Promotion with Relocation

[mormand]

Hi,
I filed CH 13 last year with a payment plan of $2,000 / month.
I have been recently promoted to run another manufacturing site within my company which requires me to move.

I currently rent at $3,500 and the relocation will now have me at apartments that are $5,000-$6,000
SD is the most expensive city in the US at the moment.

I'm concerned about two things and need advise:

1. I'll get a 15% pay increase, however, I'll also have to pay nearly double for rent at the new location.
What will this do to my plan. Will it need to get amended?

2. So far 3 out to 3 apartments have denied my application due to the bankruptcy.
I'm concerned I won't be able to relocate at all.

Please advise, I had found a great place but they denied me.
Options?

Thanks

[justbroke]

Simply stated, you will have issues renting in a relatively new bankruptcy. Most professional management companies want two years from the filing of a bankruptcy. When I applied to a very large townhome-based community, my Chapter 13 was in its last year of a five year plan and they not only approved me within 2 hours, but also allowed me to move in with no deposit. Of course my scores were in the mid-600s (650-670) and I had nothing bad on my report (an eviction will kill nearly all applications). I am also a high-income earner so that probably helped too (the leasing manager uttered "oh wow" when they saw my income).

Since you are in bankruptcy I would avoid paying $5-$6K to live downtown or in the more posh areas of San Diego. Even Carmen Sandiego would agree. Or you'll need to downsize to a studio to get it under $4K. Otherwise you'd need to prepay a significant portion of the rent to convince a professional management company, which is unlikely. The only other way is to get a co-signer. That's a significant amount for a co-signer since they typically want the co-singer to show 4X the monthly rent. That would mean that your guarantor, on a $5K-$6K place, would need to show annualized income of $240K to nearly $300K themself. (I was a landlord and I followed these national rental standards.)

Here are my thoughts. A Chapter 13 debtor shouldn't incur higher living costs to justify taking a new job when the cost of living nearly doubles. A Chapter 13 debtor should aim for stability and just keep paying and not making major changes in their lives.

Having wrote that, some companies have great relocation packages which include paying the difference in housing costs for up to five (5) years. (I worked for a company that moved me twice and they paid me a boatload of money in differential pay and housing!)

Maybe...

• ask your company to guarantee your rent for at least the first years
• ask your company to pay a relocation differential on your housing (other than salary)
• move further away from the more expensive housing areas in central SD
• maybe downsize to a studio to keep the rent about the same
• don't take the promotion

Well, those are my best ideas. I wish you luck. When I was moved by my company, I was not in bankruptcy but did get moved into the NYC area with rents I had never seen in my life. Luckily I was on that relocation package which was worth about $110K. Maybe your company can throw you a bone and give you 6 months of rent as a relocation package and you can try to placate the landlords with 6 months of prepaid rent. (Personally, I wouldn't take that much prepaid rent as it may violate deposit rules in the city/state/county.)

[mormand]

Thank you so much for the detailed response and recommendations.

I have thought about not taking the promotion, but we already hired my replacement at the current site.
So I've been commuting to SD from OC on a daily basis.

Could you share what relocation company you used?

My company has set me up with SIRVA, but the relocation policy doesn't mention anything about a relocation differential nor guaranteeing rent.

I am also concerned that because I'm a renter (not an owner with a mortgage) even with my 15-20% increase in pay, without bankruptcy, the pay increase would cover the cost of living increase. But will the Trustee want that increase in pay to go entirely to the plan?

I will ask about the relocation differential. Any other input you can offer would be of great help.

Do you offer consulting services?

Thank you!

[justbroke]

I do not offer consulting services but have been somewhat in your situation. It's a pain and frustrating when the job moves you and you are having difficulty establishing residency in the new city.

I would go to my Chapter 13 attorney and ask about the income and cost-of-living differences and how that would affect the Trustee. Just so that you know, if you're single, the maximum rent for SD County is $2,227 for a single person. The Chapter 13 Trustee would literally go ballistic if you had a rent higher than that number. (Orange county's is slightly higher at $2,438 as of 4/1/2023).

If you are in a 100% plan then all of those numbers I just mentioned are meaningless. If you are paying your unsecured creditors 100% of what they claimed (by filing a claim in the bankruptcy), then the numbers won't matter. You could live wherever you could theoretically afford so long as your 5-year plan is to pay them back in full.

