Loss of income

[laurannm]

Just got an unexpected surprise....as I have posted before, we are above-median debtors, with a small portion of income (approx. $550/month) coming from self-employment\1099. All of this income came from one company.

I was just informed by that company that effective Aug 29, they will no longer require my services, thus that income is coming to a halt.

We filed Ch 7, and our 341 is next Wednesday. Obviously our schedule I included that income. What effect will this loss have on our filing? I know we'll still need to include it on our means test.

If our Ch 7 goes through without any issues from the UST, then we are good to go. But if they decide to try and force us into a Ch 13, does the "special circumstance" rebuttal comes into play?

Thanks!! Little freaked out right now...

[FreshLikeADaisy]

Laurannm, you can bring that up at the 341: the trustee may ask you directly if you expect any change in your income in the next year, or you can simply throw it in when he asks the "true and correct" question, because that has changed since you filed your schedules. As you say, it must still be included on the means test, but it might change your schedules dramatically, so it's worth bringing up. If you were close to $0 in disposable income on your schedules before now, that will definitely put you in the negative numbers, won't it?

I'm really sorry, but I have no idea about the "special circumstance" rebuttal -- maybe someone wiser than me will chime in.

Good luck!!!

[laurannm]

Thanks

It's an interesting situation because the day after I filed, I received an unexpected raise of $280/month (gross). Now I am loosing $550, so it's a net loss of $270/month. I just spoke with my lawyer (yes, he works this late and he is telling me that the trustee will ask "if there has been a material change in income since filing", and he is basically telling me that it's up to us whether or not we want to mention the changes. I guess the key word is "material" and whether or not we feel it's significant enough to mention.

We are showing -$225 on our schedules, so it won't matter much there I don't think.

[Help!]

I think fate is working in your favor behind the scenes here in at least three important ways.

1) This loss of income shifts any above-median presumption of abuse working against you to a strong "totality of circumstances" argument in your favor.

2) You are able to assert that the means test CMI is obviously not representative of your current/projected income. This argument has been sufficient to rebut abuse or to persuade the UST to file a declination (and a point that strengthened our rebuttal).

3) It makes it clear that you are not "gaming the system". While an increase in income after filing would raise flags, a decrease in income could raise sympathy. It gives a strong impression that you've been doing all you can to repay your debts, but now you are truly in need of help.

When you are asked under oath if the schedules in your petition are correct, that would be a good time to bring it up (explaining that it happened days before the hearing and left little time to amend the petition).

I wouldn't be surprised if you were asked to produce documentation substantiating the income loss.

It is hard for me to explain this, but sometimes these strange turns of events that make you think "what did I do to deserve this?!" become part of a larger picture that produces a better outcome for you. I think you'll see this in a couple of months when you're discharged. You're in really, really good shape.

[TEW]

Sorry to hear about the job loss - I know first hand how difficult that can be. Fate is working in your favor behind the scenes on this one, though, in at least three important ways.

1) It shifts any above-median presumption of abuse working against you to a strong "totality of circumstances" argument in your favor.

2) You are able to assert that the means test CMI is obviously not representative of your current/projected income. This argument has been sufficient to rebut abuse or to persuade the UST to file a declination (and a point that strengthened our rebuttal).

3) It makes it clear that you are not "gaming the system". While an increase in income after filing would raise flags, a decrease in income could raise sympathy. It gives a strong impression that you've been doing all you can to repay your debts, but now you are truly in need of help.

When you are asked under oath if the schedules in your petition are correct, that would be a good time to bring it up (explaining that it happened days before the hearing and left little time to amend the petition).

I wouldn't be surprised if you were asked to produce documentation substantiating the job loss. It might be a good idea to get a letter from HR or at least an email to have on hand. I am guessing you will be asked if you will be eligible for unemployment benefits and if you know what the benefits will be.

It is hard for me to explain this, but sometimes these strange turns of events that make you think "what did I do to deserve this?!" become part of a larger picture that produces a better outcome for you. I think you'll see this in a couple of months when you're discharged. You're in really, really good shape.

[laurannm]

Thanks all

Help! - Your absolutely right....I was at first in shock but then realized that in a weird sort of way, this can only help us. And my lawyer pretty much said the same. And thankfully this was not my primary job, so things could be a heck of a lot worse.

Tew - I was also thinking the same. Worst case we get converted to a 13, but then a few months from now we should be below median and have a much easier time converting to a Ch 7.

I am still a little confused to how I should answer the trustee when he asks. On the one hand, I got the raise from my primary job ($280/month) the day after filing, but my lawyer advised that they typically want us to amend petitions only if the change is significant (10% or more). But then now I lose my 1099 income ($550/month), so in the end it's a net loss of $270. My lawyer is basically leaving it up to me as to how I want to answer. So I just tell the trustee "yes, my income has decreased by a total of $270", and only give him the details if he asks?

[TEW]

My lawyer said if I am asked anything to give the best honest answer with as few words as possible. She said lawyers love words.
I would say the income is less now.

[Help!]

After reading your post a second time I just realized you weren't talking about your main job/employer... editing the parts of my post that don't apply to self-employment. It still might be good to have something in writing, even if it's just an email clarifying that your services are no longer needed.

[laurannm]

Thanks Help...that was my fault, I wasn't very clear with my post.

I do have an email from my employer so I will be sure to bring that with me. If I am asked about a change in income, I am going to answer "my income has decreased since filing", and if they want more details I'll give that to them

[Help!]

My lawyer said if I am asked anything to give the best honest answer with as few words as possible. She said lawyers love words.
I would say the income is less now.

Good advice... really hard to do (keeping it short, I mean).