My Scenario

[bitesnails]

I had posted this in general but didn't get too much of a response there, I was thinking it might be better suited for the type of filing I am trying for so I am posting it here, feel free to remove the other one moderators if you deem necc. , and sorry--


My Situation:

Family: (6) My wife and I + 4 small kids
Cars: (2) paid for (with refinanced house funds!)
Home: (1) 1st and 2nd combined payment $2,300 - same lender - fixed rates
no equity as I refi'd a year ago at 100% and tapped it all - home is
currently below loan value by $30k maybe less - payment is current
Credit Cards (10+) $40k+ in debt - still current at the moment , but fading
Income (2 wage earner) both my wife and I have secure employment and gross about $80k per year
State: VA - Median Income says $46,056 for (1) wage earner and in the 4 person column it says $79,931 add the $6,900 (it says to add for each additional) and you come up with $93,731 for a total of 6 people in the house ( I think this is what it means)

**On median income I'm not sure if that list means the number of wage earners or is that (1 earner) column just supposed to represent the total household income and the subsequent columns just mean per the size of family the number changes to this--but is there another chart for (2) income earner families or is this it--i'm confused on this part as you can see**

We have decided we have to let go of the house and are looking to rent, we are upside down equity wise and the immediate real estate market doesn't look hopeful here.

Questions:
1.)Would Chapter 7 be a good choice for us or is it possible?

2.)I'd like to get a rental before my credit gets trashed is that smart or not?

3.)If you take our mortgage payment and cc bills away we look good on paper again financially speaking...when I go to the trustees office are they going to look at that and say "are you nutz...you are fine!!" or are they going to look at my prior situation vs. my midstream situation?

4.) Can you have cash in the bank midstream or just prior to filing or does that look bad? Obviously if you stop paying your bills just prior you will have more money accumulating? This part makes me dizzy.

5.) Been using the cards up until yesterday, discussed this with wife today, nothing but gas, food, minor purchases...does this look bad?

6.) My biggest question is timing...when should I file based on this in your best opinion? Should I let the bills run for a few months upaid not using them etc.

7.) How long would you normally have in the house before they actually kick you out?

8.) Is filing yourself or using one of the online form filling solutions ok? If so which ones?

9.) What are the average fees for a straight 7 for an attorney assisted BK?

Think thats it for now...sorry it was so long

Thanks in advance,

[JRScott]

1. Based on what you say above then yes you'd qualify.
2. Depends on the current rules used by Trustees. If they allow you to use a mortgage on the expense forms even if surrendering then get the rental first, if not you might need to get the rental after filing.
3. If you have disposable income left after all allowed expenses then you would be put into a Chapter 13, however many of us overlook expenses oftentimes.
4. This depends whether or not you can exempt the amount. In most places it is best to have a minimum in your checking and savings. Excess can be used to get a doctor's check up, eye doctor, dentist, car maintenance and other expenses we sometimes neglect.
5. Many lawyers will ask you to wait until 90 days after the last credit card use to file. So long though as it was not for luxury items that is it was everyday living expenses it does not matter as much. If they do challenge a charge and prove it to be a luxury (which is hard) then you'd only owe for that charge still.
6. I would put if you are able 90 days from last card use at least. Use the money to save up for the lawyer by not paying the credit card bills. Since you are surrendering the home you might could also not pay it, after not paying it a month or two see if they'll renegotiate .
7. Depends on laws in VA. Foreclosure generally is a slow process and can take up to a year in some places, I'm not sure of VA law though.
8. You can file Pro Se, if you want or think you might want to I'd use the links on this forum (General Bankruptcy Forum here) to get a NOLO bankruptcy book, it will be invaluable. We have had several Pro Se filers on the forums, the key is a willingness to learn the process and the ability to work hard on it.
9. Depends again on your area, I think mine costed around 1800. However most lawyers will accept a payment plan where you pay them a little each month and they will deal with creditor calls. Once paid in full they'll file the paperwork.

It's okay You're Welcome

(The 93k is what you'd use in the means test for a family of 6 )

[bitesnails]

Thank you so much for the advice, very helpful indeed.

So I need to look into what expenses are allowed I suppose especially some of the not so obvious ones we tend to overlook.

**I thought that if you make under the median income for your state you automatically qualify for Chapter 7...I thought figuring out expenses and disposable income was if you had to go to stage 2 of the means test. So what you are saying is even if you do make under the median, they still look at all your expenses, & disposable income ratios and can convert you to 13? I find that odd because most sites I have absorbed info from state that if you are under the median income the means test stops there.**

example quote form a site:

This living expenses list contains typical living expenses that, when subtracted from your income, determines your amount of disposable income. Disposable income comes into play if your income falls above the state median, therefore requiring you to take a means test to determine whether you qualify for Chapter 7 bankruptcy.

Does the Trustees office answer questions about allowable expenses etc.? Or does anyone have a good link on that type of information?

Thanks

[StartingOver08]

The Trustee represents your creditors. The reason you hire a lawyer is to have someone represent you.

My lawyer costs $2000 plus about another $800 in misc court filing fees, mandatory credit counseling fees etc for a total of $2800. The fee has to be paid up front in a CH 7. Most people stop paying cc's to save for the fee

BTW, you are on one of the best sites for BK info. Just keep coming with questions. Also, you can get many of your questions answered by an attorney by going to the free consultations. Interview 3 or 4 attorneys. The initial interview is usually FREE! If you go in with your specific debt/income info, you are more likely to get relevant info.

