is this considered a luxury purchase?

[waldo05]

My wife and I are considering filing BK. We are meeting with a few lawyers next week, and I wanted to get your opinion on a couple of matters. First, we do not have any major purchases outside of our adoptions costs. We paid the 1st half of the costs in March of 09' of about 9000.00 (which we put on a CC and have made all of the payments since then), back then, our family had intended to assist in the rest of the costs when we were matched. Well, our families were not able to help out and we were matched in July of 09. Long story short, our daughter was placed with us in Dec 09, at which time our 2nd half of the adoption payment was due (another 9000.00 which we put on our CC as well). There has been an additional 4000-5000 dollars of birth mother expenses we have incurred from July-Dec. We have been current with all of our CC payments (about 80,000 totalin CC debt) until Feb. I couldn't pay the minimum on one of my cards (not the one with the adoption fees on it) and I can no longer play the minimum payment game that I have been able to for the past 5-6 years. In addition, we are in our 6th month of trial payments for our Home Affodability program and are still waiting to hear if we have been apporved or denied. The problem is that if we are denied, then we will be reponsible to pay the difference between what our trail payments and our mortgage payments (right now would be about 8000).. So needless to say we are considering filing. So will I have to wait the 6 months in order to file without any "red Flags?" or will they not consider this a "luxury" purchase. Thanks for your advice in advance

[justbroke]

I wouldn't personally consider that a luxury. As a matter of fact, I would publicly ridicule any Trustee, UST or Judge who states that adopting a child is a luxury. I'm sure your local investigative reporter would love to do such a story.

The fact that some adoption expenses are tax deductible shows that the Government considers it special.

[Flamingo]

From your posting I gather you put the $9,000 on your CC in December and also at some point around that time another $4,000-$5,000 for birth mother expenses. Due to the amount, timing and circumstances, to be on the safe side I would check with a BK attorney before you assume anything.

[OhioFiler]

I would expect an AP on this if you file any time this year. You charged $23,000 while you were behind in your mortgage trying to refi through the Obama plan. You never had the means to repay this debt and the creditor will use this against you.

I don't see the courts weighing your good intentions against the creditor's objections.

[backtoschool]

Although the purchase is not a luxury in my opinion, the amount is large enough that there is a good chance the credit card company would file an AP against you.

I would wait at least six months to a year to file and make minimum payments on the card(s) in question for several months. If you file now, then the creditor will say that you used the card while legally insolvent. (90 days from filing is the legal definition of being insolvent in regards to APs)

[AngelinaCatHub]

All be it with good intentions, did you think this through carefully before your decision to increase your family size at this time? You cannot afford that child now. How will you in the future with all that a child will cost you. I congratulate you on your desires but the creditor does not see it in the "human" way. Even the Court may insist on that bill not be discharged.

I am sure this is the rarest of questions that this forum has seen, but I'm looking at your question without heart emotion. I believe you may face an AP. I hope I'm wrong.

Understand, I am happy for you and your new child. I just see this in a business type of World. 'Hub

[waldo05]

Thanks for the replies everyone. At the point we decided to adopt (we couldnt have our own) and signed up with our agency was back in June of 2008. We were orginally matched in March of 09' when the first 1/2 of the fee was due, we paid it and the birth mom skipped town. We were then matched again in July of 09'. The contract stated that we were responsible for bitrth mother expenses each month but the term "birth mother expenses" is VERY Vague. We were told normally it runs between 300-600 a month, but it has ended up being over 1000 each month (rent, APS, car repairs, maternity clothes, cell phone for communications ect..) the additional 4000-5000 in costs have been paid over the period of July to Dec. At the time we signed up for the program and when we were last matched, we thought that our parents were going to be able to help, but financial issues prevented them from doing so. We are current on the card that the expenses are on, but with the recent rise in interest rates on my cards and having to go with a PLAN B daycare (first option was a family member) in the last month, has put in a position where we didn't think we would be (and on top of everything, my wife was just hit by an old man that ran a red light on her way to work this morning I know they will be looking at this from a business aspect, but until the last 3 weeks, we were ok (being able to pay all of our bills and stay current on our CC. Thank you for all of your support and I will keep you updated as we try and come up with a plan for our family!

