Thinking about Bankruptcy

[Justsomeguy]

my question is that in Arizona if a family of 4 makes about $27000 a year do they really qualify for chapter 7. I read that if you are under the median income for your state you qualify for chapter 7. I have been doing some reading and I found that may not be true.

My situation
Family of 4
on unemployment right now but not for long hopefully my spouse makes about $ 800 a month. The reason I put $27000 above is that most likely my job that I get soon will pay $2000 a month
Plan on filing Bk around February. So most likely a job will play into this. I have taken an online means test and passed it with disposable income of -$64,000 over the next 5 years.
My worry is that I pass the means test and can not pass the I vs J test if I get a job before filing.. On the schedule J can I put the max Arizona allowances or do I put what I really spend as it is way scaled back due to being unemployed.. We turned off TV, got one prepaid cell phone type scaled back.. I would hope that on the schedule J we would be able to put expenses that a family of four would need ( of course within reason ) like health ins and other necessities that we would need.. I would be very much appreciative of any help. I have also spoken to an attorney but they are not getting back to me about questions I have.

[TheBajan]

Welcome!

First, you are way below poverty level and that's as you assume a job. Regarding your expenses, you can use reasonable expenses. By that I mean that yes, you can expense the things that you would ordinarily pay such as your cable, cell phone, ins, etc. You can also expense the additional cost you will incur in gas driving back and forth to your job, lunches (within reason), and other job-related costs. You are able to use the Arizona allowances as they relate to your situation. For example, let's assume you are only spending $20 a month on clothing (buying at thrift stores or doing without). However, let's also assume the standard allowed expense for clothing is $100 (you would have to check as I am only using this as an example), you are allowed to use the standard allowed expense even though that's not what you are actually spending. On the other hand, if you are eating out at restaraunts every night and spending $400 a month on that, you probably won't get away with expending that much for it.

I'm not from Arizona and I'm only using numbers as examples. I really don't know anything about what the actual allowances are for your state. There is a moderator here that is from your state and he/she is very knowledgeable. Hopefully he will be around to help you out better than I can.

Best regards,

The Bajan

[despritfreya]

Justsomeguy,

I am glad you found your way to this forum. There are numerous AZ folks here and I am sure some will chime in. As I earlier said, if you file before you find employment, no big deal.

At $24k-$27k with a family of 4, you are way below median income for “means testing” purposes. Work on Schedule J. The guideline I referred you to is just a guideline. If your "real" monthly expenses exceed them, you just need to be able to justify what you spend, assuming someone questions them. For example, food is $528 for a couple and $210 for each dependant per the guideline. That would be $948/month for your family for Schedule J. But, if someone has a special diet (due to health issues or religious issues) then a higher amount may be justified. Likewise, the guideline allowance for gas and maintenance is $300/vehicle/month. But, if you drive from the far west valley to the far east valley and back for work each day, you may have justification to use a higher amount. On the other hand, I think recreation is listed at $120/family/month. If your family spends $300/month you would not want to use that amount as you would not be doing the “belt tightening that is expected of someone who files bankruptcy”.

You asked what number to use if a particular expense is below what that guideline states. That is tough to answer. When I meet with my people we go over the numbers. Once I have a feel for the family/expense dynamic, I, as the attny, may decide to increase certain numbers while decreasing others. It is a tough call. You should use your true numbers and, when you meet with the attny to finalize Schedule J, make an informed intelligent decision with the attny. Assisting you with this process is his/her job and if the budget simply won’t work, he/she should tell you.

Lastly, I just want to remind you that you should speak to more than one attny.

Des.

[keepsmiling]

Hi and welcome!
I really don't think you need to worry about having too much dmi (disposable monthly income)
Your energy should be focused on increasing income and getting health insurance.
I can't imagine the tt that would be Scrooge enough to even try to put you into a 13 on that income.
Are you paying for housing somehow?

[Justsomeguy]

Hello Des and thank you for your input.. I think what scares me a little is the putting our real expenses down as they are right now being that I am unemployed. If I put real expenses which as of now are very low I am afraid I would show extra disposable income, since I lost my job we have canceled everything that was not an absolute need.. I am just nervous about this whole thing. I was able to talk to another Att today and he said the same thing as the first Att, I should have not problem qualifying for chapter 7 so I think we will be fine. Adding up the allowable expenses that AZ gives me shows that we really do not have any money left over to pay for a 13 even when I get a job but of course that is not based on the real expenses right now.
I found it interesting that one Att said to wait till after we spend our tax return to file and one said that AZ will take about 75% of my tax return. I am not sure that waiting till I have spent my whole tax return is not fraud or unfair to my creditors. I would need some of it to pay to Att her fees and maybe get my girls orthodontist work started but other than that the creditors can have the rest. I am just after a fresh start, I feel like a little kid on the playground just wanting a do over. It's amazing, I have been robbing Peter to pay Paul for so long. I was stuck in the trap of paying my credit cards with my pay checks only to turn back around and pull the money back off to pay for my bills that I should have been paying with my pay checks, kinda of an endless circle of stupidity. I am going to go ahead with the Att that seemed to be the more aggressive one, she seemed to be on top of it and know a great deal about what I should do, she made me feel at ease putting her in control of it all.

