Just received job offer. How does this affect my plan to file Chapter 7

[avengers]

I've told my story briefly here before, but I'll summarize it here. Had a high paying job. Incurred a lot of debt. Lost the job, leading to us being unable to pay the debt. That was 5 years ago. Since then, I've been wandering from gig to gig, with nothing really steady. Back in November 2013, I lost my last job. I haven't worked since then. My wife is a substitute teacher, so that money varies a lot month by month.

This summer was tough for several reasons. 1) My unemployment ran out in May 2014; 2) my wife, being a substitute, had no more work; 3) the summer here in Phoenix raises my electricity bill from $80/month in the winter to $240+/month in the summer; and 4) due to a glitch, my food stamps was reduced from $500 to $200/month for 2 months.

But I guess good news comes quickly. First, I got the food stamps reinstated back to $500/month. Then my wife got a long-term substitute gig (these are the holy grail of sub jobs. Instead of unsteady work at $85/day, she has a guaranteed job for a month at a time at $140/day). Today, I got the best news of all. An employer who had rejected me back in April now wants to hire me. This came as a huge shock to me. I haven't even had a single job interview since April and had assumed I would be out of work at least until the beginning of 2015.

Obviously, having a steady income will be an amazing turnaround for us. Even if we can't file bankruptcy, we're in a much better situation than before.

Problem is, we haven't paid any of our bills since November of last year. So our credit is completely shot. Based on advice I received here, we decided to put off filing until either me or my wife had steady work. So I was going to file in August. Now I don't know if I can.

Here are some figures.

Approximately $80,000 in consumer debt, of which about $26k is student loans (my main student loan is on deferment for a year). I partially own the house I live in (for details see http://www.bkforum.com/showthread.ph...-list-on-forms. But the gist is that I own a third interest in a house worth about $140k, well under the exemption.)

We own one car, but it is not in state as our adult son uses it in grad school. It's value is under the exemption. A friend is letting us borrow a car now, but I'll need to buy another car just to get to work.

Questions/concerns:

* While we will have absolutely no problems showing an income below the median (for the 6-months ending in July, our average income is $1900/month, well under the $4800 threshold to file chapter 7). But what about future income? My income will be somewhere in the range of $6k-$7k/month and my wife's has averaged $1k/month (but she'll make $2k in any month where she has a long-term assignment, including August.)

* I honestly have no idea how to fill out Schedule I when I only have a promise of a job where I don't even have a start date yet. What exactly do they mean by "estimate of average or projected monthly income at time of filing?" How is that affected by my job offer? Even then, the job offer isn't for a set salary, but based on how much work I complete. It may be $7k/month, but it may be $3k/month. I really have no idea.

* So I'm worried that, if we file Chapter 7 sometime before I start working, they will just bump me to chapter 13. What is the likelihood of this?

* I need a car, and I seriously doubt we'll qualify for a loan. We have no cash and the only asset we have is about $4k in an IRA. I know the $4k is protected in bankruptcy, but does it make sense to liquidate it and buy a used car with the proceeds? Luckily, my wife's job is walking distance, so I can use the borrowed car, but I have no idea when my friend will want the car back.

* Also, do I have to report a friend letting us borrow a car to the trustee?

[LadyInTheRed]

Congratulations on the job offer!

Don't cash in your IRA! It isn't worth penalties and taxes. Don't be so sure that you can't qualify for a loan until you try.

There will be a place on your BK petition (maybe on the Statement of Financial Affairs) where you will have to list any property you are holding for another. Your friend's car seems to fit in that category.

Has the home been distributed out of the trust?

I don't really have a lot of answers for you. You need to consult with some more BK attorneys right away to figure out how to proceed.

[papatango777]

* So I'm worried that, if we file Chapter 7 sometime before I start working, they will just bump me to chapter 13. What is the likelihood of this?

I'm curious - I'm basically in the same boat.......filing next week but have some job offers pending, I think. I have read that it's all based on previous 6 months income....curious how things will be affected if I have accepted a position by the time we have the hearing?

[ValleYum]

A pending job offer isn't a job in this economy, IMO. A job with reasonable job security and benefits like insurance is even tougher to come by.

