Used student loans to pay credit card 2 months back...wait to file?

[BKlooker]

You guys are reading into this a bit too deeply. The 200 was just a quick example, NOT what i actually bank each month. I didn't want to go into every little detail, i was just saying after food, mortgage, CCs, and utilities alone, i was down to that, and that doesn't include all the everyday expenses we all pay such as healthcare, gas, HO insurance, reasonable entertainment expenses, etc.

BK does allow you to include your mortgage in your calculations even if you plan to discharge it, so not sure where you got that from...

In addition, what you are saying makes no sense. Let's pretend for example I had 75K in credit card debt and my minimums were around 1.6K/month just for those. You guys are saying i couldn't include that on my test because they are going away, which means now i got an extra 1.6K on my hands, which means i can't file. How would ANYONE get BK if that was the case? The whole point is to get a fresh start.

It's just a matter of what you do with the excess cash. Let me show it to you like this to make it more clear...

So for the 90 days prefiling, here's what we got:

2K month for mortgage and ccs X 3 months = 6K
subtract lawyer's fees = 4K left
subtract badly needed car maintenace (severe) = 2.7K left
subtract doctor's bill outstanding (350) = 2.5 K
subtract the $400 minimum and $500 minimum to the 2 respective seperate CC companys for month 1's payment, then no more payments, so does not break 600 dollar rule = 1.8K left
subtract dentist bill (200) = 1.5 K left
subtract doggie visit to the vet for shots, heart/flea prevention that is overdue = 1.2 K left
subtract a partial payment to mortgage company on month 1 of maybe 300 bucks, then no more payments = 900 left
subtract stocking food, paying car insurance, hair, etc. for 3 months = maybe $ 20 left

In addition, MD allows for up to 6K "wild card" (read: cash on hand) plus 5 K property, so even if i did have an extra few bucks in the bank, it's not going to stop me.

Bottom line: right now about 63% of my take home goes straight to debt....i am not worried about the qualification part. Plus the means test and schedule J are 2 seperate things. Means test is to test for Presumption of abuse. Schedule J is for what your actual expenses are.

You get the picture. I am enlisting a lawyer on Monday, so i will let him worry about the details of the number games. But trust me, i am broke as joke. I didn't even include my soon-to-be 500 a month student loans that will kick in within a few months.

[BKlooker]

accidental double post

[brokejoker]

I'm just reading what you wrote. You said that if you quit paying your CC bills and your mortgage you would have $2000 a month to sock away. You plan on doing this 90 days prior to your filing so you will have $6000 in the bank. It's not the $6,000 you need to worry so much about (although you will need to exempt it), it's the $2000 per month you will have to sock away. Your schedule J is forward looking. You can't just claim BK and then show the trustee that you will have $2,000 per month to squirrel away. Anything over about $100/month coupled with your failing the means test could land you in a 13 so fast your head will spin. It's good to let the lawyer help you with the numbers but you do need to supply your lawyer with your expenses, he can't just make them all up.

BK let's you get a fresh start but it depends on your numbers as to if your fresh start will be a 7 or a 13. If I were you I'd start keeping track of my expenses and check out the IRS guidelines for expenses now to make sure you do qualify for a 7. Again, the extra money every month will be a problem for you unless you can show allowable (true) expenses that put your DMI low enough to qualify for a chapter 7.

[BKlooker]

And as noted above just briefly, I haven't even included the 550 a month in student loans that kicks in soon, or the extra 220/month the mortgage is jumping up to soon. I also did not include all the other real daily expenses i incur, and a few other things. Trust me...i was recommended Ch7 because my expense sheet that i gave the lawyer while consulting for a short sale indicated that I was indeed in the red every month, hence us getting into it over a possible BK.

The scenario i was painting above was more or less to say that not having the mortgage and CCs means i can redistribute to stuff i am currently charging on credit card, such as insurance and med bills, etc.

I won't go into painful details over all my finances....if I have to do CH 13, so be it. It will still be a better place than I am now. Because time is on my side, it's more a matter of good BK planning. For example, i mentioned before my 8 year old car is hitting the down-spiral. If I get a new one (obviously an allowable one) now instead of after, that adds another 3-4 hundred a month in secured debt, on top of the other things i just listed, which as you can now (hopefully) better see, the "extra 2K" is getting hard-hit by all this. Again, please DONT read this and think i have listed everything here, as I haven't for personal reasons.

