Nervous Ch 7 in NY - please comment

[happy_ira]

Hi all. I am very nervous about my chapter 7 filing; perhaps this is ordinary, but I'd like some additional input from the many on here who are going through similar ordeals. I live in NYC and earn a very good salary ($200K) but I also have huge expenses and a large family of 7 in addition to one child from prior marriage for which I owe monthly child support. Over the past couple of years, I've racked up $150k in credit card bills to pay for living expenses (not vacations!) and the only way out is... what? Debt consolidation? Bankruptcy?

To be clear, I don't live the high life--far from it. We live in (and own) a 3-BR apartment in the Bronx (which I plan to reaffirm). Have not taken a vacation in years. Kids don't attend ritzy functions. I wear the same shirts to work for the past few years. My shoes are 10 years old. We have one family station wagon. Etc. We had moved out of NYC for a few years, then moved back and the intent was for my wife to work as well since things are so expensive here, and the mortgage alone gobbles up 40% of my paycheck.

Unfortunately, in the midst of all this, my wife got pregnant and then got sick. So the baby was *very* premature weighing one pound with Chronic Lung Disease, thus my wife was unable to work while caring for the baby. And so, lots of debt to pay for living expenses (clothing, diapers, etc.). Sometimes I charged the credit card directly for these things, other times I would do a balance transfer to cover the shortfall of impending bounced checks.

I poked around the web and read up on debt consolidations, but I could barely afford that. (In case you're wondering, between my mortgage ($4,000 per month) and child support ($1,000) along with grocery ($1,000) and bare necessities ($1,000), the utilities ($400) etc.... there is a negative balance that I end up waiting to send in telephone payment or so on. Eventually, I met with an attorney who recommended Chapter 7, because there were simpyl too few choices. My Sched I minus Sched J is negative, which made me a good candidate for Ch 7 (not Ch 13).

I got my notice in the mail yesterday about the initial hearing with the Trustee. Well, apparently, he has a tough reputation in NYC so I am very nervous even though I believe bankruptcy is genuinely the right thing and I need a fresh start.

I'm a bit nervous that the Trustee (after asking the initial boilerplate questions) will ask something like: "You make $200,000 and I see you are still at negative income for the month. How are you going to manage after CHapter 7? GO into more debt?"

What would be a good response? Of course, I believe the baby is getting better and soon my wife will be able to work, thus it will contribute to household income (but not yet). Will this change the situation? What shoudl I say?

I have more questions... btu this is for starters. Thank you.

Confused.

[soleprop]

you should say what has been happening is obviously not working, you need the relief that bk provides, and the fresh start. you have some positives you're hoping will work out (baby better, wife working), and you're hoping to learn something from the financial mgt course you have to take as part of bk filing.

also you live in an expensive location there have to be some allowances made for that. it sounds like the trustee will see you're not driving matching benzes around and swilling dom while you munch the caviar.

relax, they won't ask all of the stuff you're worrying about. your toughest gig might be stuffing your life into the exemptions available to you (fed or ny state, unsure how that works for you).

good luck, keep posting, we'll keep giving you perspective.

i read what you had to say and i don't think $200k is much wage for that size family in that location. if you were in arkansas, maybe.

[BKParalegal]

I have never seen where a trustee asks how you are going to pay your bills after BK, all they are concerned about is can you pay your bills without filing bk, and do you have any assets that can be liquidated. People tend to forget that a BK Trustee is doing this job to make money. They get paid $60 a case to review a Chapter 7. Where they make their money is by acquiring(seizing sounds to abrupt) non-exempt assets. They do this because they get 25% of the first $5,000 and then it is a sliding scale down from there. So frankly, they don't care what happens to you after the BK (except for a windfall) they are trying to find assets to make some coin for themselves.

Good Luck

[jessegirl]

Hi and welcome. I understand why you are nervous. I am very nervous too. Although, my hubby does not make that much money, he does make a decent salary. I have ALOT in CC's More then you! I am very nervous about my 341 meeting as well. I worry about the same question, cause obviously after its discharge there is going to be more money left over and we will be living alot better. When I asked my attorney that same question, he says look, there are laws and you fall under the median after your deductions, so I wouldn't worry about it. You have to listen and trust your attorney. I wouldn't mention to the trustee that your wife is going back to work. Don't give them any more info. then what they are asking for. Right now she doesn't work right? So don't say that is going to. Just because you make a good salary doesn't mean that you shouldn't be treated the same as people who make less. If you qualified for the chapter 7 then you are entitled to it.

