file now or wait - what would you do?

[sadbutinneed]

My first post after lingering for a few weeks. This board has been really great!

We are in a strange situation, we are right now a family of 4 and even with my part time work, pass the means test (although over the median). Schedules I&J would work out for a Chapter 7 no problem. We've retained an atty and can use our tax refund to file now.

Here's the problem. my husband MAY get a raise in April. not for sure AT ALL. He hasn't gotten one in three years and now they are talking about a significant increase of 10-20%. Around May 1st we will become a family of 5 (I am due May 1st).

If we file now, and he does get the raise, I don't think we'll qualify as a family of 4 with his new income on schedule I. We'd still pass the means test since it's a look back. If we wait until 6 months after his raise all of my part time money would fall off the look back and according to the NOLO means test, we'd still pass the means test, but the schedule J would be harder. We're not used to having any extra money, so my idea is to decide on a budget with our atty that the trustees in this area would accept and then live by that budget for the 6 months that we are waiting?

we stopped paying all credit cards in Feb 2010, but are current on our house and cars.

I know this post is long, but I'm looking for experiences, suggestions, advice. we'll obviously talk to our atty as well, but mulling over all these options is draining my energy until our meeting on Saturday!

thanks!

[SMinGA]

One thought - when considering the option of filing later be sure to account for additional expenses of becoming a family of 5. (Congrats by the way.)

Filing now if the current conditions are likely to result in a chapter 7 would be one way to go. But is there potential for out of pocket medical debt with the upcoming new addition? If so, filing now could mean you will have debt again real soon.

Would his 10-20% potential raise be significantly more than your current part time income? If not, it seems like ultimately its a wash. Unless your current schedule I lists his current only and none for you with the assumption you will not be working when you file.

[sadbutinneed]

Good points - one concern is that if we file now, then he gets the raise and the submitted schedule j would end up showing we have a TON of DMI, since we can't currently budget for more than food, utils and clothes. If he gets the raise, then we'd have more money. My part time income is very sporadic - not consistent over even the last 6 months, but it may put us over the edge with his income change.

oh - and I am hoping, hoping, hoping he gets the raise so that we can afford to actually buy our kids some new shoes for the summer!

[BCA2009]

If you file now, you would totally ignore the possibility that he may be getting a raise. You would complete all schedules bases on your current situation. You would not include a possible raise on schedules I & J. And these schedules are submitted the date you file. You don't amend them for something that changes after you file. Only possible problem would be if your husband got the raise after you filed but before the 341. The trustee usually asks if you have had any changes to your financial situation. This still might not be a problem, but I wouldn't want to sweat it out.

Generally your 341 is about a month after your filing date. So if the potential raise would occur at the end of April, you should be fine filing right now, but if it would be in the beginning of April, you may want to consider waiting for the baby and dropping the part time job.

[SMinGA]

If he gets the raise, and you file after the baby is born - you would be able to include diapers & misc. baby supplies and I remember those days. Not cheap! Then there are kids clothes, shoes, etc. and the baby will outgrow things quickly. My understanding of schedule J is to use reasonable living expenses. What you'd spend on clothing, food, etc. if you weren't sending in credit card payments. Not to fill out J based on a current mindset of 'do without everything that is not absolutely essential' mentality. So buying shoes for the kids should be considered.

With being current on house & vehicles, and just stopped paying cards last month - you should be ok to wait if that is ultimately what you decide to do. Meaning your home, vehicles don't seem to be in jeopardy.

On the other hand - if your insurance and such is so that you should not incur medical bills in the next few months then filing now would get you on the road to recovery sooner. Just discuss the potential for the raise with your attorney.

[sadbutinneed]

two questions then:

should we fill out the schedule j based on just our current income (where we can't afford entertainment, charity, decent clothes etc) or on what we think would be right for our family making us WAY negative right now, and running about even if he got the raise?

if he knows about the raise before the 341 we need to tell the trustee even if he hasn't received the actual money in his paycheck yet?

[blessed]

I'd be temped to hurry up and file now to get it over with. I know how busy it is when a baby arrives!

And your attorney could tell you better than I, but without his raise in writing there's no guarantee so maybe you wouldn't have to mention it at the 341 until it actually comes to fruition. Better ask that.

[SMinGA]

That is really a question for your attorney - but knowing he is getting a raise seems different (to me) than just the possibility of getting a raise. It is standard at the 341 for the trustee to ask if your schedules are complete & accurate. If they are today but he has the raise before the 341 (30-45 days after filing) that could be an issue.

Its best answered in one of the pinned threads I believe, but bankruptcy is not about making sure you're destitute. Meaning that in order to qualify for ch. 7 it is not assumed you must be getting by on bread & water.

[BCA2009]

two questions then:

should we fill out the schedule j based on just our current income (where we can't afford entertainment, charity, decent clothes etc) or on what we think would be right for our family making us WAY negative right now, and running about even if he got the raise?

if he knows about the raise before the 341 we need to tell the trustee even if he hasn't received the actual money in his paycheck yet?

