HELP! Too much income for Ch. 7?

[nodinero]

All:

I have an attorney whom I feel is pushing me towards a a Ch. 13 because I make near six figures. However, I owe 320K of personal debt, and 480K considering some business debt from a failed business no longer operating (debt in business name, not personally gauranteed). Ch. 13 ceiling limit is currently 307K.

Am currently living in a 300K house I sold legitimately for FMV to a relative (within an arm's length transaction, but was sold for very near appraisal value). I pay the pmts. and consider it a "lease". Lease pmt. is near $2K.

My attorney's concern is that BK Trustee will will see the 2K lease pmt on house and near six figure income, and think that I have ability to pay back creditors, even though with utilities, groceries, gas(!!!) and expenses my family and I have very little to no money typically left over each month.

Attorney wants to "trim" the personal debt of 320K down hear the 307K ceiling limit, so that if Trustee initiates an adversarial proceeding, case can be converted to a 13... He says that if Trustee dismisses Ch. 7 and debts stated exceed 13 limit, that I'll be forced to file an "11" or do nothing. He says with my income/etc. I stand a 1/3 chance of making it through to Ch. 7 discharge. Yet, I'm thinking I have no valid way to pay back $320K...

I've asked if BK Trustee can make me move out of the house, he says no, but he can dismiss the 7.

He wants to know tonight if he should rework my case as a 13 instead of a 7 - he says he feels more comfortable that way. I want to file soon with the new law change. I am also concerned that if Trustee throws out the 7, can I "convert" to a 13 under the current law or will I be refiling under the *new* law?

Our (my wife and I's) goal is to just get rid of the past, keep/stay in the house we're leasing, and keep my current good job, etc. I'm getting the feeling though that you can't be in my position to be in Ch. 7!!!

Any thoughts? Help!?

[StaciMM]

The only advice I have is to try to find another attorney or 2 to consult with. (It won't be easy, some are not taking new clients right now.)

If you compare your housing & utility expenses to the IRS standards for your county/state, where do you fall? If you're not extremely over, and can document (check copies) the payments made I can't see where the problem would be.

How does your attorney propose to 'trim' $13k off your debts? That sounds shady and would concern me...

[nodinero]

Thanks for your post, StaciMM.

I am about 50% over the averages for my state (Ohio), in income and expenses...

Atty, plans to "trim" by using basis (principal) amounts on debts and not an up-charges, interest, late fees, etc. Seems reasonable and legal.

[hhou812hh]

Besides the fact that it's more expensive are there any drawbacks with you filing a ch11? I know it's similar to a 13, pretty much a reorganization. It's like your in the middle, earning too much for a ch7 and won't qualify for a ch13. Sorry I couldn't help. Keep us posted.

[nodinero]

I've decided to have Atty shoot for a 7 and hope for the best. If dismissed then I will file a petition to convert to a 13 hopefully under the current law based on filing of before 10/17.

[nodinero]

All, thanks for the great responses. I just thought of something as I was reading through this excellent board - If I have my attorney file the 7 and the Trustee in my case does not go for my budget (with the high home lease payment), and dismisses the 7 case and I have to convert to the 13, what happens then with regard to:

• Will the "converted 13" be under the old or new law?
• What if I can't afford the 13 plan payment, I can never go back to 7 then can I?

Anxious for a response...

[HHM]

I think your attorney is giving you sound advice. I think you do want to trim the consumer debt to under the chapter 13 ceiling so you have that option...in the event a chapter 7 won't work, (which honestly, if your making six figures, it probably won't), then you have the option of a 13.

Remember, in a chapter 13, you don't pay back all your debt, you simply pay back what you can afford to pay back, your disposible income.

But yes, if you first attempt a chapter 7 and it gets converted to a chapter 13, you generally cannot go back to a chapter 7 (at least not automatically).

Given the amount of debt and your income, chapter 11 is worth exploring, but is a very expensive propositin, the filing fee alone is as much as what most attorney's charge for a run of the mill chapter 7. But a chapter 11 is a far more expensive proposition in terms of attorney fees and costs.

[nodinero]

Thank you, HHM, very much for your info. Do you know if the Ch. 7 doesn't go through, will I be able to continue the current case with the original petition filing date and ask for a "conversion", or will the whole process start over (my concern is the new law 10/17)???

Also, are there hard and fast income rules? I have found case law where couples making $95K collectively had Ch. 7's dismissed, but I have heard other occasional instances of higher income folks getting a 7??

Thanks in advance.

[Teri]

Just a question - for credit card debts, can you go back to your last credit card statement that had any charges on it and use that amount....the months of late charges/interest not included? If you did that, would everything still be discharged?

[HHM]

Thank you, HHM, very much for your info. Do you know if the Ch. 7 doesn't go through, will I be able to continue the current case with the original petition filing date and ask for a "conversion", or will the whole process start over (my concern is the new law 10/17)???

Also, are there hard and fast income rules? I have found case law where couples making $95K collectively had Ch. 7's dismissed, but I have heard other occasional instances of higher income folks getting a 7??

Thanks in advance.

I honestly don't know the answer to your first question. However, I think that even under a conversion case, the date of filing is the date you originally filed BK, but I don't know for sure.

There are no hard and fast rules for income in that there is no set maximum amount of income for getting forced into a chapter 13, it has to do with your ability to repay your debts and the reasonablness of your expenses. But generally, unless you live in an expensive city, it will be very difficult, but not impossible, to stay in a chapter 7 if you make over $100,000 per year.

[HHM]

Just a question - for credit card debts, can you go back to your last credit card statement that had any charges on it and use that amount....the months of late charges/interest not included? If you did that, would everything still be discharged?

Why would you do that? In most circumstances, the amount of total debt is not an issue. Your entire debt to a particular creditor is discharged regardless of the amount you list on your petition.

However, as in nodinero's case, the total amount of unsecured debt can make a difference as you can only file a chapter 13 if your total unsecured debt is less than $307,675 and total secured debt is less than $922,975. Thus, your options are to file a chapter 7 and have significant assets liquidated or file a chapter 11 (which is a whole different ball game).

The amount of debt is calculated at the time you file bankruptcy, so if there are accumulated interest and late fees, that goes into the calculation.

[Teri]

Thanks HHM - the closer we get to filing, the more nervous I am getting. I started worrying because our income was high for a chapter 7 (which dummy me....I didn't even think about until I read a few posts here) I wanted to be sure that if worse came to worse we could convert to a chapter 13 - then I read about the $307,000 (not realizing that that was unsecurred and then $922,975 for securred)....whew, we are way under that.

[nodinero]

Update...

Filed Ch. 7 yesterday via attorney and got a case number... Fingers crossed with my income and my large rental payment...

[sunshine08]

Wish you all the best. Remember the forum and let us know how it all works out. You have an unusual case.
I think the fact that you found an attorney to file it that way maybe helps. Have you checked into your attorney's "batting average"?

[nodinero]

No, but he was a referral from a tax attorney I had used. He seems to be handling, a lot, I mean A LOT of cases right now... And, I feel very good and comfortable about him...