Its very expensive to live in New york City and then to taken care of that many children, its EXPENSIVE!

A chapter 7 is the right thing to do. Hubby and I looked into debt relief and those are all scams in some way. The chapter 7 will give you a fresh start and thats what it is meant for.

Sorry to here that the trustee that you got is a toughy.

Everything will turn out for the best. Goodluck...

[Tabbygirl]

First off, I am glad your wife and baby are doing better. That's the main thing; bankruptcy or not.

I honestly wouldn't worry too much about the expenses; the cost of living is high; that's well known--plus you have a large family. There are five in my household, and we spend about $700 or more/month on groceries, so you are right in line in that regard. And your utilities are nothing --we are in Texas and ours are always over $400 and we're fairly frugal (summer heat is what kills us w/ the air conditioning). Your expenses probably aren't as ourageous as you think.

If you are truthful with the trustee--as I plan to be--I am sure you will have no problems. My 341 is on 8/28, so I'll let y'all know how the truth and honesty format works once I get through that!!

Best of luck and hang in there. I am sure your case will do fine.

[Cali]

Hi and welcome to the forum.

I live in an expensive area as well and our income is pretty close to yours. I didn't have a problem at all at the 341. No one questioned our income, our expenses(since most were over the allowed amount for this area), so I am sure yours will be fine as well.

Good luck!!

[happy_ira]

Hello again all. Thanks so far for your replies. Some more questions and thoughts buzzing around my mind... please, please through to the bottom of this post where my questions are in bold. Than you all so much!!

Before I met with my attorney (whom I have a lot of confidence in), I was totally lost. Sure, I had read things online, but I finally had a better picture after I finally met with him (I got a solid referral from someone about him). I filled out the paperwork in July and August. He and his paralegal reviewed the forms, he had questions, we revised and edited, until we finally agreed on the correct amounts and forms.

One question which I alluded to above and can;t seem to find an easy answer online (even after a Google search): my Sched I minus Sched J is negative by about -$300. Specifically, my gross monthly income of $16,000 (try not to faint) is less than my monthly expenses of $16,300. None of the line items I filled out were any "red flag" ones that required additional proof why I spend on them. Instead, it was merely a function of standard deductions and things like high mortgage and co-op maintenance in the form of my secured debt.


Oh! As I mentioned above some of my CC debt was purely charging consumables and house functions to the cards. Other CC debt is because of balance transfers into my checking account to cover checks that would otherwise bounce (e.g., child support, groceries, etc.). I have not charged any credit cards or balance transfers in 4 months (120 days). My attorney said the lookback period was 60 days and he specifically set aside time to look deeper into baalnce transfers and doesnt think there'll be an issue because a) I did the balance transfers for "living expenses" and b) I had not done any txfrs for well beyond the period not allowed prior to filing. He seems fairly confident (not arrogant) that I am doign the right thing. Any re-assuring thoughts?

I'm just still nervous (you know how it is in our nervous minds) that the Judge/Trustee will think I'm full of crap (which I am not). And bear in mind that my -$300 is BEFORE paying the $4,000 in monthly credit card minimums (which I am not doing now because I can;t afford it and I have stopped transferring from one card to another just to perpetuate the vicious debt game).

What if he says: "Hey, how are you making ends meet today if you are $300 in the hole?" Will he believe that I try to stretch out my payables until the very last day? Will it truly be okay that I am 'hopeful' the baby will get better (she is) and my wife can start working again? Isn;t he going to say "well, gee, you dont need bk since you'll eb having a second wage-earner soon." ??

Also, I received a bonus in January of $40,000 (again, try not to faint--these figures are not really too high if you live in NYC), which went largely to pay off credit cards and such. HOWEVER, my monthly gross of $16,000 excldues this bonus since the monthyl average is based on past 6 months (the bonus was in January). Could the Trustee say: "Hey, wait a sec, you're going to get another bonus, so you'll be rolling in it?" My response, I think, should be... what??? Will he buy the truth: "The bonus is not guaranteed and with the tough economy, there is a likelihood that "bonus" will be a dirty word this year with no payouts." (This is true---my bonus is NOT guaranteed.))


I'm just very nervous that in my little mind these are all huge special issues, when in truth, I think everyone has their uniqueness in their cases. What do you all think?

