Question from a Teacher...

[trader19]

Guys, looking to file but now I am concerned about the means test. My wife was a teacher and I was fortunate to make a quick transition into the teaching field. She has a contract for $57,000 and I have one for $49,000. We have about $125,000 in unsecured debt. Passing the means test was a no-brainer prior to me getting hired but we had preferential payments to worry about so we had to wait. Now I am concerned. I have read online, and I want to confirm with you guys...

Since both my wife and I getting paid on a 10 month pay period from Sept-June and receive no income in July/Aug... can I simply wait until September to file so that the 6 month look back period encompasses those two months of no pay and lowers my median income?

Thanks in advance.

[Pizza]

With a $106,000 annual income, you exceed the median in all states, except for a family of 4 in Maryland ($106,707). Barring large and permissible expenses, it sounds like it could be an uphill battle for a 7. Your schedules/forms are going to reveal your monthly income going both forward and backward from the date you file. Trying to use the summer vacation to move the numbers around to your advantage probably won't work.

[btbeme]

A 6 month lookback is a 6 month lookback for income.

Unless the Trustee feels that something is fishy.

So, I strongly recommend that your plans for BK include several attorney consultations to see exactly what a Trustee in your district feels about how teachers' salaries are calculated and handled.

I will say this (adding to what pizza said) - if you have to use some magic to work the numbers to <just> squeak by, the odds are not in your favor. Now, if you are in a district that recognizes only the cash that gets deposited into the bank, that helps. But, I suggest that you find out ahead of time by a few (free) attorney consults. You aren't the first teachers to file in your district, I guarantee.....

[trader19]

So, will I have a problem passing the means test if I use that 2 month period of no income to my advantage? We have $125,000 in credit card debt. If I was going to fail the means test, it would be more worthwhile to just not resign my contract for next year and give up the $49,000 in gross salary.

[keepsmiling]

Aw trader, I would disagree.
A bird in the hand and all that, and how lucky you were to transition successfully.
Why not try to craft a livable plan instead? Many here have done so very well.

[facinglife]

This is a tricky question. I am a teacher also and I filed the end of August and did not receive any paychecks the months of July or August. My attorney kept thinking the trustee was going to question that but I was trying to explain that since I only get paid 22 checks instead of 26 a year if we had used the six month look back earlier then my income would actually be inflated. So, I did what you are proposing to do (which ends up being my actual income anyway) and there were no questions asked.

[btbeme]

So, will I have a problem passing the means test if I use that 2 month period of no income to my advantage? We have $125,000 in credit card debt. If I was going to fail the means test, it would be more worthwhile to just not resign my contract for next year and give up the $49,000 in gross salary.

What I am saying is that sometimes and in some districts Trustees will look at an annual income, divide by twelve, and use that total to calculate a six month lookback. That is not unheard of in a situation where the wage earner is on an annual contract but not paid during certain times - teachers being a common example. Some do, some don't - which is why you should consult with some knowledgable attorneys first. Indeed, even if you do manage to qualify, I would say that your income could place you into a difficult bracket where your filing would get close scrutiny - would be good to have an attorney on your side, and lots cheaper than walking away from a $49k contract.