change in income before filing

[erinmi]

My husband and I are looking into filing for Ch. 7. In fact, we have all the paperwork ready to go with the lawyer, we just need to come up with the $1000 for his fees before he will submit the documentation.

Out of the blue this past week, DH's boss informs him he wants to meet with him re: his job etc. Not having any clue as to what is going on, DH met with him yesterday and was told his boss is promoting him to a managerial position and raising his pay by over $10,000 per year. Nothing we expected at all!

Now, we will still fall under the median income because I'm very part-time (less than 20 hrs per week) in my job. However, without our debt expenses, we run dead on with expenses vs. income every month (within $25) before this new income is figured in.

We have $70K between credit card debt and a deficit from a short sale of our old house (we are renting an apt. right now)that we were planning on filing on. Plus we have $31,000 in student loans, $24,000 in two different car loans we planned to keep. So our total debt is,well, a LOT for not owning a home.

We had pretty good interest rates on our cards (most were lower than 16%) but I skipped our last payments per the advice of our lawyer and now at least on of our cards has shot up to the default rate of 29.99%.

If we file, I want to file Chapter 7 to get over and done with so we can move on and we will qualify under the median income. But do you think this new income is going to be a big issue for us at the 341?

[ameliabedilia]

When you run the numbers with the old income, how much in the negative were you? You really do want to be almost even at the end of the month. Have you done a schedule I/J yet? If that all works then you should be fine. I am not sure about both of those car loans though. Do you have very little equity in them? Or do you live in a state where you can exempt them?

[magyar123]

Timing queation: When will the raise become effective? If at the beginning of 2008, less than three weeks from now, and you still file this year, your original income information on the documents should still fly.

[FreshLikeADaisy]

I'm with magyar: if there's any time lapse between now and the effective start date of the new position (well, the first paycheck anyway) go ahead and file.

This may be unnecessary, but I would also print out my bank statements for at least the last 6 months now, so that they are as of the time you filed. My bank has this convoluted thing where you can look at six months of transactions all in one lump online, or go through a long and tedious process of requesting old statements. I did not want anything after I filed to get printed, so I did that the same day I filed. Not that I'm expecting income (gee I wish ) but if I were, it would not be included in a bucket list of transactions. If they want more than six months I will end up having to pull stmts anyway, but those are old and not relevant to today's income.

It is my understanding that when they request bank statements, etc it is as of the date you filed, not some later date like the 341. Congratulations on the raise!!!

[erinmi]

Thanks for the advice

I'm guessing that it will be the first of the year but I'm not sure!

Our bank statements start and stop with the 1st/last date of the month. I will pull the most recent stuff when we file. I'd like to file sooner rather than later, considering this and so much other stuff but gotta get that $1000

As for our cars, we are upside down in both, so we should be in the clear to keep them according to our attorney.

[ameliabedilia]

Back to my question about your being negative on your schedules as it might be hard for you to keep the cars if you are very negative at the end of the month.You really don't want to have to fight to reaffirm your loans if you will be having the money to keep them. The raise might help your case.

Also, are you really upside down on the cars? If you are, you might want to turn them in and get new ones so you can start fresh. Also, the trustee could ask you if you have had a change in income or are expecting one (actually that question is in the filing paperwork) so it might be better to wait for the raise instead of having a chance that the trustee may want to drag the case out or you have to send in extra paperwork/amended schedules etc...

[jbr12]

Isn't the Means Test / Disposable Income based on the average from the last six months? If the raise just kicked in, it wouldn't do much to raise your AVERAGE income level until you were 2-3 months out... if I understand everything correctly...

However, you do have to be aware of the trustee asking the question posed by ameliabedilia

[ameliabedilia]

Okay I misunderstood the first post or didn't pay attention . I see that your schedules are even. So, how long will it take you to save the money? If it's a long time you could consider going pro se and get it done quickly. Also, are you allowing yourself all the expenses you can? Is your rent under the median for your area? Do you have daycare listed?

[erinmi]

I haven't actually looked at our paperwork to see what our attorney put down for a net at the end of the month- our appointment isn't until the 27th.

When I filled out his form, which I am assuming he used to complete the schedules I & J, our income met our expenses including the two car payments with a positive of $25.00. I did not include our student loan payment because I forgot it as we are not paying on it right now -it is in forbearance. So technically, we would be about $250-$300 in the hole (not sure what our payment will be on the student loans).

So adding this raise will put us in the positive by about $300-$400 per month. Now I will admit we kept our expenses low (most were way less than the IRS guidelines) because we have been watching our pennies while we tried to dig our way out of our ever deepening pile of debt.

Does it really matter though if we will fall under the median income even after the raise? Can the trustees force us into a 13, if based on the law, we qualify for a 7 under the median income test? Isn't the means test only for those over the median income?

This is all much too confusing!

[ameliabedilia]

Didn't you say you would fall under the median even with the raise? I would do schedule I/J myself right now allowing for all the expenses including the student loan. If you can guesstimate what the new net will be with the raise then you can see what your schedules would look like. How much longer can you keep the loan in forbearance?

Actually everyone has to take the means test- at least the first part. As a matter of fact if you are under the median but still have more than about $150 disposable income you can be pushed into a 13.

[PaKettle]

You might be asked at your 341 meeting if anything has changed regarding your income or employment status. If they did as you would be obligated to tell them or lie.

I would discuss this with your attorney. If at all possible I'd find out exactly WHEN the first paycheck would come into play and then ask your attorney if you should re-figure your expenses considering the new job and student loan payments. (It sounds like you should be able to increase your expense profile so as to still qualify with the new job. If that is possible I think that might be the way to go. But I'm not an expert. I'd definitely discuss the ins and outs of this with your attorney!

[erinmi]

I would discuss this with your attorney. If at all possible I'd find out exactly WHEN the first paycheck would come into play and then ask your attorney if you should re-figure your expenses considering the new job and student loan payments. (It sounds like you should be able to increase your expense profile so as to still qualify with the new job. If that is possible I think that might be the way to go. But I'm not an expert. I'd definitely discuss the ins and outs of this with your attorney!

I will call them next week about it. When he has gotten a merit raise in the past, it starts with his next paycheck. But since this is also a promotion, I'm guessing it won't start until the 1st of the year. I think my DH needs to clarify this with his boss. It is a small company, and sometimes I think his boss/owner just wings it when it comes to this stuff. It is actually really finally paying DH for the extra work he already does

How much longer can you keep the loan in forbearance?

Student loan is in forbearance until September 2008. I'm trying to guesstimate his net but I haven't a clue how much his taxes will go up with this kind of raise. And trying to figure things out on the IRS's website is enough to make you go loopy