What happens if household size changes after filing?

[Rebel]

I received very good news the other day from my attorney. Due to the recent change in NY bankruptcy law, we residents now (after Jan 22?) have the option of choosing Federal exemptions as an alternative to the improved state exemptions. This is great because I do not need to use the homestead exemption, so the huge federal wildcard exemption should be enough to exempt ALL my property. As a result, my husband and I are choosing to file Chapter 7, as soon as possible after the new law takes effect. Presently, our 18-year-old son lives with us and I know that we fall way below the median income for a 3-member household, even if I calculate all conceivable income we may have received during the previous 6 months, which I have not yet done. However, it is very possible that our combined incomes, plus any additional (2 sole proprietorships plus some financial help from our other son), could result in a total income that falls above the median income for a two-member household, thus failing the means test. The 18-year-old is considering joining the military in April, which could be before our discharge. Does anyone know how a change in family size affects a chapter 7 filing already in progress? Also, my elder son gave his financial help based on the understanding that we would pay him back. Would these contributions then be considered loans (where he would be listed as a Creditor), or would they be considered income? What kind of proof of loan would be required? Timing is critical, so any information would be most useful. Thanks!

[free2breathe]

For now, you don't KNOW he's enlisting, right? He hasn't signed any enlistment papers? I would go ahead and file as household of 3. This is the first line of Schedule J "Complete this schedule by estimating the average or projected monthly expenses of the debtor and the debtor’s family at time case filed." If he does decide to enlist, then you can deal with that at that time. Make sure your attorney knows the possibilities and he/she can advise you on that matter.

As far as the money that your son has given you, you can list it an unsecured debt. You don't need proof of a loan from a family member. You just need to make sure you haven't paid him any of that money back within the last year. If you have, it could be considered a preferential payment and the panel trustee could actually ask your son for that money back.

[tcreegan]

Hi Rebel,

The means-test is a strict 6-month lookback, so whatever you have on file-day is what you use. Your case, hh = 3

Schedule I&J really don't have a place to put household size, they are the 'forward looking' post-BK income and budget.

I agree w/ f2b, if he hasn't signed papers yet, he hasn't enlisted ...to count the number of 18 yr olds I have talked to who said they were going to enlist , it would take more fingers and toes than I have....but the number who actually enlisted I can count on one hand...

Ask your lawyer, if they are worried about it, schedule J has a line for 'reasonably anticipated' changes. "18 yr old son is considering military enlistment" would suffice.


As for the elder son, I would be leery of listing a family member in the BK. Unless it was all documented and served some purpose, I wouldn't want to catch the eye of the trustee and have them going over everything with a fine-tooth comb looking for an insider payment.

...you know the ol' saying...keep it simple

Tom in Colo

[Rebel]

Your replies are very helpful and greatly appreciated- thank you! Staying under the median income for the means test was my biggest concern, along with the possibility of being forced to switch to a 13 midstream because the info used on the means test would change. Sounds like that won't be an issue. Even if my son's recent loan is added into last 6 month's income, we still fall well short of the state median income for a 3-family hh. We will address changes to the Schedules I/J if and when they occur.

As for not listing my son as a debtor- our attorney was pretty insistent that all lenders needed to be listed, including family members. '$100 borrowed from Uncle Joe' was the example he used. My sons loans are pretty easy to prove- his records of EFT's to my bank accounts would correspond to deposits in mine. Actually, I was thinking it would be beneficial to list family loans (we owe money to both 'mothers' as well), as a high debt total would require a larger DMI before being kicked into a 13. My understanding is that there is a DMI $ range (109.58-182.50) where one is required to file 13 IF paying this amount monthly to creditors over 5 years will pay back at least 25% of the debt. 182.50 x 60 months is $10,950, which is 25% of a total debt amount of 43,800. We have more debt than that, without family loans, but am I correct in assuming that our total will be lower if some Creditors do not put in a claim? If that is the case, seems like the more debt we list, the safer we are. Because of our asset situation, it is important that we tread carefully and consider every variable to insure that we stay a 7, or go into a 13 with very small payments. Everything seems so complicated- I feel like we are walking a high wire and the least misstep could catapult us into disaster!

Aside from all that, our attorney insists we need to list family members that have loaned us money but, Tom, your comment has me a bit concerned about opening a can of worms. We have not made any insider payments, but I can see that the process of looking for some might be a hassle. Then again, if they only go back a year, maybe it won't be so bad? I need to make sure I do everything by the book and not give the Trustees any reason to think this is an abusive filing. Definitely an issue I will bring up with the attorney- thank you for shedding light on this. I have wondered why the BK Trustee or Court should care if I owe money to family members, but thinking about their concern over insider payments, it makes sense...

[tcreegan]

Hi again Rebel,

Go w/ your attorneys advice, they know the local court and trustees!!

After thinking about it, the insider payment would only apply if you paid them, not vice versa. And loans are not usually considered income.

Full disclosure to your attorney...give em all you got...best way to go!

Tom in Colo

[debee]

My understanding is that there is a DMI $ range (109.58-182.50) where one is required to file 13 IF paying this amount monthly to creditors over 5 years will pay back at least 25% of the debt. 182.50 x 60 months is $10,950, which is 25% of a total debt amount of 43,800.

Minor point, but the DMI range changed last April according to the provision in 11 USC 104. The new numbers are $117 - $195 (+/- the change). So, Yay! You have ten extra dollars to play with.

Also, to overcome a presumption of abuse when your DMI is less than 195.42, you need the DMIx60< 25% of your unsecured debt. You probably knew that, but just in case I thought I'd throw it in.

Since there's an electronic trail between your son's account and yours, it seems wise to account for the loans. You don't want to leave them off and end up stammering when/if asked about the transactions later.

[Rebel]

Thanks, guys, for the encouragement and insights! I thought I was using the most current numbers, as somewhere I saw even lower numbers than the ones I quoted here. Every dollar helps! Our debt is all unsecured, except for a piece of real estate we wish to keep- not our residence, but will also be exempt... another issue that will need to be dealt with at some point during this process, I am sure.

Especially important to tread lightly in my neck of the woods- our attorney has put the fear of God in us concerning the Judge and Trustees in our jurisdiction- supposedly one of the toughest districts to achieve a successful Chapter 7 anywhere. I feel so special...