Sorry for all the questions, but we are so confused...

[Quiznos1]

We attended several free consults last week that left us very confused Each attorney seemed to have differing opinions on how to handle our situation. We would really appreciate any input anyone may have that would help us make better since of our situation.

Our situation is this: when calculating the means test with the six month look back, we are way over the median and our income to expenses shows a considerable amount of DMI. Our current income consists of three months of my husband’s previous salary (which is almost double the median), three months of unemployment for him, several IRA withdrawals and a lump sum severance payment. Also, I have been on leave for the last few months so I have made no income to speak of, but will be returning to work this month. However, my income will not be enough to cover our basic expenses. We only have one 1994 car (paid for). Our mortgage is fairly low- we’ve been here for 20 years. Our unsecured debt is high.

The first attorney told us that we should file a Chapter 7 right away because the severance pay and IRA withdrawals would not count as income in the six month look back.

The second attorney told us the severance pay and IRA withdrawal would count toward the six month look back. He said we should wait a couple more months before filing a Chapter 7 because we are above median income and would have too much DMI. He also expressed concern that my husband had not been unemployed long enough.

The third attorney agreed with the second attorney that we would not pass the first or second parts of the means test, but that we should file a Chapter 7 right away because we could declare ‘special circumstance’….i.e. husband’s unemployment/ loss of income. She said she thought it would fly because looking forward we would have a negative DMI.

[159515951]

Severance pay typically counts the same as any other income. The IRA withdrawal likely doesn't count, but you'll need to at least acknowledge and explain it in your filing.

Is there a reason you're in a rush to file? If it's cleaner to wait a few months, then I'd wait a few months. I'm not an attorney, and don't even play one on TV, but IMO unless you're being served by your creditors you have some time to sort things out before filing.

[Quiznos1]

Thanks, 15951951. No, we are not late on any debt. However, our funds will run out very soon. The only reason we would want to file now is because if my husband gets a job, which we pray he does, we will have to file for a chp13 instead of chp7. On a more emotional note- I am very nervous about not paying our bills...the thought of creditors calling day and night really unnerves me.

Quiznos1

[betterlife13]

I asked the first attorney we met with the same thing re: early IRA distribution as counting towards median income. He said "in my opinion it does not," but did not say that "legally it does not." Subsequently, I've researched this, and found at least two bankruptcy attorneys online opinions that say definitively it does not. Hope this is correct -- I even saw something about IRS tax liability due to early withdrawal of IRA possibly being dischargeable... I wouldn't make a bet on this little ray of sunshine, but was encouraged to even see it mentioned, as we are also in the same position.... Good luck to you -- I'll be curious what we both find out on this issue.

[TheBajan]

Quiznos1,

First of all... welcome!

I understand how difficult it is when you are current on your bills and yet you know the clock is ticking before you simply can't pay them. We waited as long as possible to stop paying and the emotional roller coaster ride was unbearable. The phone calls started a few weeks after we missed the first payment. We simply stopped answering the phone. Others here have dealt with it by setting up and using Google voice. I don't have personal knowledge of that but I know you can look it up online. I'm pretty certain it's free.

I know you just want this nightmare to be over but I have to agree that waiting for your husband's 3 months of income to drop off is going to be in your best interest. No one will be taking any action in that time other than the phone calls and that can be dealt with. I can't surmise how likely it is that your husband will or won't get a job but you need to make decisions based on what your reality is, not what it might become. I'm not an attorney and I know that some here have successfully filed over-the-medium but it can be messy and you have described your situation as one with lots of DMI. That's a high risk of moving into a 13 which is what you are trying to avoid.

Slow down, breathe deep. We've all been where you are. You can't control all the 'what-if scenario's' so let them go and deal with what you have. Please do stick around. This is a wonderful place to learn, vent, and celebrate when it's over!

Best regards,

The Bajan

[159515951]

On a more emotional note- I am very nervous about not paying our bills...the thought of creditors calling day and night really unnerves me.

Quiznos1

I completely understand. We just finished the first year of our Chapter 13. When our attorney told us to stop paying our creditors, it was a complete shock to the system. We'd never been late on anything before that point, and it was very tough to just ignore our obligations. What made things WAY better for us was securing an attorney a few months before filing. That way we were able to just give our creditors the name and contact info for our attorney when they called, and let them know that we were in the process of filing. They asked whether it was a 7 or 13, asked when we were filing, and never called again. Several of them amazed us by telling us that many of their customers were in the same situation, and wishing us the best.

So -- as long as you can punt them to your attorney, the calls are really no big deal in my experience. You should stop paying your bills IMMEDIATELY after deciding to file, though. In our case, it allowed us to save a few $$ before filing and get everything in order. It's all very counterintuitive, but you'll get through it just fine.

[Drazil65]

Sorry you have this confusion adding to your already emotional situation. As far as all the credior phone calls, do yourself a favor and search Google Voice here and then set it up on your phone. Life savor and you will not have to field all the phone calls plus will have all the calls in one place on your computer for your records if you ever need it. Good Luck!

[katztoo]

The bad part about filing before your husband finds a job is that a BK on your credit report can prevent some from hiring him. I say that through personal experience. My husband was about to be hired for a job (that had nothing to do with handling money) and then did not get it because of a bk on our credit.

[Quiznos1]

Katztoo, sorry about your husbands job. Hope he is able to secure something soon. BK before hubby gets a job is a big concern of ours as well.

Drazil65, thanks for the Google Voice idea. Ill do some research.

uiznos1

[Quiznos1]

OK, we spoke with another attorney today. He ran a means test for us and said we should wait to file a chp7 because we would have too much DMI to qualify.
Four different attorneys...four different opinions...

Still Confused
Quiznos1

[btbeme]

If you wait, it sounds like a cleaner filing, which is good. If hubby gets a job in the meantime, it sounds like a Ch 13, which isn't the end of the world.

Either way, a fresh start. A low DMI Ch 13 is certainly survivable.

It will take quite a while for anything "bad" to happen afer skipping payments on non-secured creditors. The worst is the phone calls - plenty of info herein to handle that. After 3-6 months, you might see someone file a suit, but that is simply the trigger for filing your BK. No worries - we have all "not paid" and all of us survived. You will to.

[katztoo]

Quiznos1, he did get another job shortly after that. The company that hired him did not run a credit check.