means test question

[frankx99]

When determining the income for a family and I am filing solely, then is it my income or the combined income of the household that will be used to determine means for a Chapter 7?

thanx in advance for any help

[magyar123]

It will be total household income, yours & your wife's. If both of your salaries total to more than your state's median income you'll be sentenced to a Chapter 13.

[frankx99]

Even if we file our taxes separately?

[monkatom]

" If both of your salaries total to more than your state's median income you'll be sentenced to a Chapter 13."

Is that true? I thought even if you make more than the median but pass the means test you could still file a 7?

[HHM]

That quote is "mostly" true. Your case is assumed to be an "abuse" if your salaries are over the median income and you attempt to file BK-7. But you are correct, if after doing the means test and schedules I & J, you show less than $100 per month disposible income, you may be able to stay in a chapter 7. That assumes the court in your district recognizes the reasonablness of the expenses you have.

[frankx99]

What happens if I have more real estate equity in my home than the unsecured debt that I am trying to get rid of. Do I have to play the unsecured creditors back in full if I file for a Chapter 13, or can I work out a lower monthly payment?

[HHM]

What happens if I have more real estate equity in my home than the unsecured debt that I am trying to get rid of. Do I have to play the unsecured creditors back in full if I file for a Chapter 13, or can I work out a lower monthly payment?

Assuming you are not overestimating the value of your home, and the amount equity minus the exemption is more than the unsecured debt you owe, YES.

In a chapter 13, your unsecured creditors must get paid at least as much as they would get in a chapter 7 if the debtor had non-exempt assets that were liquidated in the chapter 7.

For example, if you have $80K equity in your home, your state has a $20k, homestead exemption, you would have $60K of unexempt equity in your house. If you only owed $50K to unsecured creditors and you filed chapter 13, your chapter 13 plan MUST pay $50K over the 60 months.

[frankx99]

Do you know of any site that would give me an accurate value for my home? I applied for a home equity loan recently and they offered me $70K. My unsecured debt is $42K. I am assuming that bankruptcy might not help me get out of this debt. I wanted to take a home equity loan but my wife refused. YIKES!

[HHM]

Turning unsecured debt into secured debt is almost never a good idea. Your wife was right to refuse.

Without more background on your situation, no one here can really say what might be best for you. Check out this thread here...and do the exercise for your circumstances.

http://www.bkforum.com/showthread.php?t=11328

[frankx99]

I just did a little more research and it seems I have $100K+ in equity in my home. It looks like bankruptcy is not an option. Unless of course there is another option that I have not considered. it looks like I am going to have to to grin and bear it. Thanx for the help.

[JollyGG]

I just did a little more research and it seems I have $100K+ in equity in my home. It looks like bankruptcy is not an option. Unless of course there is another option that I have not considered. it looks like I am going to have to to grin and bear it. Thanx for the help.

Have you looked at a chapter 13. With that much equity your plan would probably be 100% payback, but it still has it's advantages. Take a quick look over in the chapter 13 area to determine if that might be a good option for you.

Could you sell the house, pay all your debts, and buy something different?

[frankx99]

I did look at a possible CH 13 filing but like you said 100% payback with a bankruptcy on my credit file makes it hard to see any advantage, but please fill me in. I'm all ears!

[EveryDayAdam]

I did look at a possible CH 13 filing but like you said 100% payback with a bankruptcy on my credit file makes it hard to see any advantage, but please fill me in. I'm all ears!

Are you already behind on debts? If so, a BK will most likely help improve your scores then hurt them. I was behind on most of my debts when I filed chapter 13, and my scores actually went up by 50 points.

Even if you aren't already behind on your debts, a BK isn't going to mean much after a couple of years. People who are current with their bills when they file for BK recover from BK much more quickly...When you are done with your BK, and you've made the 5 years of payments, your credit will very likely be at where it is now or even better. Most people's credit scores will be right back at their pre-BK levels about 2 years after they file. And if you want to buy a house, federal law guarantees you prime rates 2 years after you file BK if you don't have any late payments on your credit report after you file.

Simply: BK isn't as bad to a credit score as most people think. You will have trouble getting credit for a year or two afterwards, and the rates will be terrible, but if you can be good during those two years, you will start to see some very nice credit offers.

The best way to rebuild your credit after BK is to get a low/no-fee SECURED credit card that reports to the credit agencies. Make a couple of small purchases with it each month and pay it off on time every month.

The advantages to filing a chapter 13 are:

* No more calls from your creditors...They must stop, you get peace & quiet.
* You know exactly how much you are going to have to pay. You make one monthly payment to one person. The payment arrangements are pretty firm for 5 years. No negotiation, no adjusting interest charges, no late fees, etc. The payments are set...especially since you'd be in 100% payback.
* The interest on your unsecured debt goes away. The balance of your debt on the day you file for BK is what you will pay to that creditor over the 5 years...Assuming a a rate of 15% on the 47,000 you have in unsecured debts, this will mean you will save a total of $24,370 in interest over that 5 years...a small fortune.

There are a few costs: Filing, credit counseling and other misc. charges will cost you about $300. The Chapter 13 trustee will also take about 10% from your payments to pay his expenses...it varies...mine charges 8%, the most i've seen is 10.

An attorney for a chapter 13 will cost you about $2000, but that can typically be paid inside your plan as just an added debt...I'll assume $50k for your debts at the time you file, plus attorney's fees:

$50,000 x 1.1 (trustee percentage) = $55,000 in total payments over 60 months: $55,000 / 60 months = $917/mo for 100% payback...and that's assuming that all of your creditors file claims...All of them rarely do.

If a creditor does not file a claim with the court, it will shorten the length of your plan and not lower your payment. It's also really impossible to tell how many will file claims. So far in my case, only about 1/3 of my total debt has been claimed...and from what i've read, I shouldn't expect too many more to file now. Some people have had only 1 or 2 unsecured creditors file claims, some people have had every single one...it's impossible to tell: Plan for all of them, and be surprised when some dont. The creditors that don't file claims get discharged without payment...so there is a VERY good chance you won't have to pay some of those creditors anything at all.

...All in all, BK is a very good deal for just about everyone...even those in a 100% payback chapter 13.

[frankx99]

thanx for the reply. It seems that the biggest benefit would be to remove the interest from the debt. Right now if you can believe it, all the debt is at 0 interest, and I am not late on any of the payments. I'm going to consider what you said. thanx again!

[HHM]

This all begs the question...What has changed such that you cannot afford at least the minimum payments?