How to pass means test without quitting job?

[squeeze]

A few years ago I signed a number of large scale advertising contracts for a company that has since closed. As it turns out, the fine print on the back of these contracts stated that I agreed to be personally liable for the entire contract. The business closed without paying the contracts. The creditor sued, and a judgment was awarded against me for hundreds of thousands of dollars. It was a default judgment, and I've only recently discovered this entire situation.

Probably the easiest way out of this will be to file Chapter 7. The challenge is that after struggling and scraping the bottom for the last few years, I've finally landed a job that I love, and that pays well.

So, I have the following questions:

1. Assuming my employer agrees, can I reduce my income by shifting from full time to part time during the 6 month window associated with the means test? If so, how would the courts interpret this? Could this reduction be initiated by me, or would it need to be initiated by my employer?

2. Can I reduce my income by taking unpaid leave? (probably no, but thought I'd ask!)

3. I currently work on a base + commission structure. If my employer lowers my commission without explanation, are they at risk of fraud?

4. I'm a valued employee, and my employer would likely want to help me. Yet it seems to me that even discussing this with my employer would likely expose them to charges of fraud. Is there any safe way to talk with an employer about "creative" ways to reduce my income?

[squeeze]

By the way, filing Chapter 13 is not an option.

I'm not going to spend the rest of my life paying this debt. I'll quit my job if I have to, but it's either settlement (unlikely) or Chapter 7.

[biotechsolution]

If the judgement is more than 50% of your total income it would most likely
be considered business debt and therefore you wouldn't be subject to the means test. Get yourself a good attorney.

[squeeze]

This is a fascinating statement. Can you please clarify a few details of this?

* If the debt is classified as business debt, why would this alter the requirements for the means test?

* Can you point me to any specific section of law that clarifies this "50% of total income" rule?

Thanks

[mtbc]

http://tinyurl.com/ygufvfm doesn't quite answer your questions but may be interesting nonetheless.

[biotechsolution]

If the judgement is more than 50% of your total income it would most likely
be considered business debt and therefore you wouldn't be subject to the means test. Get yourself a good attorney.

50% of total debt.

[HHM]

You may want to review if your case qualifies for a non-consumer chapter 7 bankruptcy. But as was pointed out, the business related debt must be 50.1% of your TOTAL debt (That includes counting your mortgage as consumer debt).

I wouldn't involve your employer in any sort of BK fraud. Let's be blunt, that is what you are talking about. Intentionally hiding assets (income) with the express intent to hinder, delay and hide the income from your creditors. Let's say you file BK and this scheme gets discovered, the court can "deny your discharge." That means that NONE of the debt that was part of your BK will ever be discharged, ever.

I am not sure how paying 5 years in a chapter 13 is spending the rest of your life (unless you are in your 70's or 80's. If you do NOTHING, you will probably end up with a wage garnishment that can last indefinitely.

[music12]

i am not sure it's fraud, because the OP does not seem to intend to get the income and hide it, but rather not to get the income for 6 months. it certainly sounds like cheating, but it's not hiding assets. i haven't seen any prohibition anywhere on quitting a job before bk. i don't know about getting wages decreased.

anyway, it certainly feels like gaming the system, which might be fraud, but it's not fraud due to hiding assets but due to gaming the system. try to ask a lawyer as a hypothetical question...

[squeeze]

There is no intention to hide assets, only to reduce income for 6 months.

This does seem like "gaming the system" and if gaming the system is identical with fraud, it's fraud.

Yet there are more questions here ...

1. The court often allows a person to file within months after they have quit their job. This is a fact. So why would the court fail to allow a person from filing within months after they have switched their job from full time to part time?

2. How could a chapter 13 filing resolve this debt in 5 years? Anyone care to explain this one? At my current income, it would take at least 10 years to pay off the principal alone, not counting any accrued interest.

[mtbc]

I don't know how the default judgment affects it, but I assume the 5 years comes from discharge following successful completion of the chapter 13 payment plan. (What you can actually afford to pay and what IRS guidelines suggest you can afford can be rather different, mind.)

Personally I'd be worried about the six months thing. At least I'd extend it rather longer. If something looks a bit too much like gaming the system then I'd worry that a trustee would smell blood and they may be a good lawyer themselves; at the least they might get suspicious enough to give everything else rather more scrutiny. I've been trying to keep my bankruptcy very red-flag free, though there's nothing I can do about that we have way more debt than assets.

[music12]

the bk law caps the time of pay-back at 3 or 5 years, regardless of how much of the debt was repayed. in most ch13 cases, the debtor pays back only part of the debt. in ch7, the debtor has no means to pay back anything, in ch13 the debtor has some ability to pay back. hence the "means test."

[HHM]

It is fraud guys. Just because you have someone else involved that is withholding the assets, doesn't make it any less fraudulent.

Having your employer "conspire" with you to withhold income that you were previously entitled too...please. Excuse my french, but if you did this, and were caught, you would f' yourself 9 ways to Sunday.

Trust me, I have seen people denied discharge for far less.

Let's take this out of the BK context for a second, if an employer receives a wage garnishment, that is a court order. If the employer and employee conspired, at that point, to reduce the employees wages so the garnishment could not be enforced, that is fraud. It really is no different in the BK context. Your feeble attempt to play semantics and try to think this scenario is "not hiding" assets is completely off base.

Your scheme doesn't even pass the smell test. Answer this. If you were called to testify in court, under oath, and asked,
On "x" date (more than 6 month ago), you were earning X, correct?
As of the date of your petition, you claimed your wages were X, correct?
When did you meet with a BK lawyer?
Without divulging the specific content of th discussion, are you aware of what is known as the means test?
Are you aware that the means test...(description of the means test).
What happened at your work to cause a decrease in wages? (how would you answer without lying).
-Would you really be willing to answer: I wanted to pass the means test so I had my employer lower my wages"

[music12]

there is a line somewhere between bk planning and fraud, but it's not a clear line. if what HHM is saying is true, then anybody who quit their job within 6 months of bk would be denied their bk. however, that's not what the law says right now.

also, it's withholding assets only if the plan is to give the income back to the debtor after the bk is closed. if the employer does not later give this money to the debtor in some form, then it's not withholding assets. but then again, something could be fraud even if it's not precisely withholding assets.

anyway, you are obviously trying to get around the law that determines whether you are a ch7 or ch13 based on your means. and you know you are doing it. it's just not good, to say the least. plus, no matter how nice your employer seems right now, once he hears about this idea of yours he just might change his mind about whether you are so valuable. then he could fire you which i guess will get you the ch7 in 6 months... but not exactly the way you wanted it.

[whipster1]

You guys need to realize he previously stated he is the CEO/owner, and would be lowering his own pay. He is trying to game the system.

http://www.bkforum.com/showthread.php?t=48982

[squeeze]

HHM - Thanks for the hard hitting words, I appreciate them. I'm convinced on this one point. Asking my current employer to help me pass the means test would be a spectacularly stupid thing to do.

However, I'm not yet convinced that a decision to work part time would be construed as fraud.

- - -

court: "What happened at your work to cause a decrease in wages?"

squeeze: "For the past six months or so, I've only been working part time instead of full time. Now go f*** yourself. "

court: "And why did you starting working part time?"

sqeeze: "How many carefully crafted reasons would you like? I've been working too hard, and needed more rest. I've wanted the extra time to launch a start up business. I'm an aspiring writer and tried to write the great American novel. I went back to school and needed time for my studies. I wanted to start training for a marathon. Now go f*** yourself."

- - -