[waldo05]

well, here is an update. We were just informed that our "home affordability mod" was apporved. We went from our 10 yr interest only plan at 1720 a month (7.125%), to our trial period payment of 1350.00 a month (which we paid for 5 months) to their offer of 1820.00 month at 7.125% 40 year fixed rate. So not only did our payments increase almost 100 more a month (I realize that they are now going to collect principal as well as interest), but if we don't accept, it is my understanding (and I have to call to confirm) is we will have to pay the difference in our original payments and the trial period payments plus all late fees and interests up front or they will continue with the process of foreclosure.

I have a new question, our new payment would really help with our means test (our old one would too) but if we are not able to pay the "new" mortgage payment (We would be able to if I stop payment on all of my CCs) and can't come up with the deficiencies between the trail and original payments, do you need to be current with your secured debt in order to use it on your means test? I need to know how to approach this mortgage situation as it applies to our means test/BK filing. We have realized that we are not interested in keeping our house (120K under water) so I need some advice as to what is the best way to approach this issue. Should we wait until we file BK to stop making mortgage payments and then be able to save that money to get a place to rent or should we accept their offer, come up with the payments, file BK and not reaffirm, and then stop making payments. We are stressing out and all we want right now is a fresh start and focus on the future. I hope my explaination here makes sense if not, please ask clarifying questions and I will respond asap. Thank you for all of your help

[maxwellv8670]

I was just reading the thread and I know this is a dumb question but curious to know what an "AP" is? Makes me think of associated press but I know that isn't what it is.

[justbroke]

I was just reading the thread and I know this is a dumb question but curious to know what an "AP" is? Makes me think of associated press but I know that isn't what it is.

(Adversary Proceeding. The name of the "complaint" process within a Bankruptcy. It's a miniature trial within the bankruptcy court, with all the trimming of a full blown trial. I only say miniature, because they are within the larger Bankruptcy case context.)

do you need to be current with your secured debt in order to use it on your means test?

No, but entering a Chapter 7 and not being current, could cause you other issues. As a point of fact, you include secured debt on the Means Test because it's "contractually" due, not because you're paying it. As for whether you can include it on Schedule J, is a whole different story.

As for strategy, that's a good topic for your attorney. If you want to "ride-through" on the house, you'll need to be current going into the Chapter 7 so you can do a "retain and pay". So, it's definitely better to be current when you file.

[lovebirds]

Thanks for the replies everyone. At the point we decided to adopt (we couldnt have our own) and signed up with our agency was back in June of 2008. We were orginally matched in March of 09' when the first 1/2 of the fee was due, we paid it and the birth mom skipped town. We were then matched again in July of 09'. The contract stated that we were responsible for bitrth mother expenses each month but the term "birth mother expenses" is VERY Vague. We were told normally it runs between 300-600 a month, but it has ended up being over 1000 each month (rent, APS, car repairs, maternity clothes, cell phone for communications ect..) the additional 4000-5000 in costs have been paid over the period of July to Dec. At the time we signed up for the program and when we were last matched, we thought that our parents were going to be able to help, but financial issues prevented them from doing so. We are current on the card that the expenses are on, but with the recent rise in interest rates on my cards and having to go with a PLAN B daycare (first option was a family member) in the last month, has put in a position where we didn't think we would be (and on top of everything, my wife was just hit by an old man that ran a red light on her way to work this morning I know they will be looking at this from a business aspect, but until the last 3 weeks, we were ok (being able to pay all of our bills and stay current on our CC. Thank you for all of your support and I will keep you updated as we try and come up with a plan for our family!

It sounds like your birth mother milked the system for everything they could squeeze from you. Car repairs....WTH? Hope your wife is fine.

[maxwellv8670]

Thanks justbroke for the 411 on what AP means!

[waldo05]

"It sounds like your birth mother milked the system for everything they could squeeze from you. Car repairs....WTH? Hope your wife is fine."

She is, car isnt they are having a hard time finding saturn parts (going out of business)
It did feel like that for most of the time, and if you refuse to pay, you run the risk of her "changing" her mind. A very terrible cycle, they really have you over a barrel (thus us not wanting to go though it again because the Birh mother expenses are "non refundable" if they change their mind......

[DeadManCrawling]

Schedule J depends on district and local case law.

In our district, you CAN use expenses from the means test that you will not pay in the future, and not be penalized under the totality clause.

Other districts come down on the opposing side.

This is a tricky area and one where you want to know exactly what you're doing before you file. To go into that minefield with only guesses can lead to disaster.

[flyinbroke]

You got rooked. The person I know who played birth mother only got her medical care paid for by the adoptive parents. An oops baby did not mean she couldn't pay her own rent. Car repairs? Cell phone (that she probably had anyways?) Wow.