Paying Debts vs. Not Paying them before filing for Chapter 7

[mjengineer]

I am currently interviewing lawyers to handle my attempt at Chapter 7. But I have not paid the balances on my credit cards or other mortgages except my primary one in months. Does it matter if I have stopped paying the debts, or should I continue paying them depleting my accounts to show "distress". A lawyer hinted to me that I might not be able to use them as expenses if I am not paying although they just won't go away on their own! If I need to throw money at them to show I really have no money left I will, but I was saving up to pay for my legal fees and buyback my vehicle if it gets taken in Chapter 7.

[biotechsolution]

You can't use any credit card or unsecured credit payment as expenses. If you're filing bk stop paying on anything that is not a secured debt that you are keeping.

[AngelinaCatHub]

You can't use any credit card or unsecured credit payment as expenses. If you're filing bk stop paying on anything that is not a secured debt that you are keeping.

Absolutely correct. Use your excess money for legal and exempt expenses such as food, rent, clothing, and that kind of stuff. Don't save up too much to buy your car back as it becomes an asset if it is substantial. Spend down on stuff that is allowed. Food is always a good idea to stockpile as it is getting more expensive by the day. Buy it today at today's price. 'Hub

[mjengineer]

Is there a link where all the exempt items are listed, I clicked on one, but it took me to the allowable expenses values page?

[helpmeout]

First of all, any credit card debt/payments is not going to be allowed as an expense. They will be discharged.

What your attorney may be referring to is the mortgage payment. You can't list it if it isn't current. And not listing it doesn't necessarily mean you won't qualify for a chapter 7. I didn't have rent or a mortgage listed and showed a positive DMI, but that was only because there was no rent/mortgage listed. The totality of circumstances allowed me to do a chapter 7.

[AngelinaCatHub]

Is there a link where all the exempt items are listed, I clicked on one, but it took me to the allowable expenses values page?

http://www.filing-bankruptcy-form.com/forms/exemptions/Florida.pdf

For Florida. 'Hub

[mjengineer]

Thank You. That will help a lot. I think I am only now confused on one thing.

I fail the median income test because I make over the value for my state.

But on the "means" test do they care about the amount I have left at the end of each month or my total debts? That is the only thing left I am really confused about. Just because I am not paying the debt does not mean it will go away, and they try to sue me to that effect.

I have a lot of mortgage debt, and from what I am hearing the credit cards won't factor into anything it's almost like they don't exist. I used some of the credit cards for business and a lawyer told me I should be able to include that portion by testifying to that effect.

I guess the DMI vs. I&J is what I am unsure of how that factors into whether I qualify or not??

[tcreegan]

Hi mjengineer,

The means-test is a "snapshot" of your financial condition going into BK. It is pretty mechanical, input data, get result.

There are numerous online means-test calculators, but here is the real thing:

http://www.uscourts.gov/uscourts/RulesAndPolicies/rules/BK%20Forms%201210/B_22A_1210.pdf

And here is a line-by-line guideline:

http://www.justice.gov/ust/eo/bapcpa/docs/ch7_line_by_line.pdf

Grab these and start filling it in, if you can get to "presumption does not arise" the door is open, welcome to Ch 7

Tom in Colo

[debee]

I guess the DMI vs. I&J is what I am unsure of how that factors into whether I qualify or not??

The means test is looking at whether you have the means to pay back some of your debt. As others have explained, you can't include as an expense any debt that you are hoping to discharge with a chapter 7. If you take the means test (using the expenses that are allowed in your area and circumstance) and you fail it, then chapter 7 is not an option. If you pass it, then you move on to the next hurdle: schedules I & J.

If you fill out schedules I and J (using the expenses that are allowed in your area and circumstance), there are DMI figures that will spell trouble. If you have anything in the range of $117-$195 per month, and if that amount (x60) is equal to or greater than 25% of your non-priority unsecured debt, you will not be able to proceed in a chapter 7. You will have enough to fund a chapter 13 plan.

If $117-$195 is less than 25% of your non-priority unsecured debt, you may proceed with a chapter 7.

BUT, if your DMI is $195.42 chapter 7 is no longer possible regardless of what percentage of your debt would get paid. With exactly $195.42, you can fund a chapter 13, period.

Since you're over the median, your expenses will be scrutinized. They will look for anything over the local & national standard, and they will object to anything they think is not "reasonable & necessary". They will be trying to come up with the DMI needed to put you into a chapter 13. If you're close to the $195.42, they will be looking for the $10 (or whatever) needed to get you there. You have to have an ironclad filing.

[mjengineer]

The means test is looking at whether you have the means to pay back some of your debt. As others have explained, you can't include as an expense any debt that you are hoping to discharge with a chapter 7. If you take the means test (using the expenses that are allowed in your area and circumstance) and you fail it, then chapter 7 is not an option. If you pass it, then you move on to the next hurdle: schedules I & J.

If you fill out schedules I and J (using the expenses that are allowed in your area and circumstance), there are DMI figures that will spell trouble. If you have anything in the range of $117-$195 per month, and if that amount (x60) is equal to or greater than 25% of your non-priority unsecured debt, you will not be able to proceed in a chapter 7. You will have enough to fund a chapter 13 plan.

If $117-$195 is less than 25% of your non-priority unsecured debt, you may proceed with a chapter 7.

BUT, if your DMI is $195.42 chapter 7 is no longer possible regardless of what percentage of your debt would get paid. With exactly $195.42, you can fund a chapter 13, period.

Since you're over the median, your expenses will be scrutinized. They will look for anything over the local & national standard, and they will object to anything they think is not "reasonable & necessary". They will be trying to come up with the DMI needed to put you into a chapter 13. If you're close to the $195.42, they will be looking for the $10 (or whatever) needed to get you there. You have to have an ironclad filing.

Good information there, I found a lawyer I am comfortable with. Since my mortgages are business debt, apparently as long as my business debt outweighs my personal debt I can qualify for chapter 7. The issue is it's close and I have to prove what portions of my credit card debt are "business" and which ones are "personal". It would be a slam dunk, but my primary mortgage is considered a personal debt which added with the CC's pushes the numbers up there.