Differing Chapter 7 legal advice

[ccposter]

I tried to file Chapter 7 in June. I spent weeks getting my paper work and then was about to electronically file when my lawyer then informed me I had to state to the court I was spending all of my monthly income. When I said I couldn't and wouldn't do that because it wasn't true, he said I would get into an adversarial situation in the BK process for a chapter 7 being forced into a 13 and advised me not to file. I have read on this forum that if you have as much as $180 a month in discretionary income you are forced into a chapter 13.

Now another lawyer is saying it is only based on past 6 months income and since it is less than $43,000 annualized there is no problem filing Chapter 7.

I only have cc debt at two banks but the accounts have gone to collections. No house, no car. My income for the past six months was considered disability payments through a VA program and exempt in most states but not where I live. I will go onto W-2 status at $3300 a month next week.

I do not understand why this is not a black and white matter of statute and why there should be differing opinions.

[tcreegan]

Hi ccposter,

The law is sort-of black & white. For a single person in Oregon, the median income is $3665/month. You take your last 6 months income (gross) and divide by 6; if you are $3665 or less you automatically qualify for a Ch 7. From your post, it looks like this is you.

The first gray area is if you are over $3665/month. You can take your income and deduct expenses to see if income minus expenses is $3665 or less. It's not too gray though, allowed expenses are pretty well laid out in something called the means-test.

The second gray area is how you stay in a Ch 7. You will put your expected (post-BK) income on Schedule I and will put your projected (post-BK) expenses on Schedule J

Schedule I minus Schedule J = Disposable Monthly Income (DMI) If your DMI is less than $187 you stay in Ch 7, over $187 and you go into Ch 13 (or dismiss)

Your projected expenses on Schedule J is the gray area. This is probably what your 1st attorney was talking about...spending all your monthly income.

payments through a VA program and exempt in most states but not where I live Actually VA benefits are exempt in Oregon....but by exempt they mean the $ from VA benefits in the bank doesn't get lost in the BK. The VA benefits still count as income (which isn't fair b/c Soc Sec benefits are not income, for some reason, Congress failed to mention VA benefits in the new BK law)

Not sure if this makes it as clear as black & white, but maybe black & gray.....?

Tom in Colo

[daylate]

I agree that you should be able to FILE a Chapter 7- the problem as Tom points out is staying there-if you can't spend the 3300/month or at least all but $186 or less of it then the 7 goes out the window and you'll be in a 13. To clarify a point Tom made, even though Soc Sec income is exempted from income for the means test, I believe it is included in your income for Schedule I- makes no logical sense, but hey, Congress wrote the law so what do you expect?

The other thing to consider since you apparently have no assets and your only income is VA disability pay then maybe bankruptcy is not for you right now-if your VA payments are exempt under Oregon law then creditors can't touch them even if they get a judgment so it seems to me that this may be the way to go. Check with your lawyer about this option.

[ccposter]

Some additional info

Thank you tcreegan and daylate for the comments and help.

I don't know if this would make any difference, but I have been declared disabled by two state agencies, but am getting no financial help. I have what is considered a developmental disability (Aspergers syndrome / high functioning autism) which has been the cause of some employment problems.

Maybe it wasn't clear from my post, I will be earning W-2 wages when my job converts from exempt disability status to regular employment this week (at a loss of 25% of take home pay due to changing to taxed from untaxed status.) It is a one of a kind VA program that is too complex to go into here. I would still have about $1200 in after expenses income per month.

It seems the best option would be to be unemployed, then there would be no income to count. This is a possibility if I go back to a temporary contractor situation and then become eligible for unemployment again, rather than staying on my present comparatively low paying permanent job. The debt and BK decisions are coloring all my thinking on decisions. I am seeing another lawyer later this month about debt collection defense.

[tcreegan]

Hi again ccposter,

....hmmmm...with the uncertainty about the future and not fitting the Ch 7 numbers right now....I would agree with daylate, a BK probably is not the way to go.

I am seeing another lawyer later this month about debt collection defense ....I think this a good way to go. Hope they have some good info for you.

Keep us posted on how it turns out,

Tom in Colo