stuff, my PC, some clothes, a tablet, and that car. That is all I own really. The rest of the stuff in here is my girlfriend's.

[justbroke]

I have a couple of older game systems, last generation stuff, my PC, some clothes, a tablet, and that car. That is all I own really. The rest of the stuff in here is my girlfriend's.

Reads as though all the stuff and clothes maybe worth $500 and the car $4-5K so I would think that your attorney can squeeze those in to make that a no asset Chapter 7 case.