Failed Means Test...Can I still file 7? Loss of Income as of Friday

[bkinwastate]

Hello,

My wife lost her job a couple of weeks ago. We were planning on a 13 but now, we may be able to get into a 7 (which of course is preferable.)

The issue is the 6 mo. look back on salary. With it, we show $1000/mo in disposable income so we fail miserably.

However, with the income loss we would pass the means test on the 2nd phase (income/expenses.) I am over median on my own by $300 per year.

Now she will get unemployment which takes us to -$677/mo on the means test. Without unemployment, we would be at -$3,103 on means test.

My question...can I still file 7 even though I fail the means test? We need to file in April as we are getting sued and a judgment is forthcoming which we are trying to avoid. It will be bad enough having a BK on the our public record let alone a judgment as well. Not worried about credit score...

6 mo look back sucks when you have a recent loss of income and they don't take that into consideration.

Help!

[Meatstick]

You should consult a lawyer as sudden loss of income may be a valid arguement to filing a 7 instead of a 13. How do your expenses look on Schedule J ?

[MrBankruptcy]

You might have to wait a month or two to qualify but do not get into a chapter 13. It will cost you thousands and with the loss of income you will be setting yourself up to fail. Wait and wipe out all your unsecured debts. Chapter 7 rules don't let any attorney tell you differently. You will pay for attorney fees 3000-5000 and don't forget the trustee gets 10% of everything you pay back. It stays on your credit for 7 years, it takes 3-5 years to pay off and the pain continues.

[bkinwastate]

Schedule J shows around -800 per mo.

[dakota112]

I had to wait 6 months for my income to fall off after I lost my job. It was very difficult to get by and I had to depend on help from family but it is a far cry better than spending 5 years beholden to a bankrupt system that CH 13 is. It is a bad life and it never ends. In this economy one can be in and out of jobs indefinitely which means alot of ongoing trustee, lawyer and courts and stress. Get it over in a 7 if at all possible, live and learn from the experience and move on to a better and leaner life. My advice only.

[bkinwastate]

Thanks for the reply's so far...

I would wait the 6 months if I thought we had the time...unfortunately, we are being sued and probably the longest I could hold out for would be 45-60 days if that long. The last time we paid CCs was May 09 so I figured that would be the last month before we would have to file.

I guess I am just wondering if we file with failing the means test but showing schedules I&J being negative, how successful would we be in going for a 7.

[espo1357]

your 13 isn't going to be that bad, is it?

if you are getting sued, I would make a move to file, especially if your stress level is very high.

you can always convert to a 7 afterwards, and the 13 won't cost you too much.

good luck.

[momofthree]

With your schedule J negative, I'm wondering how they could require you to file a ch. 13, if there's no DMI to fund it?

[mtbc]

There is a chapter 7 exception for showing that special circumstances rebut the presumption of abuse. I don't know in practice if a sudden job loss tends to fly as sufficient special circumstances under 11 USC 707(b)(2)(B) but, even if there's precedent, I'd expect to have to argue it cogently.

Of course, they don't require you to file bankruptcy at all!

[bkinwastate]

Thanks for the reply's. I guess then my other question is how difficult would it be to convert to a 7. Do we simply convert after 6 mo. have passed to bring the means test to our current salary situation if we haven't had any change in income?

[Depressed]

Aren't CH 13 payments based on what you are expected to make in the future, not what you made in the last 6 months? Wouldn't then your current circumstances allow for a Ch 7. if argued by your attorney?


I'd bet if the attorney made more money filing a Ch7 versus a CH13 he'd find a quick way to get you into one.

[espo1357]

Aren't CH 13 payments based on what you are expected to make in the future, not what you made in the last 6 months? Wouldn't then your current circumstances allow for a Ch 7. if argued by your attorney?


I'd bet if the attorney made more money filing a Ch7 versus a CH13 he'd find a quick way to get you into one.

Not sure about that, but I think they look at your past not future income. Attorney makes more in a 13.

[Depressed]

The means test looks at the past six months, the schedules are suppose to be based off future income and expenses. I'm under the impression they don't have to match the means test. I'd imagine that alot of attorneys just use that information because it makes work more easier for them.

As far as my statement concerning attorney fees -- I get the impression that alot of attorneys push people into CH13s just because they make more money that way. Then when you can't keep up with the plan - because it's unreasonable - they charge you again to convert your case. Where I live, they get another $1750 for a 13 over a 7, I see that as plenty of incentive to push you into a 13 when they could have also done a 7.

[BCA2009]

I don't know if it is accepted in all districts, but your attorney can file an affidavit indicating that your wife is unemployed, and then omit her salary when completing the means test. I would ask your attorney about this.

Good Luck!

[thoover34]

do I understand this properly that you had to wait until your 6 month income average dropped so that you could pass means test eventhough you had no job--they in effect say draw unemployment and get sued ---??