New and so many questions

[Maine]

I am meeting with a lawyer friday but I am so overwhelmed with questions that I thought I would start here. (I talk too much- so I bolded the real questions)


History: Mr. Maine was unemployed 15 months, now back to work at reduced salary. Job is temporary- only 1 year contract- not likely to extend.

Hoping for Ch7, with 30k CC debt, 2K medical, 2k utilities with liens on house.
We have: 2 zero equity cars, and one junker, zero equity primary house and rental house with 2 mortgages (income= expense...rented to family member)

We pass Means test which includes 3 months of minimum wage job and now 3 months of new job. Current income would maybe not pass means test. (VERY CLOSE!)

Which will they use for figuring if we are Ch 7 or 13? Current or 6 mo average?

IRS numbers for means test expenses are high, we do not spend that much. What numbers do they really use when figuring our payment ability? We have scrimped and skimped on everything for the last 18 months. I'm worried that being frugal is going to bite me in the butt.

Past all the little stuff it gets confusing. Mr. Maine is out of state for work, the company reimburses hotel and food. It is dollar for dollar reimbursement with receipts. How does that figure into income? (It is not considered income by the IRS, but will it be by BK?

We own 2 houses, both upside-down. Want to keep primary house, but willing to (happy to!) lose 2nd house and it's 2 mortgages. I am so confused!

Only assets are household junk, $200 swimming pool, swingset, 5yo riding mower, a snowblower, 2 plasma tv's (OLD!), 2 computers, guitar, ipod, video game system and assorted small stuff. I think we can protect it all with exemptions.

Thoughts?
Does this sound more complicated than normal or am I just Panicking??
Thanks!

[Oblib2345]

Sounds to me like you are panicking a little too much :-). Most of your questions are better left for the lawyer as he will know state exemptions and their bk laws much better. But, as for the assets you list, I wouldn't think you would have a problem exempting those. The thing you have to remember is that you are listing all your assets at garage sale prices, not retail. Too many people think about how much they paid for something instead of how much they could really get by selling it (which is generally not much).

Just take a deep breath and talk to your lawyer about the income issues, but the bk process is really not as bad as people fear (at least in my experience). Not saying its a good thing, but most of your fears on losing posessions are generally unfounded. Unless you have something really valuable, the trustee is not going to want to go through the hassle of taking and selling your stuff.

[researchnerd]

The means test uses the 6-month lookback to determine whether you are below median income for your area. Current income is used to determine disposable income for possible Ch13.

Don't worry about your household stuff...the trustee doesn't want it. They're looking for sellable assets like boats, RVs, sports cars and vacation homes.

[Maine]

I figured we would be ok with assets- thanks for confirming!!!

It is mostly the income that is confusing me. (seems like his job will be a lawyer issue, too specific for average knowledge.)

Means test we are below median- under by 8k or 9k. Will we definitely be allowed to file ch 7? Or will they say "your current month expenses show that you have $400 left each month...we will convert you to ch 13 even though you passed Means test"

I can't prove some of the monthly expenses because we have not had any money to spend in so long. The kids need to go to the dentist, the car needs tires, ect...money I NEED in the budget but have not spent and therefore can not prove I need. Grrr!

[SMinGA]

Current income is used on schedule I, current expenses on schedule J. As others have said - actual income is used at time of filing to determine disposable income. Perhaps now is a good time to figure out what your real budget is, in terms of regular living expenses WITHOUT skipping necessities. That does not mean steak dinners 7x a week, but allotting money for the things you need. Groceries, clothing, home maintenance, etc.

The travel expenses reimbursed by your employer - that is going to best be answered by your attorney. The $ coming back to you may be counted as income, but in that case the expenses would count as well. Should not be able to count one and not the other...

[researchnerd]

Means test we are below median- under by 8k or 9k. Will we definitely be allowed to file ch 7? Or will they say "your current month expenses show that you have $400 left each month...we will convert you to ch 13 even though you passed Means test"

I can't prove some of the monthly expenses because we have not had any money to spend in so long. The kids need to go to the dentist, the car needs tires, ect...money I NEED in the budget but have not spent and therefore can not prove I need. Grrr!

If you are well below median then yes, most likely you will be able to file Ch7.

Some expenses are assumed to be reasonable and necessary, including medical and car maintenance. If you haven't yet, check out the online means test -- you can see everything they assume you will need to spend money on. The only time you might need to prove it is if your actual expenses exceed the IRS allowances.

[SMinGA]

These should be things you can claim in your budget without having to prove you have been spending it already. Its understandable that leading up to BK, many people avoid some things in an effort to make ends meet. Time for that way of thinking/living to end though.

Ultimately it will probably just be important to claim reasonable amounts. And your attorney can help you with that. Some things are obvious though - claiming $500/mo in medical, for example would probably need something to back it up. Claiming up the IRS allowance of $60/person should not.

I can't prove some of the monthly expenses because we have not had any money to spend in so long. The kids need to go to the dentist, the car needs tires, ect...money I NEED in the budget but have not spent and therefore can not prove I need. Grrr!