You definitely need to consult with your current attorney. We used Altair Global for relocation. Our average relocation package had a value of $110K with global packages being even higher. The company "guaranteed" our rent/mortgage differential in a writing and it lasted for 5 years on a sliding scale (decreasing from 100% differential to a 50% differential by year 5). Our company also gave us differential in pay if the pay decreased due to locality. That was a nice thing but they always moved me to more expensive areas so I never need the locality adjustment for pay.

[mormand]

I'm not in a 100% plan.
Married and planning on having our first child. So a studio is not really feasible.

I'm curious, how was the differential paid? If it came in the form of salary, income, that would impact my 'disposable income' and potentially increase my payment plan?

I will pursue this with my employer but want to make sure it doesn't become increased income that will counterproductive.

I am in constant communication with my attorney, but also looking for a strategic approach from someone that can guide me how to make the most of this situation and my options.

Thank you!

[justbroke]

My differential was paid in my check as a line item. So yes, your trustee would see the difference in income.

I didn't know you were married. The limit for 2-people in SD county is $2,615 for an apartment. It would go to $2,756 when you have the little one. I was worried that you'd get severe pushback if you told the Trustee that your housing expense went to $6,000/month when the UST Means Test only allows $2,615/month for an apartment in SD County.

Not being in a 100% plan makes things tougher. The court would say that the unsecured creditors shouldn't suffer not being paid because the debtor wants to spend more on housing than reasonably required. I can't define "reasonably" because I was allowed to have a $5,000/month home when I was in bankruptcy although the county limit, under the UST Means Test allowances, was only $1,800/month! I think income does matter but I already owned the house and it was necessary for my reorganization. The question would be whether a $5-6K apartment is "necessary" for your reorganization.

I would be looking at reasonable housing within a reasonable commute. I worked in Burbank/Glendale so I understand long commutes (most of the people I worked with commuted 90 minutes each way). The question is what is reasonable. You have to think of it this way. Do the unsecured creditors get more money because you relocate spend $5-6K on an apartment? Or would they get the same or less? If they would get less, the Trustee would not go for that at all. You have to negotiate your way into spending that amount on housing... even if you are in downtown SD.

Your issues are going to be the large increase in income and your housing cost. If you kept your housing cost around $4K/month the trustee may be more reasonable when you contribute that extra $1K/month to the unsecured creditors. In any event, this will be a tough sell on the Trustee unless the creditors are getting a net benefit and your move is not detrimental. Especially since the Trustee will ask if you took this new position by choice.

(Note: our relocation check was a separate check given to us, but make no mistake it was W-2 wages and reported at the end of the year. The IRS considers it a fringe benefit and it is fully taxable as regular income. The company did a gross-up in salary at the end of the year to "pay" for the taxes. They also grossed-up the salary if they paid any other cost-of-living adjustments such as the differential. Our net-net was that we never came out-of-pocket for changes in our living expenses. I received two gross-ups: one for the original $20K "30-day expense" check they gave me whenever relocated, and then another gross-up for the housing differential.)

[shipo]

Geez, all of this talk about apartment cost in the San Diego area is giving me flashbacks to the 1970s when I rented a studio in East San Diego for $130 per month, including covered parking, and $200 per month for a large 1 bedroom in La Mesa.

[justbroke]

shipo the good ole days! I remember when I was afraid to purchase a home for $400K in Half Moon Bay (SF) screaming that it was way to expensive in 1999. Ooops! I remember saying I'd never pay $300K for a condo in Redwood (Oakland) Heights back then. The opportunities I lost shall forever remain unspoken.

[shipo]

shipo the good ole days! I remember when I was afraid to purchase a home for $400K in Half Moon Bay (SF) screaming that it was way to expensive in 1999. Ooops! I remember saying I'd never pay $300K for a condo in Redwood (Oakland) Heights back then. The opportunities I lost shall forever remain unspoken.

Damn! You and I were almost neighbors; I was being heavily recruited by DHL in Redwood City back in 1990, and then the first Gulf War started and put a stop to their hiring for the duration. I had been out to the DHL offices for interviews twice and was about to make an offer on a 3-bedroom condo on the beach in Half Moon Bay prior to the start of hostilities; I'd probably still be there if I'd taken the job.

[justbroke]

Let's just say I was working next door to the cylindrical buildings in Redwood City! It's been so long that I think I have mixed up Half Moon Bay for the area right around the cylinders.