Our thoughts after initial consultation with BK attorney

[nednj36]

My wife and I want to do a chapter 7. The means test is very close due to estimated house value being too high per Zillow/Chase Home Valuator. Attorney stated he is confident we can pass means test, but wants full fee upfront and stated if Ch 7 does not work because of means test failure 13 is an option. Through research I've found that Ch 13 has a low success rate. In addition, it's likely that my wife and I will be divorcing withing the year.

Is it standard for attorney's to require full retainer before calculating Means test? Again, my wife and I definitely do not want to go the Ch. 13 route.

Thoughts?

[AngelinaCat]

Yes. Consult at least three more attorneys. All will have different experience, and a little different 'take' on the CH7 vs CH13 route. Keep in mind that some will specialize in CH7s and others in CH13s.

As far as the full fee, I am confused. You mention 'full fee' in one spot, and 'full retainer' in another. The retainer is usually the down payment to secure the attorney, with the rest of the fees to be paid later. Which is this?

Welcome to the forum, BTW.

[TXskyblue]

My lawyer required $250 to do a formal means test. If I decided to file with him, the $250 would be applied towards the retainer. If I decided not to, the $250 was *poof*.

Seemed like a fair deal to me so I paid the $250 and ended up retaining the lawyer as well.

[nednj36]

Great info. So if he cannot guarantee a means test "pass" for Ch.7 after the $250

[nednj36]

Sorry. Immense stress. Did not finish reply. Meant to say; if after the $250 deposit he cannot guarantee us passing Ch 7 means test, we should not retain him correct?

[keepmine]

My wife and I want to do a chapter 7. The means test is very close due to estimated house value being too high per Zillow/Chase Home Valuator.

This has nothing to do with the means test. You may have too much equity in the home vs what your state allows you to exempt. These are two different issues.

[nednj36]

so basically if there is too much equity we may not qualify even if we pass the income/debt means test? What do most attorney's and courts use to determine value? Zillow states our zestimate is $280,000, but that's because a house was just sold around the corner at a very high price. Our home is in need of many repairs and we think it's worth about 220K which would put us in fine position

[Pjmax]

I can't address the house or means questions, but you do need to consult with a few more attorneys before signing with one. Write down these questions and any more you can think of, and ask each attorney, so you can compare answers.

Some attorneys have a payment plan, but you will be expected to have a certain amount paid before they do any work, which is understandable. Most want the entire fee paid before filing a Chapter 7.

[keepmine]

so basically if there is too much equity we may not qualify even if we pass the income/debt means test? What do most attorney's and courts use to determine value? Zillow states our zestimate is $280,000, but that's because a house was just sold around the corner at a very high price. Our home is in need of many repairs and we think it's worth about 220K which would put us in fine position

That's correct. If you have an asset that's valed above what your state exempts, you either surrender it in a Chapter 7 or file a 13 to keep the asset.
Ask your lawyer how values are determined in your district.

[nednj36]

Ok. Thank you!

[TXskyblue]

Sorry. Immense stress. Did not finish reply. Meant to say; if after the $250 deposit he cannot guarantee us passing Ch 7 means test, we should not retain him correct?

The lawyer cannot guarantee that the trustee will not dispute your means test. So, there can be no guarantee. However, the lawyer (or his paralegal, more likely) will input your 6 months of paystubs, your bills, your house, etc. and see where you fall. This takes time and skill to enter properly, so no lawyer will do this for you in a freebie meeting. If he does not think you have passed the means and there is no strategic planning you can do to make yourself pass, then you have a choice to make. Lose $250 and look elsewhere or accept his assessment.

My story is that I'm an above-median earner but my house note and car note are pretty high. The first lawyer I spoke with did some back of envelope math and told me I'd be paying something like $900 a month for a chapter 13 payment. I was not happy because I knew there was no way I could make that payment. I went to the lawyer I have now and his back of the envelope math said I was pretty close on the means test and that for $250, his office would perform the actual means test. I agreed and, with some strategic planning, my means test came out where I qualified for a chapter 7 with some room to spare. I did wait 6 months from when I first met the lawyer until when I file, to fully implement my lawyer's recommendations. I'm about a month away from discharge, so the UST could still object but I have high hopes that it will be smooth sailing.

[TXskyblue]

You are asking about home valuation, as well. If push comes to shove and the trustee doesn't accept your valuation of the home, you could always pay for an appraisal just like you did when you bought the house.

I looked up NJ exemptions and it appears that, like my state of Texas, you can use either your state exemptions or federal exemptions. I see that NJ does not have a homestead exemption so if you have equity, that will be an issue for a chapter 7. They'd rule you an asset case. You could go with the federal exemptions, however, which allows ~ $43k in homestead exemption, so you could possibly keep your home is your equity is less than 43k. All this is independent of the means test, however. The means test is merely to determine is you will be allowed to file a chapter 7 instead of a chapter 13.

[nednj36]

Thank you. Very helpful information!

[keepsmiling]

Welcome to the Forum!

You will be using Fed Exemptions, no question. NJ exemptions aren't even worth the time to talk about
Think about that divorce. If you wind up in a 13 it will get very messy and you may want to do that first.

What do you plan to do with the house post divorce?
Also- no matter what you are going to want a realistic value on your house. Think about inviting a realtor in pretty soon and be sure to point out all the issues and mention that you would want a QUICK sale and that it should be a realistic quote and not some pie in the sky number to get you to list with them. You might want to do some of your own research as well on condition of recently sold properties. Don't go by Zillow... it knows nothing of the state of your home. You might want to compare it to "fixer uppers"... maybe even ask around on how much it would take to fix what's broken.

We are in the same boat btw with possible equity issues. Stopped us cold in our tracks a while ago (along with other issues). Rock and hard place. You know what rentals cost in NJ I'm sure.

You may wind up with some pushback from a tt on this... we do hear about it occasionally. He/she could wind up asking for a buyback of some of your real or imagined equity.
Once you get enough posts feel free to pm me. Always good to chat with another NJ-an (ite?)

Good luck, hang in there and KEEP READING and ASKING.

[nednj36]

Thanks KS. Thanks to everyone. Very helpful and soothing in our difficult times.