[Justsomeguy]

Hi and welcome!
Are you paying for housing somehow?

Hello Keepsmiling,

I am currently paying for housing and able to keep up with it but that is because everything else went out the window like TV and other things I could live without for a bit. I am also not spending money on gas like I would if I was driving to work.. I hate being unemployed like this so the gas portion will come back soon I hope. Thank you for your time by the way.

[despritfreya]

So, I see you are up with the chickens, like me. Early riser or just losing sleep. Hope it's not the latter.

I absolutely agree with the attny. If you do not want to lose the refund to a trustee, you receive, cash and spend it (keep track on how it is spent) before filing. Doing so IS NOT fraud. If you have not received, cashed and spent the refund the Trustee gets a pro rata share of it through the month of filing. For example, if you file in November, the Trustee gets 11/12ths of the refund. If you file after November he gets 100%. Not sure why one attny would tell you "75%". Since tax refunds are not "wages" under AZ law, the 75% exemption for wages/commissions does not apply (if that is what the attny was referring to).

Stop losing sleep over the budget issue. I am sure Schedule J will show close to a negative cash flow if not an actual negative cash flow.


Edt: Oh, and by the way. . . having cable/Direct TV or the like is highly overrated. Never had it and probably never will.

Des.

[keepmine]

Hello Des and thank you for your input.. I think what scares me a little is the putting our real expenses down as they are right now being that I am unemployed I have had to cut back a lot. I am reading that you have to put down your real expenses which as of now are very low, since I lost my job we have canceled everything that was not an absolute need.. I am just nervous about this whole thing. I was able to talk to another Att today and he said the same thing I should have not problem qualifying for chapter 7 so I think we will be fine. Adding up the allowable expenses shows that we really do not have any money left over to pay for a 13 even when I get a job but of course that is not based on the real expenses right now If they took what we spend right now I would have left over. I found it interesting that one Att said to wait till after we spend our tax return to file and one said that AZ will take about 75% of my tax return. I am not sure that waiting till I have spent my whole tax return is not fraud, I would need some of it to pay to Att her fees and maybe get my girls ortho work started but other than that the creditors can have the rest.

First of all, you're allowed to lead a reasonable lifestyle. So, don't worry about using current expenses that are the result of a barebones budget. Use reasonable expenses that most people have to support a family of 4.
Next, there is nothing fraudulent about spending down assets before you file. In fact, that's pretty standard advice around here. In fact, we call it preplanning your bk.
End of the day, you should be a routine run of the mill Chapter 7.

[Pjmax]

Hi Justsomeguy.

The experts will correct me if I'm wrong, but I don't believe your income, for filing purposes will be based on projected income, but your actual income for the twelve or six months up to the date of filing (it seems to vary by individual attorney, district, etc.)

I was unemployed at the time of filing, and certain actual expense items were much lower than they would have been if I were working, gas and tolls for example. My attorney bumped a few things up, like gas, to a more realistic amount. When I was gathering my info for my lawyer, I made a list of all expenses, with two columns, the first was actual at the moment, and the second column showed the amounts if/when I was working. I had both figures available for my intake appointment. Your attorney will/should know what is reasonable for your district and local trustees.

It seems a little odd that income is actual, where expenses may be a little bit 'projected', but I look at it as, one can't pay the bills and meet reasonable living expenses on the actual income, which is why we file in the first place.

I hope you read as much as you can here on the forum, there is a lot of great advice and please remember, you are not alone, you will have a lot of new friends to help you through it.

[keepsmiling]

OP, understand something. It is not in the tt's interest to put you into an unmanageable 13. If it doesn't get completed, nobody wins.
It would be completely unreasonable to expect you to complete a plan on this income.
You have plenty of time. Read here, get edumacated and plan.
I'm thinking you should be eligible for other kinds of assistance on your income. I hope you have looked into LIHEAP/food stamps/ state kid's health plans etc.

[Justsomeguy]

Wow, thank you guys for all your input, I really appreciate it. I think I might just be reading things on the internet and getting confused. That is why I stopped here, i figured that I could find people just like me and have been through what I am about to go through. Thank you again

So not to beat a dead horse but from what I am reading here is that I am allowed to put what my normal expenses would be if I where employed and supporting a family of four. It is for that reason that the Trustee gives me allowances and as long as I am being stupid like spending $400 a month on entertainment or things like that I should be OK. I was thinking at first I had to put what I am spending right now which is not even close to what I need to spend on my family.. Thank you again and please if anyone else wants to chime in I am all ears.