Are you employed the day you sign your petition? No? Then you are unemployed.

You can put on your Schedule J Line 19 ("Describe any increase or decrease in expenditures reasonably anticipated to occur within the year following the filing of this document") that you are actively job hunting if your lawyer says it is okay.

Someone in the 341 hour before ours had gotten a job since filing but all the income did was put him to a positive $10 after paying the bills he had on Schedule J (he had negative DMI before). The Trustee wished him well on his Fresh Start. YMMV.

[avengers]

And that's my worry. Schedule J will go from negative to possibly very positive.

[avengers]

* So I'm worried that, if we file Chapter 7 sometime before I start working, they will just bump me to chapter 13. What is the likelihood of this?

I'm curious - I'm basically in the same boat.......filing next week but have some job offers pending, I think. I have read that it's all based on previous 6 months income....curious how things will be affected if I have accepted a position by the time we have the hearing?

There are several different incomes you have to list. One of them is based on the past 6 months income. But another is based on your "current" salary.

[papatango777]

change in income

There are several different incomes you have to list. One of them is based on the past 6 months income. But another is based on your "current" salary.

Right - I think that's the question, though...If current salary and previous 6 months are in the same bracket, but AFTER you file, but BEFORE your hearing, if your income increases, is that an issue?

[LadyInTheRed]

Right - I think that's the question, though...If current salary and previous 6 months are in the same bracket, but AFTER you file, but BEFORE your hearing, if your income increases, is that an issue?

Your petition is based on your circumstances on the day you file. If, on the date you file, you have accepted a job and it is a certainty that you will go to work, then your Schedule J income will be based on your income. If the job becomes a certainty after you file your petition, it should not change whether you qualified for a Chap 7 discharge on the date you filed. If that happens, the trustee may have some questions about timing. Let your attorney know about the job offer so s/he can advise you accordingly.

[avengers]

Your petition is based on your circumstances on the day you file. If, on the date you file, you have accepted a job and it is a certainty that you will go to work, then your Schedule J income will be based on your income. If the job becomes a certainty after you file your petition, it should not change whether you qualified for a Chap 7 discharge on the date you filed. If that happens, the trustee may have some questions about timing. Let your attorney know about the job offer so s/he can advise you accordingly.

So I'm SOL? Forced to file Chapter 13 instead? Guess I should start research chapter 13, since I know absolutely nothing about it.

I spent months telling my wife that there was no rush to file Chapter 7, "we can file any time and it's best if we file after we get some money." Now I'm gonna look like an idiot because we might not be able to file Chapter 7 at all and will be stuck in Chapter 13 hell for 3 years.

Maybe I'll negotiate with the CC companies? But if they accept, e.g., 25%, won't they want the entire 25% in one lump sum?

[LadyInTheRed]

So I'm SOL? Forced to file Chapter 13 instead?

Not necessarily. It sounds like you will pass the means test based on your last 6 month's income. Schedules I and J will show what your DMI is based on your projected income and actual expenses. It may not show enough dmi to fund a Chap 13. You need to have an attorney run the numbers and tell you whether you are at risk for a objection to Chapter 7 based on a totality of circumstances. You should consult with attorneys right away because if you do end up in a Chap 13, your income in the 6 months preceding the month in which you file your petition will determine whether you are in a 3 year or 5 year plan.

Consult with at least 3 attorneys and make sure you hire one who doesn't recommend a Chap 13 just because he doesn't want to have to fight objections to a 7. An attorney may not be able to guaranty a Chap 7 discharge, but you don't one who will roll over and give the trustee whatever he wants.

I spent months telling my wife that there was no rush to file Chapter 7, "we can file any time and it's best if we file after we get some money." Now I'm gonna look like an idiot because we might not be able to file Chapter 7 at all and will be stuck in Chapter 13 hell for 3 years.

Chapter 13 does not need to be hell. A good attorney will make sure your plan is livable.

Maybe I'll negotiate with the CC companies? But if they accept, e.g., 25%, won't they want the entire 25% in one lump sum?

Yes. And there may be tax consequences to settlement and you are unlikely to get all CC companies to agree to the settlement you want.