There are many many others on this form that have walked into BK Ch7 with perfect credit (meaning they aren't paying a thing late, yet), but have proven that they are overstretched and managed to make it work. I think i am in this boat, but if CH13 is where it's headed, it's still a better alternative for letting things continue to slide as they are now until i am asking my parents for money every month to pay my CCs. I think we can all agree on this.

My lawyer is/will be made aware of all this and we will come to a decision. If it's decided i need to wait til some of those actual expenses to really kick in late next year to file (or initiate the student loans now and get the car now), i don't have issue with that at all either. That's all a part of good planning, not my lawyer "making it up".

My whole point with that 2K mess was simply to say like everyone else here said...when you are living essentially "rent free" for the time leading up past foreclosure, you can start rebuilding things between the time after you file and moving forward til you have to leave the house. That's all.

I appreciate the warnings.

[backtoschool]

And as noted above just briefly, I haven't even included the 550 a month in student loans that kicks in soon, or the extra 220/month the mortgage is jumping up to soon. I also did not include all the other real daily expenses i incur, and a few other things. Trust me...i was recommended Ch7 because my expense sheet that i gave the lawyer while consulting for a short sale indicated that I was indeed in the red every month, hence us getting into it over a possible BK.

I won't go into painful details over all my finances....if I have to do CH 13, so be it. It will still be a better place than I am now. Because time is on my side, it's more a matter of good BK planning. For example, i mentioned before my 8 year old car is hitting the down-spiral. If I get a new one (obviously an allowable one) now instead of after, that adds another 3-4 hundred a month in secured debt, on top of the other things i just listed, which as you can now (hopefully) better see, the "extra 2K" is getting hard-hit by all this. Again, please DONT read this and think i have listed everything here, as I haven't for personal reasons.

My lawyer is/will be made aware of all this and we will come to a decision. If it's decided i need to wait til some of those actual expenses to really kick in late next year to file (or initiate the student loans now and get the car now), i don't have issue with that at all either. That's all a part of good planning, not my lawyer "making it up".

My whole point with that 2K mess was simply to say like everyone else here said...when you are living essentially "rent free" for the time leading up past foreclosure, you can start rebuilding things between the time after you file and moving forward til you have to leave the house. That's all.

I appreciate the warnings.

You cannot claim student loans as expenses on your means test or your expense schedules because the loans can be put into forbearance. Y(I think you know this, but I am putting out the fyi for others reading the thread) Student loan expenses are not going to help you with your budgeting re bankruptcy.

[BKlooker]

Again, not talking about means test within that context, was talking about schedule J. You can't put loans in forebearance without hardship, so i am not getting it, but I will talk about it with the lawyer and see what he says.

This idea that your student loan payments don't at all factor into you finances whatsoever for BK doesn't make much sense to me.

[momofthree]

To back up BTS, when you file ch.13, the student loans DO go into forebearance, so they are therefore not allowed on the schedule J when calculating whether or not you have enough DMI to fund a ch.13. If you browse the forum, you'll find quite a few people who've made that mistake and end up in 13-land--most attorneys know better though. You will need to find other allowable expenses to eat up your monthly budget. And, while you can claim the mortgage payment on the means test, if you're giving up the house, you cannot include it on the schedule J since it's forward looking, which means you also can't include the "increase in mortgage payment" on there either.

Here are the IRS allowances for a single person:
Rent allowance (varies) average seems to be around $800/mo in Maryland.
non-rent expense (utilities/cell phone/etc) also varies average seems to be about $400/mo
$526/mo Food/clothing/personal care items/household supplies/misc.
$60/mo medical
$270/mo operating costs for 1 vehicle (gas & maintenance)
$496/mo UP TO this amount based on your ACTUAL car payment. It will probably be in your best interest to finance a new car right about now!

=$2056/mo w/out car payment
OR
=$2552/mo with car payment

give or take a couple hundred based on what your county rent allowance comes out to and how much recreation, etc that you are allowed in your district.

Anything over these amounts can be objected to by the trustee and help throw you into a ch.13. If you have $180 more income than those final figures I came up with (again give or take based on your county rent allowance), then they will push for a ch.13.

Not trying to be a debbie downer, just want you to prepare yourself adequately. Like I said, buying a car will help you decrease your dmi and get you closer to ch.7 territory, and your attorney might also have other expenses that he know he can slide past the trustee. You may also decide that you want to keep your house rather than enter a ch.13 as that allows for the higher payment as well as home maintenance expenses, etc.

