BK attorney says I can qualify for 7 in CA no problem..but I don't agree...what to do

[alibaba]

Here is my stats:

CA
family of 4
make about 41-42k over last 6 months and will be that way going forward
50k credit card debt
13k car debt
just foreclosed on house in November 2010 so credit is low 600's not in good shape anyhow.

From my research, it appears that 1. I make too much to just qualify, and 2. according to the NOLO calculator I do not have enough expenses and will have money left over at the end of the month, like $800 or so if they wipe my credit card debt. That spells 13 to me and I would rather stop paying some of them and try to settle than to try 13.

Ok, so I went and saw a local well known bk attorney. He thinks a 7 should be no problem.

Minute I hand him my down payment check for $500 he walks me out to the front and assures me if it goes chapter 13 it will be fine your car will be in it student loans etc

NO WAY am I doing a 13...From my income I think I will end up right back where I started paying way more than I can realistically afford. I told them to hold on to the check (I did sign a retainer agreement which they failed to give me a copy of) until Friday, which is now Saturday because he won't be in the office till then. I am thinking this sounds too fishy and I should go get my check.

Any advice? I think I am headed to 13 and I don't want to waste my money if that is the case.

[jeep75]

The median Income for CA is $78,869 for a family of 4. You appear to be only 1,000 or 2,000 over this. At the most this about 166 a month which is already below necessary disposable income to *not* qualify for chapter 7. It is close, but this is without figuring ANY of your allowances.

It looks like something wasn't entered correctly in the nolo test. You should have no problem passing the means test.

[alibaba]

Thanks Jeep75 for the response. Maybe I don't understand the whole thing much yet, of course this is why I am here. I think I am just a bit over for sure, that is what it looks like. I have made around 100k for the past few years but my income is down just like everyone else in the world. I calculated it out and it will be at most for the whole year in the mid 80's with what little bonus money we still receive at work. I think the best snapshot I can gather for the test would be from January to June 2011 file in July-those will be the leanest 6 months of this year, although again, it will be just over by 1500-2000 or so

[momofthree]

Since you're a renter and don't have a large mortgage expense, and only have $13k in auto loans, you may very well be in ch.13 territory. As backwards as it sounds, it may benefit you to buy 2 newer cars (with payments under the IRS standard of $496 each). If you add in those allowable expenses, you'll be more likely to qualify for a ch.7. Ask your attorney before filing.

[jeep75]

I missed that about not having a mortgage.. I agree with momofthree.

[Unibrow]

So you make around 85K?

Consult with more attys in the area first to see the general feel of the local area and see what expenses you can use more of.

[alibaba]

Since you're a renter and don't have a large mortgage expense, and only have $13k in auto loans, you may very well be in ch.13 territory. As backwards as it sounds, it may benefit you to buy 2 newer cars (with payments under the IRS standard of $496 each). If you add in those allowable expenses, you'll be more likely to qualify for a ch.7. Ask your attorney before filing.

The car is newer 2010, so I am keeping it. The attorney did recommend we (I am the only one filing my wife is not) buy another car to help get us closer. I just re-did the nolo calculator again, and I was not putting enough monthly taxes into the equation, which I think I now may pass, but we may end up needing to buy that car regardless. I just sold a 2008 car with a 600/mo payment prior to this to try and lower our bills-and now I feel like I am being punished for trying to do the right thing.

[alibaba]

So you make around 85K?

Consult with more attys in the area first to see the general feel of the local area and see what expenses you can use more of.

I expect to make around that this year, yes. That puts me over by around 7k for an entire year. I am thinking you are right I am off this week from work-I am a teacher and we are on spring break. Maybe I should poke around for some more free consultations

[dman]

Ah, teacher...do you get summers off? If so, do you still get paid the same amount for those months? If not, can you wait until after the new school year starts to file? For example, if you start back August 8, and will get your first paycheck in September...I'd file September 1st. That way you have 2+ months in your 6 month lookback where you were making $0. Of course, you could file later, as long as those summer months were in the 6 month lookback period (just assuming you'd rather file sooner than later).

[daylate]

I think even if you finance a clunker, you get to take the whole operating expense thing-even Supreme Court Justice stuck -in-the-1780's Scalia said so. A strategy to consider. Also I'd stop payment on the check and get a new attorney.

[momofthree]

I think even if you finance a clunker, you get to take the whole operating expense thing-even Supreme Court Justice stuck -in-the-1780's Scalia said so. A strategy to consider. Also I'd stop payment on the check and get a new attorney.

You get to claim the full operating expense, yes. You do not get to claim the full ownership expense on the schedule J, only the actual payment amount.

[alibaba]

Unfortunately my school is year round charter school, we never stop except for two weeks in the summer and two weeks at christmas. So I have to go with the first 6 months of the year as June is my weakest (lowest earning) month. It is a bit hard to explain but we earn incentives based upon student performance, and the end of our fiscal year is between now and June and when I make the least so now is the time.


Let me ask, so I buy a 2nd car, and I claim the $496, but I can only claim the total payment amount on schedule J, correct? I am contemplating high vs. low payment car. I am very close to being in chapter 13 territory, so I am thinking higher payment.

Also, in buying this second car I was thinking in my wife's credit only, yet I am the only one that is filing, is this going to be a problem or do I have to be on the note?

Thanks again everyone I am learning, and your experience is priceless to me.

[daylate]

You get to claim the full operating expense, yes. You do not get to claim the full ownership expense on the schedule J, only the actual payment amount.

But it is my understanding that you get the full $486 for ownership costs on the means test. That could be enough to qualify for a 7.

That being said if OP has 800/month after bk then he is looking at a 13 almost for certain imo and that would argue for a higher car payment. However, I find it difficult to believe that a family of 4 in California can have that much disposable income even without cc debt. Perhaps OP is not re-figuring what expenses will be when cc debt is eliminated. I'm betting clothing,medical,food,car maintenance,etc can easily eat up the 800 or at least enough of it to get it so that he won't be forced into a 13.

Alibaba- sorry for the third person or second or whatever person I was just writing in but are you familiar with section 707(b) of the bankruptcy code? It spells out when and how a trustee or a judge may find a presumption of abuse even if you pass the means test. I would search through this forum for info on that, and Schedule J expenses. Lots of good stuff there if you haven't already looked for it.

Good luck.

[momofthree]

But it is my understanding that you get the full $486 for ownership costs on the means test. That could be enough to qualify for a 7.

Yes, on the means test he'll be able to claim the full ownership cost. However, the means test is only the first step in determining whether someone can qualify for a 7. There is then the forward-looking disposable income shown on the schedule J. If that amount shows anything over $187 (or is it $181? Somewhere around there, lol), then that person cannot file a ch.7. Unfortunately, only the debtors actual payment is allowed on the schedule J. So, as backwards as it sounds, it's best to get as close to the IRS limit as possible when buying a new vehicle if you're borderline for a ch.13....

[alibaba]

Yes, on the means test he'll be able to claim the full ownership cost. However, the means test is only the first step in determining whether someone can qualify for a 7. There is then the forward-looking disposable income shown on the schedule J. If that amount shows anything over $187 (or is it $181? Somewhere around there, lol), then that person cannot file a ch.7. Unfortunately, only the debtors actual payment is allowed on the schedule J. So, as backwards as it sounds, it's best to get as close to the IRS limit as possible when buying a new vehicle if you're borderline for a ch.13....

That is what I have been trying to figure out-whether to just buy a car that is $200 a month or something $400+ a month and that helps answer that question, thanks for your help.