chapter 7 and "surplus" income in CA

[astroboy]

Hi,

I have family of 4 in CA, make about 45k and owe about 32k. I'd like to file chapter 7. I'm well below the median income, but how much "surplus" income is allowed and still be able to file chapter 7? I am temporarily working some OT at work but that could end at any time and would most definately end before completing a chapter 13 repayment plan. Any advice for schedules I and J? I also need to reaffirm a car loan as I only have a year to go and I absolutely need my car. But I guess I need to prove that I'm able to afford to make the payments, never had a problem with the car loan, never missed a payment.

Thanks for any advice.

-Nathan

[keepsmiling]

Welcome astroboy, you have found the right place.
I can almost guarantee that you will not have enough "surplus" for a 13. Do you own a home? Equity situation there? Your state?
Most of us forget that we've spent so much paying our minimums on cc's that we haven't budgeted a "normal" amount for regular, allowed expenses like food, clothing, etc.
But you will want to time your bk so that your OT does not affect your outcome. There is a six month look back. That may be critcal for you.
Tell us some more about what's going on and we'll do our best to guide you thru. Meanwhile, read the stickies and as much of the forum as time allows so that you become knowledgeable.

[LadyInTheRed]

Welcome to BK forum.

Median income for a familiy of 4 in CA is $79,971. Does your overtime put you anywhere close to that? If your household gross income in the 6 months before the month in which you file is less than $39,985.50, you pass the Chap 7 means test. If schedules I/J show that you have enough income to fund a Chap 13, the trustee could object to Chap 7 based on the totality of circumstances. Unless you have some very low expenses, I doubt that will happen. With your income, a good attorney should be able to get you through a 7 with no problem.

You don't have to prove you can afford to make payments to reaffirm the car loan if your attorney signs a statement that it isn't a hardship for your to reaffirm. But, if you are worried you can't prove you can afford the payments, you probably shouldn't reaffirm anyway. Most lenders won't repossess a vehicle if payments are current. You could call your lender and ask them their policy about that.

Have you made appointments for free consultations with a couple of bankruptcy attorneys?

[astroboy]

Thanks so much for the responses guys,

My OT pay might put me up to 55-57k if it were to continue for a year. Still nowhere near 79k for a family of 4. I'm in Orange county, CA. I don't own a home, so I would use CA's second set of exemptions, just own regular household goods, plus the car I'm making payments on. I don't have an attorney and was hoping to do this pro se as I'm pretty good at understanding the petition. I just worry because I hear things like "even if you make way less than the median, you can still only have a surplus of about $100 or they will make you file chapter 13". And then when you try to prove you can still afford your car loan, the judge might say "well if you're too broke to pay your other bills, what makes you think you can afford the car?" I only have about 15 months left on a 5 year loan and haven't even been late once. If I lose that car I would have no way to get to work and would lose my job too. With my income I have no trouble paying for the real essentials, like food, clothing, gas, school supplies, health insurance. I just can't afford to make any headway on credit card bills.

[jst4f]

Suggest that you at least interview a few lawyers to be sure you are ready to go it alone. It is doable but not for the faint of heart.

[grisandole]

Hey there! I'm not an expert but I'm also from CA and wanted to do pro se. I actually enjoy legal work and have done my own family and civil law. I ended up going with an attorney and am so happy that I did. I had to take out retirement money to do so, and I have no regrets. If you can, pay the 1k for the lawyer, it is SO much less stress, which is why I ended up going that route. I work full time and am gone for over 10 hours a day, and while I *could* have done it myself, the hours and stress and would not worth it. The filing document is huge, the driving to the court to file is a pain, etc.

[astroboy]

Well, from Nov 2012 - Feb 2013 I did have a weekly furlough at work so that lowered my income for the last 6 months by a bit. After taking those furloughs into account and to the best of my calculations my income might be 200 or so over my expenses, but I'm about 25000 below the median income for my family size. For my car loan; according to kbb and nada right now it's worth maybe 1000 more than I owe. I only have 15 payments left to go. Do you think I'll have any trouble with either the court or the lender trying to keep the car? I'm more than willing to reaffirm.