As far as "how does anyone qualify?!" Many of us have children, which allow for much higher expense amounts (the single person with a good job is pretty much screwed in the BK equation!), and I know for me we were doing fine until we were hit with a medical diagnosis (ongoing) that wasn't covered by our insurance as well as a large cut in pay. So, we were suddenly unable to cover even the basics anymore. We went the 13 route to strip our 2nd mortgage, but we had the option of a ch.7.

Here is the trustee website that shows the IRS standards so you can check out your particular housing allowances: http://www.justice.gov/ust/eo/bapcpa...anstesting.htm

[BKlooker]

Thanks, momo that does help. That being said, from what I understand, that's for the "allowable" amount that you basically get credit for regardless of showing otherwise. If you can prove you actually spend more than this on certain things, it's the actual amount you can use for Schedule J as I understand it, not for everything, but for some things...again not a lawyer, just trying get understand.

Also, the county rent allowance for my area is over 1 grand, so that knocks me up to around 2800 in expenses there, assuming a car.

The other thing I didn't mention was my 401K. Right now my employer pays some, but I don't pay anything. If i started paying say $350/month to that (which is less about 7% of total gross income), that knocks that figure over 3100, which would be more than I am making in take home pay (what's the max contribution one can give to 401K under BK, or is there a limit?). Looks like it about adds up to me....thanks for pointing out the details though, that helps me decide about the car.

Are there specific types of cars you are "allowed" to possess, or does it not matter as long as the payments are within the guidelines and the difference in property value as far as sale price minus amount owed on it does not exceed your wild card and property amounts? Or is that if the car's "value" exceeds 11K, it's automatically considered an asset for CH 13 instead of CH 7?

[tcreegan]

I am glad you are using an attorney BKlooker, there are mulitple problems in your posts but that is why we hire a BK attorney, right?

Be sure you give them all the info you have and be brutally honest with them so they can do the best job they can.

Good luck to you on this,

Tom in Colo

[Pandora]

The other thing I didn't mention was my 401K. Right now my employer pays some, but I don't pay anything. If i started paying say $350/month to that (which is less about 7% of total gross income), that knocks that figure over 3100, which would be more than I am making in take home pay (what's the max contribution one can give to 401K under BK, or is there a limit?). Looks like it about adds up to me....thanks for pointing out the details though, that helps me decide about the car.

If you arent already contributing to a 401K or havent been in the past - generally it will not be allowed to start doing so just to bring your take home pay down. Tons of threads on here that have info on this very subject. Also if you know you're going to file (regardless if 7 or pushed into a 13) to pay creditors anything even if under the $600, may be reversed by the trustee. You're talking about paying to creditors in your post above and albeit partial payments - if your trustee is a hardass, he/she just may reverse it. You're talking about possibly getting a newer vehicle - but dont forget to account for the fact that you have to be able to exempt your current vehicle if you keep it.

I'm with the others - think you're going to have an extremely hard time claiming a 7 and will be put into a 13 based on info provided.

[BKlooker]

Thank you, tc. Yeah, I am frankly one of those people who will never understand why people would try this on their own without a lawyer (unless you are already in the field yourself), ESPECIALLY a CH 13, just because of details like those discussed herein. I tried to fill out the means test by myself recently, and it was so massively confusing to me, I gave up...I suck at legal documents like taxes and such.

My attorney says the best way to approach this is to take your time and plan ahead as much as possible before you file. That means making a budget and plan for things like cars, loan payments, housing expenses, 401k, etc. for the 6 month lead up.

I do plan to be totally honest with him, especially after reading around, so he can be as helpful as possible. I think the biggest thing is a lot of people are scared away from trying BK because of all the details in the exclusions/exemptions and what not they think may or may not count. I originally didn’t think a car payment would count at all, but I seem to be wrong.

If it turns out I am headed for CH 13 land or even just plain old ordinary debt settlement for the CCs, then so it is. I may consider keeping the house but still try for getting the CCs knocked away because as was noted that will allow for higher exemptions, and the 33K I own on CCs gone would mean in 2 years I would stil have the house, car, and student loans to fight, but would be free of the 850-1000 bucks a month I am spending on the CCs, which could be put into the principle on the house and be in a much better position to sell it then.

I think we can all agree that I am wise to look into this now and get organized about than be like the hundreds of other folks on her who dipped into their 401K, have negative savings, no assets, and can hardly afford to keep the lights on half the time. I am happy I got it now rather than getting that far down the road and realizing I should have started earlier.

[backtoschool]

Thanks, momo that does help. That being said, from what I understand, that's for the "allowable" amount that you basically get credit for regardless of showing otherwise. If you can prove you actually spend more than this on certain things, it's the actual amount you can use for Schedule J as I understand it, not for everything, but for some things...again not a lawyer, just trying get understand.

