Ch 7 and means test

[lostoutwest]

Hello,

I live in Oregon and am about to go through a divorce. I am trying to figure out how to handle things through the divorce in the event I need to file. Currently I make approx $8000/mo gross. My wife makes approx $4000. Our mortgage is $2350, not including property taxes and homeowners (another $500/mo there). The major recourse debt is our $55k heloc and $45k in CC debt.

After the divorce, I will be subject to projected child support for 2 kids that may be around $1000/mo (perhaps more, perhaps a bit less). When I input figures into the means test calculator using projected numbers for child support and leaving the standard numbers for rent, etc, it appears I pass the test. However, I am assuming I can use the full $2350 for the mortgage payment. Would that hold true even after the divorce?

Secondly, I am considering stopping payments on the house since it is underwater by approx $55k (basically the amount of the heloc) and neither of us want or can afford it after the divorce. Would I be hurting myself in a potential future Ch 7 is I am not making the payments?

Thanks for your help. I am meeting with a BK attorney friend tomorrow to discuss options (perhaps using the Ch 7 threat to settle for 20% or debt or so). This site is a wealth of info and good people!

[jennilynn]

Definately meet with an experienced bankruptcy attorney.

Your income gross is pretty high, and while yes, you can deduct for taxes, etc. on the means test - how you use those figures will vary on when you file and your district and what they allow.
for instance, if you alone file and you are NOT living with your wife, your income counts only - if you are paying child support, you take that deduction. If you file while still with the wife - BOTH incomes are counted, and of course, no child support is deducted...
As for the house - where I am, if you are surrendering the house, you don't get that $2350 mortgage payment deduction, you use the rental/housing allowance deduction, but not both - that's considered "double dipping" on your allowed deductions... but again, districts vary on how they interpret the means test.

As for the house payments, again, this is probably something a skilled bankruptcy attorney needs to go over with you and would know your specific area and how the cases are going.

[lostoutwest]

Definately meet with an experienced bankruptcy attorney.

Your income gross is pretty high, and while yes, you can deduct for taxes, etc. on the means test - how you use those figures will vary on when you file and your district and what they allow.
for instance, if you alone file and you are NOT living with your wife, your income counts only - if you are paying child support, you take that deduction. If you file while still with the wife - BOTH incomes are counted, and of course, no child support is deducted...
As for the house - where I am, if you are surrendering the house, you don't get that $2350 mortgage payment deduction, you use the rental/housing allowance deduction, but not both - that's considered "double dipping" on your allowed deductions... but again, districts vary on how they interpret the means test.

As for the house payments, again, this is probably something a skilled bankruptcy attorney needs to go over with you and would know your specific area and how the cases are going.

Thanks for the reply. I figured I would file after the divorce is final. If I am unable to use the mortgage payment, perhaps I will not stop payments. It may make sense to continue paying and living in the house until I file on my own (if it comes to that) so I can use that deduction. After taxes, medical/dental, child support, I will need that mortgage payment to get into a CH 7. If I lose that, I am 13 all the way with likely a 100% repayment plan. Ugh.

[helpmeout]

Thanks for the reply. I figured I would file after the divorce is final. If I am unable to use the mortgage payment, perhaps I will not stop payments. It may make sense to continue paying and living in the house until I file on my own (if it comes to that) so I can use that deduction. After taxes, medical/dental, child support, I will need that mortgage payment to get into a CH 7. If I lose that, I am 13 all the way with likely a 100% repayment plan. Ugh.

One thing to keep in mind is that if any of the debt is joint debt and you are court ordered to pay it and your stbx doesn't file, then you may end up paying it anyway. Especially if your stbx has a good attorney who is smart enough to put in the divorce decree that you and your stbx will indemnify and hold each other harmless in the event of a bankruptcy. It's in mine. Had I not refinanced the house and gotten my ex's name off of it, the family court would still order me to pay it even though it was just discharged. And it would be legal.

[lostoutwest]

It is joint debt and I think we will agree to divide it up. However, I have already thought I will need to fight the hold harmless, defend and indemnify provision. Thanks for the reminder though! Any more divorce/BK advice is greatly appreciated. Its all new territory for me...

[helpmeout]

It is joint debt and I think we will agree to divide it up. However, I have already thought I will need to fight the hold harmless, defend and indemnify provision. Thanks for the reminder though! Any more divorce/BK advice is greatly appreciated. Its all new territory for me...

You aren't going to be able to fight it. A judge will order it. What's the point of you getting debt, declaring bankruptcy and then your stbx has to pay it anyway. And, to be honest, I would agree with a family court judge ordering you to pay the debt anyway. Although, if your stbx is smart, she will insist on you taking on the debt that is just in your name, her the debt that is just in her name. And if it iisn't the same amount, then she gets more assets to compensate for that. This way you filing for bankruptcy will have no impact on her whatsoever. Also, if I were her, I would not sign off on any quitclaim for the house until such a time as my name has been refinanced off of the mortgage.

In fact, why don't you just deal with the bankruptcy before the divorce?

My bankruptcy did not impact my ex at all as I had done the right thing and taken his name off of everything by the time I reached this point.

[lostoutwest]

You aren't going to be able to fight it. A judge will order it. What's the point of you getting debt, declaring bankruptcy and then your stbx has to pay it anyway. And, to be honest, I would agree with a family court judge ordering you to pay the debt anyway. Although, if your stbx is smart, she will insist on you taking on the debt that is just in your name, her the debt that is just in her name. And if it iisn't the same amount, then she gets more assets to compensate for that. This way you filing for bankruptcy will have no impact on her whatsoever. Also, if I were her, I would not sign off on any quitclaim for the house until such a time as my name has been refinanced off of the mortgage.

In fact, why don't you just deal with the bankruptcy before the divorce?

My bankruptcy did not impact my ex at all as I had done the right thing and taken his name off of everything by the time I reached this point.

1) Perhaps another way to deal with it would be to let the creditors obtain a judgment against me and then let my wife obtain one, then file Ch 7 on all. I would have to look into that even being possible since you can not discharge child support. Don't know about an obligation to the wife re: debt.

2) There is little debt in my name, more in hers. The things that gets me going is that she is the one who ran it up, I just sat by thinking things would get better, she will figure it out and that I will make more $ and be able to pay it off. Stupid me.

3) No quitclaim on the house since neither of us wants it. Also, in this market, no ability to refi since it is possibly underwater the amount of the heloc ($55k). I will, however, get a BPO to confirm.

4) If we go through a BK before divorce then we will be in Ch 13 for sure and a possible 100% repayment plan. At that point I would just negotiate a lower interest rate and repayment plan to creditors.

[helpmeout]

1) Perhaps another way to deal with it would be to let the creditors obtain a judgment against me and then let my wife obtain one, then file Ch 7 on all. I would have to look into that even being possible since you can not discharge child support. Don't know about an obligation to the wife re: debt.

Sorry, but what you are planning on doing is wrong. Just like it would have been wrong of me to have filed bankruptcy before removing my ex's name from the joint debt.

And chances are a family court won't allow you to do so. Probably in the form of alimony (which isn't dischargeable, either) should your stbx file a contempt motion because she now has to pay what you were supposed to. A family court judge could very well make her whole. And in a way that you can't do anything about.

And have you considered how your anger and revenge seeking (because the above reeks of you wanting to get even) will impact your kids?

Better to do a joint bankruptcy or at least discuss it with your stbx. Because if you both file at the same time, this isn't an issue. If you aren't living together, it doesn't have to be joint.