Chapter 7, Family Medical Leave

[kleinkp]

My wife will be taking 4 months off for the birth of our child, she is going to quit 2 months after she returns to work from her leave. During the time she is a way we will qualify for Chapter 7 because its unpaid leave. If she returns after we file chapter 7 for the last remaining months of here contract, before she stays home full time to care for our child, will we still be able to continue in a chapter 7? Or does she need to quit prior to filing chapter 7, it would be nice to get the extra two and half months of pay!

[tcreegan]

Hi kleinkp, and welcome!

The Ch 7 means-test is going to be the 6 months right before filing. So with 4 months leave, you have to average in 2 months of her pay no matter which way you do it. Unless, of course, you wait 6 months after she quits.

How you do it depends, 6 months your income + 2 months her income = ? something close to $5184/month? The $5184 figure is Washington median income for a household of 2. You can be over that for a Ch 7, there are deductions you can take, but if you are a grand over, most likley you will be in the wait 6 months after she quits boat. After you file, you will use your post-BK income and expenses. The one-time 2 months pay shouldnt be a problem, post-BK is "forward looking," not the strict 6 month lookback on the means-test.

Not sure if I helped or just made it clear as mud.....but keep posting, lots of good people around here to help out!

Tom in Colo

[ValleYum]

Awww Tom you are SO awesome and helpful!!

Hi kleinkp and welcome from another WA poster!!

So what happens if kleinkp and his wife file sayyyy the day after the baby is born? Are they a family of 3 with the same 6-month lookback as if they filed before the baby was born? By doing this 'strategically' that would bump their income closer to 6k per month ($5946).

LOL Nevermind... someone (ahem, me) needs to stay away from the wine for the rest of the evening...

[kleinkp]

It would be nice to get the 2 months extra income after filing but that might show disposable income post BK even though she will be living her job to care for our child.

One other question is if we are under IRS expenses for certain monthly categories can we claim the IRS numbers for those particular monthly expenses or do we have to use our actual estimated monthly expenses?

[free2breathe]

On the means test, you get to use the IRS standards. On Schedule J, you are supposed to use your actual expenses. Now, you do have a place on both Schedule I to "Describe any increase or decrease in income reasonably anticipated to occur within the year following the filing of this document" and on Schedule J "Describe any increase or decrease in expenditures reasonably anticipated to occur within the year following the filing of this document". So, while yes, you would have 2 months of income post filing, you would also have majorly increased expenses with a brand new baby (think diapers, formula, etc.) and I think could effectively explain it. And the best part is, your expenses will increase immediately and remain, but the income will only increase for those 2 months and then decrease to pre-petition income again.

[kleinkp]

Thanks for the great info! I pulled out $4,000 in cash a few months ago out of my saving account before considering bankruptcy and did it to cover daily expenses for when my wife isn't working for 4 months! (trying not to use plastic anymore)
Do I need to let my attorney know about the cash on hand to get an exemption?

[free2breathe]

Technically yes. Any cash on hand and in your bank account is considered to be property of the bankruptcy estate, so you should let the attorney know for sure. You don't want that to get snatched up by the panel trustee.


ETA: just looking at WA state exemptions. Thankfully you have the option of using federal. WA cash exemptions is all of $200. EEK!

[kleinkp]

Will my family and friend find out about my BK?

[free2breathe]

Will my family and friend find out about my BK?

Bankruptcy is a matter of public record, so technically someone could find out about it, but only if they are pretty caught up in searching public records as a hobby. Though some areas post the bankruptcies in the local paper, it doesn't seem to be a very common thing. Look in your local paper under the legal notices. If you see bankruptcies in there, there is a chance someone you know would see it. But honestly, how many of us really look at those?

[kleinkp]

I keep hearing about the Trustees and Im creating a picture in my head of CSI investigators probing not only me but family and friends! Probably built them up way to much, just nervous there going to be harassing everyone I know!

[free2breathe]

Keep this in mind The trustees have other jobs. They are acting trustees in each district, but most of them are attorneys in their own practices, or accountants, etc. They earn $60 for a no-asset Chapter 7. They earn a percentage of assets in cases where there are assets to distribute. It's not worth their while to harrass your family, friends and neighbors. The only time they would have any reason to contact someone is if you had paid a preferential payment to one or transferred property to them in order to hide assets.

I know it's really hard, especially in the beginning, to wrap your head around exactly what does and doesn't happen in a bankruptcy. Our emotions tend to trip our rational thinking up. Best advice on this forum? "Keep in mind that filing bankruptcy is a business decision, period." It helps when you can put it in that perspective. You have come to the conclusion that this is the best financial decision you can make at this time for yourself and your family. You'll find a lot of support here and a lot of answers....just nothing that can be considered "legal advice" ;)

[kleinkp]

How about credit card usage, as of last week I stopped using them, 5 months of no usage with under $10,000 debt, I plan on paying my payments until I file for chapter 7. Plan to hopefully file in May of this year, because of some advice to file after I receive my tax refund?

[free2breathe]

Really no point in paying payments on debt you are hoping to discharge. That money can be better put to use to pay for your attorney, stockpile diapers, food for your pantry, etc. Same with the tax refund. You will want to spend your tax refund on reasonable expenses....pre-pay your car insurance, pay your utilities, etc. These sorts of expenditures are acceptable.

[kleinkp]

Thanks so much you've been a great help and relief! One last Question my mother n' law put my wife and I on a title of a small undeveloped piece of land in the middle of no where (value well under $15,000, she paid $5,000 three years ago) we didn't pay anything toward the purchase more or less beneficiaries of the worthless square of land! Is this going to show up in the trustees hands, hoping to keep the mother n' law out of my business!

[free2breathe]

You will have to list it. Whether the trustee would take any interest in an undeveloped piece of land or not...unsure.