Also, the county rent allowance for my area is over 1 grand, so that knocks me up to around 2800 in expenses there, assuming a car.

The other thing I didn't mention was my 401K. Right now my employer pays some, but I don't pay anything. If i started paying say $350/month to that (which is less about 7% of total gross income), that knocks that figure over 3100, which would be more than I am making in take home pay (what's the max contribution one can give to 401K under BK, or is there a limit?). Looks like it about adds up to me....thanks for pointing out the details though, that helps me decide about the car.

Are there specific types of cars you are "allowed" to possess, or does it not matter as long as the payments are within the guidelines and the difference in property value as far as sale price minus amount owed on it does not exceed your wild card and property amounts? Or is that if the car's "value" exceeds 11K, it's automatically considered an asset for CH 13 instead of CH 7?

Many districts do not allow 401k contributions on the expense schedules. Student loans as I said in my earlier posts are not allowed on expense schedules either. As a rule of thumb, keep your monthly expenses to household expenses, housing, car, medical and insurance. Anything discretionary such as 401k contributions are red flags for the US trustee and are often not allowed.

[BKlooker]

Thanks Pandora. My 401K allowance for my company (that is, when they will start allowing contributions period) just start 6 months ago. In other words, i was in fact contributing at my old company out of pocket. You have to work at my current job for X years before they start up the account for you, and that just happened 6 months ago, so me starting to contribute now and waiting 6 months file may not raise any eyebrows.

My lawyer has been at this for 15 years, and i am very happy with how knowledgeable and nice they have been so far. If it turns out they think Ch 13 is most likely in my scenario, then we would talk about that option and where it would leave me as far as what we would want to include, and how it the payments would work out and for how long. CH 13 still has benefits over going commando and allowing myself to synch further and further into this hole....I originally had 45K in CC debt, have paid it down to 33K, and have been steadily increasing that over the past year. I don't wanna end up with having to sell my dog to be able to eat.

As noted before, there are other things I didn't mention here. I assist in paying for my mother's care-facility (she is disabled), and I also have regular charitable contributions that play a factor (have had those for several years), and a few other odds and ends, which is why i am not going to worry about which BK option just yet, as i still haven't even given my lawyer a single financial document just yet (will start that on Monday).

As was noted before to a few others, The intention of this thread was not to dispel all my finance info to see whether Ch7 or Ch13 would best apply, which is what this is trailing off in to. I only listed truncated information to give you an idea of where i stand as far as no kids, no other homes, etc. But it's not intended as a full disclosure for qualifying. The point was to ask was it wise (in general terms) to get the car now cause it's coming within 18 months anyway and how did my using a SL to pay a CC affect my outcome.

Nevertheless, I do really appreciate all the info even if it looks like it's not what is desirable. My not having children might make it harder, but there were a few other people on here who were in a similar position as myself (no kids, decent paying job) who managed to knock a CH 7. I'm going to be hopeful about this, because it's the only way i am going to make it through. Time will tell. i will keep everyone posted on how it goes.

The way I see it....i gain financial stability regardless of which route I go (Bk ch7, Bk ch 13, or debt settlement), and my lawyer's firm handles all of the above

[BKlooker]

This is to update on my situation after meeting with my lawyer, for anyone who was curious.

He reviewed the student loan payments I made to the credit card company. He said that the worst that would happen is that the trustee may take the money paid to those credit cards back and either distribute them evenly to each creditor, or simply give it all back to the student loan finance companies to pay down the student loan debt itself.

It does not affect the discharge-ability of either the cards or the loans or my ability to get a successful Chapter 7 because neither is secure debt (student loans are not secure debt, despite what others have noted, they simply have stickier credentials for discharge in BK).

I asked about the car, and he said lawyers can't advise anyone buy things prior to filing for BK with the exception of certain cases in CHapter 13. That being said, he said the car won't matter (getting it now or later), because my expenses monthly are already going to knock me into the right category, and not having the "new" car asset and going into it with my paid-off car with little value easier. In addition, since my car was co-signed by my dad, if they looked at it as an asset, they would have to give my dad 50% of the value anyway (car is only worth 4,600 on kelly BB).

After looking over my paperwork and expenses preliminarily, he is quite confident I qualify for a chapter 7 without worry. Now it’s time to round up paperwork and then schedule the next meeting with the firm (currently scheduled for November 15), and the say as long as I include everything in the packet, we would do the means test that same day and likely file for BK within a week after that.

Stay tuned…..