Are you being pressed right now with a lawsuit? Because you want to put as much time as possible between your charges and the filing date. Besides BK discharges the past debt. Once you file, you are responsible for current debt like ongoing HOA fees (even if you surrendered the house but the deed is still in your name).

Check the exemptions for your vehicles in your state. You might have to give up the cars to the BK estate since they are assets so you need to have a plan for the vehicles. Many people get a vehicle with payments prior to filing.

[bitesnails]

Awesome info , thanks , I will check on the car situation for sure.

[JRScott]

The means test is just one part of the petition. If you are under median the presumption of abuse does not arise and thus you tentatively qualify for a Chapter 7. (If abuse rises you do not qualify for a 7 and have to file a 13)

However if when compared Schedules I and J if you have as little as 150 dollars left a month they can still put you into a Chapter 13 as you have sufficient disposable income to make the payments.

Expenses sometimes overlooked includes medical (if you don't go a lot you sometimes forget), eye care, dental care, car maintenance, property taxes, car tags, car inspection. Most folks are also skimping on the clothing and food budgets at this point too.

[RedLight]

JRScott is right. We were really close to the median income and our attorney sat down with us and "tweaked" our expenses to leave nothing left. I think we had like $2 a month left over by the time she was done. Things like dry cleaning and other items we didn't even think about. I think you will qualify for a chapter 7...just find a good atty now.

[bitesnails]

Thanks again for all the good info, this site has been so helpful.

[bitesnails]

JRScott is right. We were really close to the median income and our attorney sat down with us and "tweaked" our expenses to leave nothing left. I think we had like $2 a month left over by the time she was done. Things like dry cleaning and other items we didn't even think about. I think you will qualify for a chapter 7...just find a good atty now.

Love the FICO spreads in your signature lol. I know I'm above 720 right now and headed down fast. I am actually looking forward to taking myself and my family off the grid and learning how to live on cash again. When I was in my 20's I lived on cash, no credit, best financial times of my life. I sometimes think that the Credit Scores, the House , the American Dream we all sometimes chase is actually what keeps us down and in place. I'm hoping even though this feels bad to me sometimes, that it will somehow turn out as something right.

[TEW]

Love the FICO spreads in your signature lol. I know I'm above 720 right now and headed down fast. I am actually looking forward to taking myself and my family off the grid and learning how to live on cash again. When I was in my 20's I lived on cash, no credit, best financial times of my life. I sometimes think that the Credit Scores, the House , the American Dream we all sometimes chase is actually what keeps us down and in place. I'm hoping even though this feels bad to me sometimes, that it will somehow turn out as something right.

I think your right. I got divorced got rid of all debt no CCs no nonthing. I was going all over the place doing things. I knew how much I had to spend if I didn't have it I didn't do it.
wait till you see your CR about a month after you file all zeros

[bitesnails]

The means test is just one part of the petition. If you are under median the presumption of abuse does not arise and thus you tentatively qualify for a Chapter 7. (If abuse rises you do not qualify for a 7 and have to file a 13)

However if when compared Schedules I and J if you have as little as 150 dollars left a month they can still put you into a Chapter 13 as you have sufficient disposable income to make the payments.

Expenses sometimes overlooked includes medical (if you don't go a lot you sometimes forget), eye care, dental care, car maintenance, property taxes, car tags, car inspection. Most folks are also skimping on the clothing and food budgets at this point too.

I was reading this gain and had a question:

"...(If abuse rises you do not qualify for a 7 and have to file a 13)"

How does 'abuse' arrise?

I am struggling with the concept that they look at your gross income for the median income qualification in the means test...then they look at your net every month - all your expenses to see if you have a $150.00 left ?? I still can't wrap my head around that.

We have $4,600 a month net income

We have currently in bills:

CC's = $1,500 a month in min pymnts
Mortgage= $2,300 per month
Child Care= $800.00
Gas and Food= $800+ a month
Utilities= $450
Insurance=$125
Medical gets taken out of our checks , about $450.00 for medical.
Misc. Stuff with 4 kids= $400+
probably more but thats just rough(obviously there are things you don't put in)

So...as I've stated before...and I guess I'm just torturing myself here, is that if you take away the mortgage if we walk away (which we are), walk from the cc's which we are...how on earth could we justify not going 13? I just don't get it.

You file BK because of your present situation and then the Trustee is going to work your numbers based on what you have left after you have eliminated the reasons for filing in the first place? I need a fresh start but it seems the more I think about it I'm still trapped, I'm damned if I do and damned if I don't type of scenario here.

I'm figuring that if you take out the mortgage (and the trustee doesn't allow it as an expense) and the cc bills...I'll have enough income to save again and take care of my large family on a cash basis again, stay out of trouble and not live on credit cards for essentials.

Thanks,

[mmenz22779]

your child care is only 800 for 4 kids WOW

Mine is 1600 for 2 kids

it is also a big expense on my chapter 7 means test.

[JRScott]

Well you'd want to replace your mortgage expense with your rent expense in that case. Which even if its half what your mortgage is or higher I don't think you'd be in trouble.

What kind of school fees you pay?
Haircuts?
Did you include maintenance on the car?

Okay lets see:

Home Maintance
Electricity
Heating Oil
Telephone
Cable TV
Internet
Food
Clothing
Laundry and Dry Cleaning
Medical and Dental Expenses
Transportation
Entertainment, newspaper, magazines
Charitable Contributions
Homeowner's Insurance (probably in your mortgage)
Life Insurance?
Health Insurance?
Auto Insurance?
Taxes (that are not deducted from payroll/incl in mortgage...this is like your county property taxes, etc)
Transportation (not counting car....oil, maintenance, gas, tires, inspection, license plate, driver's license)