Don't forget this:

Obviously, having a steady income will be an amazing turnaround for us. Even if we can't file bankruptcy, we're in a much better situation than before.

A decent income and a Chap 13 is better than a Chap 7 and not enough income to cover your expenses. In a Chap 13, your creditors will no longer be the ones in control. You will discharge $54K in debt after 3 years of making payments based on what you can afford instead of what the creditors demand.

[LadyInTheRed]

And that's my worry. Schedule J will go from negative to possibly very positive.

Don't jump to conclusions before you even know for sure what your Schedule J will look like.

* I honestly have no idea how to fill out Schedule I when I only have a promise of a job where I don't even have a start date yet.

If you still don't have a start date, I don't know how you can say for sure that you even have a job. Have you made appointments for consultations with attorneys? If not, do it now. Timing is everything!

[avengers]

If you still don't have a start date, I don't know how you can say for sure that you even have a job. Have you made appointments for consultations with attorneys? If not, do it now. Timing is everything!

I do have the offer letter now. Also have two consultations scheduled this week.

[LadyInTheRed]

I do have the offer letter now.

Congratulations! Despite the BK issues, that really is good news.

Even if you end up in Chap 13, with a new job and a debt payment based on your disposable income, you will be better off than if you were unemployed with no debt.

Also have two consultations scheduled this week.

That's good news too! Let us know how it goes.

[avengers]

Just thought I'd update this thread with the two consultations.

First consultation was terrible. Attorney did not seem to want to be there and gave incredibly generic answers to every question I asked and didn't ask me the right questions either. Not even going to consider him.

Second was much better. He asked pointed questions, realized I had done research and didn't find the need to talk down to me as if I knew nothing.

The good news is that he believes we will still qualify for chapter 7. In his 10 years of practice, he's only seen one case dismissed from chapter 7 because of excess income on schedule I and schedule J. And because of our extenuating circumstances (my job is glorified part-time work, albeit relatively high-paying part-time work, my wife's job as a substitute teacher can end at any time, and I've just received a job after 10 months of unemployment), he doesn't think the trustees will be too concerned with the situation.

As he explained it to me, there are two trustees in a case. A US trustee who looks for abusive filing and a second trustee (the one you have the 341 with) who tries to protect creditors. Since we will easily pass the means test, he doesn't think the US trustee will look too carefully at schedules I and J.

The bad news is that he requires payment of $2500 up front before he will take the case. Which basically means we can't file until September 5 (when I receive my first paycheck from the new job and my wife receives the first payment of the new school year). It also means that we have to show them two paychecks that add up to $2500 in a single pay period, while simultaneously claiming that we can't afford to pay our debts. Again, extenuating circumstances exist here, but it seems to me that will look bad.

(A further extenuating circumstance that I didn't mention before--my wife's school district now has a policy of a maximum number of days worked per substitute. It's a pretty silly rule aimed at evenly distributing the sub hours among the registered subs. The problem is that my wife is popular for a reason--she's a better sub than most. But because she's a better sub, she gets more work than most subs. That's going to end this school year. In fact, our local school can't find a full-time teacher for one position, so she's starting the year at that position. The good news is very steady work for the first 1-2 months of the year. The bad news is that my wife will likely have zero work after this position is finished, because she won't be allowed to work the rest of the school year. So her income will look much higher in September/October than it will the rest of the year, when it will be zero. )

We're going to roll the dice with the second guy. Hopefully, we get the chapter 7 discharge and we can move on. We will definitely not be moving to chapter 13. If chapter 7 is denied, we'll just pay everything on our own. I do not want to have 100% of every pay check taken to pay off creditors.

[LadyInTheRed]

It sounds like you found a good attorney. I bet you will get a Chap 7 discharge. But, if you don't, don't reject a Chap 13 without learning more about it. You would not have 100 percent of every check taken. A Chap 13 plan pays what you can afford to pay after your living expenses are paid. According to your original post, you have $54k in rechargeable debt. To pay that in 60 months without chap 13 you would have to pay $900 a month plus interest. In a Chap 13, your payment could be much less and will not include interest on your unsecured debt.