Bankruptcy Planning

[cr2285]

I've had a couple of 'free' initial consultations. Both atty's have said that I fail the means test (which I already knew) and steer me towards chapter 13 (Even though I'm current on my house and all of my debt other than the house is unsecured.) The main reason I fail the means test is because I just recently paid off my vehicle and I'm not allowed to use that deduction (form B22A, nbr 23). When I suggest that I either: 1. Trade in my vehicle and buy another one or 2. Get a loan on my current vehicle and put that money into my house, they kinda shrug their shoulders and say things like "I can't really tell you to do that."

While I appreciate the 'free' consultation, I don't think I'm getting the full skinny.

I understand that the new law prohibits them from saying certain things, but I also know that they get paid more for a chapter 13. Has anyone been able to go over 'bankruptcy planning' issues with an atty by paying their hourly rate and peppering them with questions, ideas, plans, etc?

[brokentex]

I've had a couple of 'free' initial consultations. Both atty's have said that I fail the means test (which I already knew) and steer me towards chapter 13 (Even though I'm current on my house and all of my debt other than the house is unsecured.) The main reason I fail the means test is because I just recently paid off my vehicle and I'm not allowed to use that deduction (form B22A, nbr 23). When I suggest that I either: 1. Trade in my vehicle and buy another one or 2. Get a loan on my current vehicle and put that money into my house, they kinda shrug their shoulders and say things like "I can't really tell you to do that."

While I appreciate the 'free' consultation, I don't think I'm getting the full skinny.

I understand that the new law prohibits them from saying certain things, but I also know that they get paid more for a chapter 13. Has anyone been able to go over 'bankruptcy planning' issues with an atty by paying their hourly rate and peppering them with questions, ideas, plans, etc?

You know what you need to do to make the cut, so why do you wanna pay an attorney $200 an hour to tell you.


Isn't your car about to blow up ?

[cr2285]

Just to make sure.

If I was just filling out a gym membership, that's one thing.
Filing Chapter 7 is an entirely different animal.

[keepmine]

One of the provisions of bk reform is, lawyers can't suggest you incur new debt prior to filing.
I'd say your house probably had a rough winter and needs new gutters and painting. You really ought to get your A/C serviced before summer and you and your family likely need some dental work and maybe annual eye exams,etc. The car itself could use new tires and a brake job and so forth and so on.
Like my esteemed collegaue Brokentex says, you know the drill.

[annikasaunt]

Yes, Let's see...I'm going to the dentist this morning, I've done new tires, tuneup on car, fixed some bath faucets in the house. I've scheduled an eye appt. You get the drift...use your money now for all this crap. Get rid of the car and then wait a couple of months and get started.

Attys aren't supposed to suggest all this stuff, but mine did. I'm not going to tell on him!! LOL

[time4cake]

The main reason I fail the means test is because I just recently paid off my vehicle and I'm not allowed to use that deduction (form B22A, nbr 23).

Line 23 regarding the vehicle expense, doesn't imply a loan payment. It represents the cost of ownership. Even if you have no loan or lease payments there are costs associated with ownership that you are allowed to expense. It is my opinion, and my attorney concured that you get to take the IRS deduction allowed on line 23 regardless if you have lease or note payments.

If I understand things correctly. Line 22 represents the cost of transportation, and should not be confused with the cost of owning a vehicle which is the expense in line 23.

Lets say you don't use or own a vehicle. You would still be allowed to take the IRS deduction on line 22. So, this line has nothing to do with the cost of owning a vehicle. Line 22 is basically giving you an allowable expense to transport your body from place to place, be that work or the grocery store.

Line 23 is all about the costs associated with owning a vehicle. There are many costs associated with owning a vehicle that are not costs of transportation (Insurance, registration, car wash, etc.) Line 23 allows you to pay for these type of expenses. It doesn't matter if you have lease payments or loan payments.

I could be wrong, but I doubt it.

[Minnymouth]

You stated that you paid your vehicle off......now way too much equity in it..... You want to take a loan against it and put that money on your home....(thus creating equity in your home - unless its repairs on the home).....

Any "big" expense you have right before bankruptcy (180 days before) would be considered possible fraud..... Only thing you might slide pass and not be questionable is trading in your vehicle for a better one before bankruptcy.

An attorney is only going to suggest so much. They can be questioned if they KNEW about big charges you might incurr before filing. They will "hint" about what you can and cannot do, but will cover their own A$$..... in the end!

Yes, since your vehicle is paid off you are a good candidate for Chapter 13 in order to keep your vehicle... In Chapter 7 your vehicle becomes an asset that can be sold to pay creditors since its paid for. The exemption would not cover the value of the vehicle. You would be in a position where you would have to buy your vehicle back from the Trustee in order to keep it.

As some of the others have said - Don't you need to take out a loan against your vehicle - since you need to repair the roof, need new tires on the vehicle, new water heater,
a/c unit is getting very old? Just make sure you keep receipts of all repairs being done.

Keep us posted, let us know what you do...

Minny

[cr2285]

Line 23 regarding the vehicle expense, doesn't imply a loan payment. It represents the cost of ownership. Even if you have no loan or lease payments there are costs associated with ownership that you are allowed to expense. It is my opinion, and my attorney concured that you get to take the IRS deduction allowed on line 23 regardless if you have lease or note payments.

The board certified attorney I spoke with said the exact opposite. If don't have a monthly payment, you don't get to claim the deduction on line 23. I agree with your line of thinking, you shouldn't be penalized for not having a car payment, but there's alot in this new code that makes no sense.

In Chapter 7 your vehicle becomes an asset that can be sold to pay creditors since its paid for. The exemption would not cover the value of the vehicle.

I can exempt the full value of my vehicle under the Texas exemption or use the $2,950 federal exemption, then use the wildcard exemption for any remaining equity since I won't need to use my full federal homestead exemption.

The statute is pretty clear about what they can't advise you of. If I word my questions correctly, I should be able to get the answers I need. I just have a feeling alot of these attys are trying to 'sell' chapter 13's.

[SinkingFast]

Tattered is right. You get the Cost of Ownership deduction regardless, if you own a vehicle.

If you own a vehicle and have a payment, the payment is deducted out of the cost of ownership on that line and then added back later in the Means Test as an expense.

You are allowed to claim the cost of ownership for 2 vehicles if you own 2. But no more. If you only own 1 vehicle, you only get the cost of ownership for one vehicle.

The attny will have to have copies of your vehicle titles on file when you file for BK. It's partly for valuation purposes, and partly for proof of ownership.

We did a big No No earlier this week. We sold a vehicle. We owed taxes big time for 2005. Only way we could get the bucks was sell the vehicle. Didn't wanna go into BK or come outa BK with tax debt hanging over our heads. And, like the attny said, not much the Trustee can do about it. It's not like we took the money and spent it on vacation or paid unsecured CCs. The Trustee probably won't go back to the Lender of the auto loan, and definitely won't go up against the IRS.