Many, mnay thanks for the comfort and input.

[BKParalegal]

Let's not confuse the Trustee's job with the responsibility of the credit card companies. The trustee will look at use of the cards, and inquire about large purchases. However, his role is not to necessarily determine credit card fraud as much as it is the credit card company, and they do this by filing an adversary to your petition. Your attorney guided you correctly to minimize any likelyhood of the cc's pursuing what would inevitably be a fruitless pursuit.

You stated it correctly, in regards to your bonus, you cannot guarantee nor expect a bonus and the trustee can't either. The fact that you may or may not receive a bonus is on par of you may or may not have a job in the future(not literally, this was just for example purposes)

The trustee won't even know about the past bonus let alone the future one, since it is not anywhere in your paperwork.

Good Luck

[happy_ira]

The trustee won't even know about the past bonus let alone the future one, since it is not anywhere in your paperwork.

Well, the old bonus will show up on paystubs if he requests them. As for the next year bonus, there's no such thing, so that oen cant possibly showe up.

[BKParalegal]

He can't the BK Code in regards to the B-22 only allows a 6 month record of your income. Now he can look at prior year tax returns and compare income to date, but that would be stretching it at best. You said it before, that you feel like your situation is unique, but I have filed 1000's of BK's ( no Flamingo I am not soliciting for business) and many clients had and will get bonuses, and we time the filing as best we can to avoid that being counted. It is a common practice and it is no cause for alarm. A trustee is not stupid, but the law is the law, and it works for you and against you depending on how you use it.

Good Luck

[WoodSprite]

Ira, I think BKParalegal has given you (and all of us) some excellent advice -

I have never seen where a trustee asks how you are going to pay your bills after BK, all they are concerned about is can you pay your bills without filing bk, and do you have any assets that can be liquidated. People tend to forget that a BK Trustee is doing this job to make money. They get paid $60 a case to review a Chapter 7. Where they make their money is by acquiring (seizing sounds to abrupt) non-exempt assets. They do this because they get 25% of the first $5,000 and then it is a sliding scale down from there. So frankly, they don't care what happens to you after the BK (except for a windfall) they are trying to find assets to make some coin for themselves.

As for the amounts, you know, I'm sure your $16,000/$16,300 feels exactly as scary as my $1,520/$1,690. We're in exactly the same situation - albeit in different worlds. An NYC trustee, however tough, is going to be accustomed to seeing those sorts of figures and isn't going to make the assumptions that us upstate country bumpkins might!

I was terrified about the possibility of losing my home and my land, and since I was re-affirming a car, I was worried that the trustee would grill me about how I intended to pay for it, but as BKParalegal suggests, probably all she saw was another boring no asset case with no presumption of abuse. The faster she could get on to the next case, the more money she'd make - and maybe the next case would involve some nice juicy non-exempt assets. What a relief to realize that just because my "unbuildable" three little acres of forest with no access to electricity is the most important thing in the world to me, doesn't mean it's of the slightest interest to anyone else.

It sounds as if you're being honest, and you're in good hands. So I say listen to your attorney, and keep coming here, both for moral support and to learn as much as you can about the process. Rejoice in your family, and try to focus on the future.

[happy_ira]

Thanks for the additional comments and support, Woodsprite and BKParalegal.

While this info here is invaluable, I'm also more nervous than ever. I like my attorney and he has 20 years experience dealing in NYC with many "high wage earners" and he feels comfortably confident in my case having an excellent chance (he is not cocky), but he's still a busy attorney. So I don't get the detailed level of attention and info I need (after all, to me the filing is the entire world; to him I am another client).

I'm presently distraught over two things that I can't wrap my head around and hope someone can help here:

1) My automobile, which alluded to above: After my filing, within a day actually, I suddenly realized my car lease was ending. Yes, I had been asleep at the wheel (no pun intended) and focused on my BK and family, the dealer called me and said "Are you converting this to a purchase or are you returning the car?"" Needless to say, I can't have my family of 7 go without a car (albeit a 2007 station wagon). And naturally, who is going to lend me an auto-financing after my BK filing? So I converted it into a "purchase" and financed the car. Unfortunately, before I could stop the Ch 7 paperwork, it was filed without mention of this new asset. I am painfully honest so I feel I need to "pull" the filing and redo a whole bunch of forms (also because my monthly payment went up a little because it is now a purchased vehicle). What do I do?