[keepsmiling]

You will want to redo your expenses to show less than 200 dmi. If you want to list all of your expenses, we're pretty good at tweaking them. Chances are you underestimated and forgot a few things... maybe car tags, medical expenses, life insurance, home maintenance? Have you stopped paying your unsecured expenses?

[keepsmiling]

How about renter's insurance?

[LadyInTheRed]

Hey there! I'm not an expert but I'm also from CA and wanted to do pro se. I actually enjoy legal work and have done my own family and civil law. I ended up going with an attorney and am so happy that I did. I had to take out retirement money to do so, and I have no regrets. If you can, pay the 1k for the lawyer, it is SO much less stress, which is why I ended up going that route. I work full time and am gone for over 10 hours a day, and while I *could* have done it myself, the hours and stress and would not worth it. The filing document is huge, the driving to the court to file is a pain, etc.

This a really good point. I thought about filing pro-se and probably could have managed it. But, I already have a full time job and didn't need another, even temporarily. It's more than filling out a few forms. If you feel up to it, great. But, you should still consult with a few BK attorneys. I think doing that and asking more questions here will make you more comfortable that you can get a Chap 7 discharge. If it doesn't, then you should definitely hire an attorney because either (1) you don't understand the issues as well as you need to if you are going to file pro se, or (2) your case will have issues that require the assistance of an attorney.

Also, if you share your monthly income and expenses as keepsmiling suggests, we may be able to help you get your dmi down on schedules I/J. One thing to remember is that your current expenses, while struggling to keep up with debt payments, may be lower than what would be considered reasonable. You may be cutting some corners that you won't be expected to continue to cut after filing BK.

[Pizza]

Without serious budgeting, some of us tend to subliminally, and incorrectly, think of 'disposable income' as something along the lines of:

Paycheck - Monthly Bills - Utilities = $$ left for 'other stuff' = Disposable income.

My lawyer's advice was to pull up Excel and dissect all that 'other stuff' until everything is accounted for - down to the very last item. Upon doing so, not only did I discover that I had no 'disposable income' that could be disputed as part of a chapter 7, but I actually needed to increase income by about 20% to fit a realistic, "real world" budget. A very sobering experience. Comb through all your consumables in your house. Go down every month of the calendar to see what kind of typical expenses you're not capturing. You will likely be surprised at the results!

Also keep in mind that the I/J's are forward looking, after those monthly payments to creditors are gone. Some things that may be reasonable and necessary you are currently doing without because of those payments!

[Pizza]

ADD: Schedules I/J tend to demonstrate different things in Ch.7 vs. Ch.13. For Chapter 13, you have already determined that you can repay some of your unsecured debt; you are now determining what the monthly amount will be after your reasonable and necessary expenses are deducted. For Chapter 7, you are merely demonstrating that you are unable to afford a Ch.13 plan; being below the median tilts that conclusion greatly in your favor.

You will simply need to show what expenses you expect to have after the BK. As long as you aren't blatantly over-indulging, you shouldn't face much scrutiny.

[astroboy]

Here is a rough draft of my schedules I and J

schedule I

wages: 3310

taxes:260
benefits:354
contribution to Health savings account: 130

take home pay: 2566

spouse: child support from previous marriage 303

total before OT: 2869
estimated overtime:500
total with OT: 3369

Schedule J

rent: 500
elec: 75
water: 70
telephone: 125
misc:internet cable: 100
haircuts: 50

food: 700
clothing: 275
laundry: 100
medical and dental: 200
recreation: 150

auto ins: 120
gas: 300

car payment: 355
pet food and supplies: 50
diapers: 50

total: 3220

$149 per month left over after expenses.

Some questions:
Is my contribution to my health savings account ok to put on schedule I? it does come out of my paycheck and I've exempted the account on schedule B.

Do my schedules I and J look resonable? Does it look like I'm spending too much on something?

We currently rent 2 rooms from family members to keep expenses down. That's why my rent and utilities are are lower than average. Would that bring on any more scrutiny to my case?


Thanks so much for any help.

[keepsmiling]

I never made it past your 500 rent
how did you manage that for a family of 4 in CA??? are you renting from family?
ok, just went back and saw that you did.
Easy solution if you don't come up with anything else- raise the rent. In fact, consider doing that anyway. They can always give you back the excess money later.

[keepsmiling]

Probably want to lower the recreation budget too.