Until you actually receive the money in your paycheck you haven't got a raise yet. Over the past two years my comapany has told us three times that we should be getting a raise in "two months". All three time it fell thru.

I would not lie to the trustee. If he specifically asked if you expect a change in income in the future, You should say that you are always hoping for a raise, but haven't got one in three years. But the general question asked is " has anything changed since you filed." You want to honestly say "no".

On that point: always answer "Yes" or "No". Do not elaborate or expound on a subject unless the trustee asked you to. No good can come from rambling on about something.

As far as the expenses on your schedule J, they will increase due to an extra person in you family, but there are IRS standards based on the number of people in your family. You are free to list higher amounts but the trustee may challenge them. Your attorney should know what is accepted in your district.

And you fill out the forms based on a reasonable budget for a family your size. Not the way you have been scrimping by for the last two years. You need to account for car and home maintenance, reasonable entertainment, reasonable charitable donations, medical expenses, etc. Your attorney can tell you what is exceptable.

Your expenses need to be as much as your income, maybe a little on the negative side, that way if he challenges you on something you are still at break even. The theory I've read on this board is that you don't want to be too much negative because the trustee might say it's not a feasable budget, but when we honestly comepleted ours, we were about $900 negative per month due to average medical expenses and private school tuition. We weren't able to use the tuition on the means test, but it was a current expense we were paying so we listed it on schedule J.

None of our expenses on any of the forms were challenged, but I think that was because our attorney knew what would be accepted and what wouldn't. Having an attorney that knows the local customs is money well spent.

I asked my attorney what we would do if we were to get dismissed (we were 24K over the median income). He replied that he never has cases that get dismissed, because he only files solid cases. I looked up his last 100 cases on Pacer and everyone was discharged - None dismissed.

Bottom line is be truthful, but know what is and isn't acceptable in your district.

[keepmine]

I'd wait until after the addition to the family. You'll be a larger family for means testing purposes.
Also, {and I sure don't mean to send negative vibes} but, suppose there are complications with the birth/pregancy and you end up with massive medical bills that insurance won't cover and you already played the bk card?
Bk is a business. Plan this thing out and file when the time is right. You want to maximize the bk protection for your growing family.
I'd agree with the poster who suggested your budget is too heavy on scrimping. You're allowed to lead a reasonable lifestyle. Your budget needs to reflect that.

[momofthree]

For a family of 5, IRS standards permit $1186 per month as a food/clothing expense. Chances are you've been spending much less than this (I know we spend closer to $500/mo!). But your schedule J is forward-looking, based on what you will spend in the future when you're not carrying a huge debt-load any longer.

Transportation expenses (ownership & operation expenses) are also quite lenient.

Medical has an allowance of $60/mo per person, so $300 a month for a family of 5.

You can also list entertainment expenses, etc. Between all of the allowable expenses, you should easily be able to make your schedules I & J equal, even if he gets the raise (based simply on the way you've spoken about your situation).

You can't make it negative (they won't allow that on the I & J schedules), but you can adjust as you see fit (within the guidelines) to make the income and expenses equal.

[mtbc]

Between all of the allowable expenses, you should easily be able to make your schedules I & J equal, even if he gets the raise (based simply on the way you've spoken about your situation).

You can't make it negative (they won't allow that on the I & J schedules), but you can adjust as you see fit (within the guidelines) to make the income and expenses equal.

Where's this rule about it not being negative? I thought I'd seen plenty of examples of negative DMI, including the current chapter 7 Nolo book's, and mine was too. Of course, there'd be an undue hardship issue if you were also trying to reaffirm debt.

[momofthree]

Where's this rule about it not being negative? I thought I'd seen plenty of examples of negative DMI, including the current chapter 7 Nolo book's, and mine was too. Of course, there'd be an undue hardship issue if you were also trying to reaffirm debt.

Negative DMI on the means test, yes. In fact, we had -$990 on the means test. But on schedules I & J, if you're in the negative, how are you surviving? It's forward-looking. If you don't have credit, you can't spend what you don't have. Something has to give. Schedules I & J need to be equivalent or positive. Believe me, I'd love to put down the IRS standards for food and clothing. That allows $1186 a month, but our budget only allows $480 a month. If the money isn't there, we can't spend it. Period.

[mtbc]

Yes, I'm talking about DMI on Schedules I & J. It's commonplace to have it be negative, and, outside of reaffirmation, I've never heard of it raised as an issue. As I mentioned, even the Nolo book has negative DMI in its example.

Is this a chapter 7/13 difference, perhaps?

[momofthree]

Yes, I'm talking about DMI on Schedules I & J. It's commonplace to have it be negative, and, outside of reaffirmation, I've never heard of it raised as an issue. As I mentioned, even the Nolo book has negative DMI in its example.

Is this a chapter 7/13 difference, perhaps?

That may very well be what it is. We're in a 13, so I'm not very familiar with ch.7 guidelines.