2) OMG. I am losing countless hours of sleep over my 401k loan re-payback which I have no choice but to repay. It is an automatic deduction of $1200 per month (yes, that is the monthly deduction). If I left the compnay tomorrow, I'd have to pay it all back (which is impossbile because I dont have a red cent to my name). Well, today I called the company who administers the plan (Fidelity) and said "hey, I'm having a hard time making payments and have a lot of expenses." Can I stop paying for a little while? Naturally, the rep said "Nope. The deduction will continue involuntarily for as long as you are employed... unless you file bankruptcy in which case yoru company will defer payments for a time" WHOA! That last piece was new to me. No other rep had tole me in all the times I called. Which leads me to believe the Trustee will add back the deduction and it'll possibly push me over the Means test.

SoI hav ea call in to my attorney, but until I hear back from him, I need peace of mind!!! Do you know if I will be able to amend the filing ASAP before my inital hearing? I dont even want to go the first hearing with the way things are.

Thank you for the support and knowledge, as always.

[WoodSprite]

I like my attorney and he has 20 years experience dealing in NYC with many "high wage earners" and he feels comfortably confident in my case having an excellent chance (he is not cocky), but he's still a busy attorney. So I don't get the detailed level of attention and info I need (after all, to me the filing is the entire world; to him I am another client).

I hear that! Try not to be so understanding, though, that you don't press hard enough to get your questions answered. (It takes one to know one...)

After my filing, within a day actually, I suddenly realized my car lease was ending....I converted it into a "purchase" and financed the car. Unfortunately, before I could stop the Ch 7 paperwork, it was filed without mention of this new asset. What do I do? ...Do you know if I will be able to amend the filing ASAP before my inital hearing?

You'll definitely be able to amend the filing before your 341...you've got 60 days, right? Now whether or not your attorney will charge you for that, who knows. It's got to be done, though, and it's not all that unusual.

I'm really sorry to hear your car payments are higher - that's the last thing you need at this point - but of course it actually helps you in terms of the BK, since you have even less money left at the end of the month. What I'd worry about, though, is how much equity you've got in the car. We only get a $2,400 exemption in NY. Another thing to ask when the atty calls back.

I am losing countless hours of sleep over my 401k loan re-payback

Oy...the 401K thing is worrying, but remember you're paying your attorney good money to worry for you. (I should have such worries...I cashed mine in in a stupid, futile attempt to avoid all this. Before I found this forum, obviously, and before I ever considered BK. I had no idea it would have been exempt...) I guess I'd want to know whether your company WILL defer payments, or whether it MAY defer them.

I'm just guessing, here, but possibly it's to do with the stay against creditors that happens as soon as you file? Even the "good guys" are required to cease collections activity - I was surprised to find that this meant Honda stopped sending me regular monthly bills I needed to pay to keep current. (Watch for that, by the way, with your new loan, which you'll now need to re-affirm). I got a letter telling me where to keep sending checks to them, but it was buried in a bunch of re-affirmation paperwork, and I could easily have overlooked it. Anyway, maybe that's all it is.

Hope you get a call-back soon!

[fltoo]

Agreed, so glad BKparalegal is back because her advice is very sound. Although not accepting it as legal advice, having an experienced person giving her time is invaluable.

[momof5]

I'm a bit nervous that the Trustee (after asking the initial boilerplate questions) will ask something like: "You make $200,000 and I see you are still at negative income for the month. How are you going to manage after CHapter 7? GO into more debt?"

Have you answered this question yourself?
Thats probably more important than even the Trustee questioning you although I have never heard of that happening.

I see your income is $16,000 a month and after going through all the amounts you have mentioned it still doesnt add up to that. You do not include the $4,000 in credit payments that you are currently not paying.

While I am not here to question what you have written, I also think for your own sake you need to really take a close look at your expenses and figure out a budget. You need to become a 'team' with your wife as well. You dont mention her spending habits. I imagine though she has become accustomed to a certain type of 'lifestyle'. You really are going to have to figure out how to survive post BK.

I am in New York as well... not in NYC but on the other side of the state. I have 5 children and we live very modest on less than $35K a year at this point. While that probably sounds like peanuts its about average in this area. We have had to give up many of the luxuries that we enjoyed while using credit. By we, I mean each and every member of the household.From ages 39 down to 6.