Questions about Schedules I & J forms

[uofaguy]

Hi all,

I am confused about the Schedules I & J forms and hope to get clarification.

Our situation:
We will soon be attempting to file Ch. 7 due to business/investment debt. The majority of our debt is business debt so the means test should not have to be completed. However, attorneys I have spoken with are concerned the trustee will try to force us to Ch. 13 because once we surrender the investment properties we will have additional monthly income.

Schedule I Question:
In trying to resolve our situation, I was dumb & cashed in some long-held stock options (basically, threw good money after bad) so our gross income is much higher the past few months than what it will be going forward. Also, my wife & I get bonuses at work, but it is not guaranteed. When I complete Schedule I, do I need to include the stock options/bonuses, or is it more a look-ahead based strictly on our salaries?

Schedule J questions:

[B12]

You are not dumb. Many of us "threw good money after bad."
We were trying to do the right thing.

[lrprn]

Our situation:
We will soon be attempting to file Ch. 7 due to business/investment debt. The majority of our debt is business debt so the means test should not have to be completed. However, attorneys I have spoken with are concerned the trustee will try to force us to Ch. 13 because once we surrender the investment properties we will have additional monthly income.

A legitimate concern.

Schedule I Question:
In trying to resolve our situation, I was dumb & cashed in some long-held stock options (basically, threw good money after bad) so our gross income is much higher the past few months than what it will be going forward. Also, my wife & I get bonuses at work, but it is not guaranteed. When I complete Schedule I, do I need to include the stock options/bonuses, or is it more a look-ahead based strictly on our salaries?

If the stock options were cashed out during the six-month full calendar month lookback before you file, then yes, you have to count the stock money as income. The bonuses also count as income if they fall within the six month period as well. However, FUTURE bonuses that occur after you file are just that...in the future...so they aren't counted on the Means Test as income.

Schedule J questions:
We both currently contribute to 401k plans. Should we put this down on the Schedule J? Will the trustee oppose it?

Yes you need to list the contributions. There is current bk case law that allows contributions to 401K plans during Ch 13 if you get pushed that direction, so no, the trustee should not oppose it.

We are also expecting a child in ~6 months. If the Schedule J is to be used to determine a future payment plan in an effort to kick us to Ch. 13, do we include expected hospital/delivery costs, diaper costs, etc for the new baby? Or, do we only list current expenses?

You can only include current expenses....sorry. Although the baby should make its arrival as expected, there's just no way to guarantee that's going to be the case ahead of time.

If you do get pushed into a 13, then after the baby is born and you know what all the bills are going to be related to your new bundle of joy, your lawyer can file an amended plan to accommodate the baby and its added expenses. (Congratulations on the coming addition to the family, btw!)

Hope this helps, Jon. Hang in there - these rough seas will settle once you know which direction everything is going to go after you file. Until then, hang out here with us and keep asking questions. We'll help you sort things out as much as we can.

[leftyf]

Thanks to this forum, I did not bother paying any creditors once I knew I would have to file. For that, I am forever indebted (no pun intended.)
Lefty

[CindyLou]

Could you possibly wait to file until the 6 month look back does not include the bonuses and the cashout and so that the baby is here and the expenses reflect it as such?

[JollyGG]

Could you possibly wait to file until the 6 month look back does not include the bonuses and the cashout and so that the baby is here and the expenses reflect it as such?

That was my thought as well.

[uofaguy]

Thanks for the replies and clarification.

I would like to be able to wait a few more months to file BK to avoid the stock option income, however, I need to file before foreclosure begins. A lot of it will depend on the banks. I am a few months late already on the mortgages and the properties are in Texas, which is one of the fastest foreclosure states.

At this point I am still trying to find an attorney that is experienced in business debt (and doesn't want to automatically push me to a Ch. 13 with the means test as those I've met with already did) to lay out a strategy of next steps.

Thanks again.

[Boscoe]

What is your date for the stock options to be 6 months out? If you are successful with the chapter 7, then that won't really matter, but just to be safe.....

My foreclosure in Florida started after I missed the 5th payment. You will likely get served at your house. But don't be alarmed. It is just a formality.

From what I hear, it is better to file the bk before the foreclosure is final, so post-bk, they consider it 1 event and can not say you have a foreclosure on your record because you won't.

[uofaguy]

Unfortunately, we won't be 6 months out on the option exercise until 12/19/07. Fingers are crossed, but I'm not optimistic that the banks will let us go that far w/out exercising their foreclosure option - - that will be 6 months of missed payments. Who knows, however, given all the foreclosure activity these days

[Boscoe]

Uof A:

Here is the Texas law. Did you say you are 3 months behind now, i.e. last payment made in June? Depending if their backlog matters, it sounds questionable whether you will be able to make it until December.

But again, your business case shouldn't require you to take the means test, so I would think that you could just show your regular income and not mention the stock options.


Texas Foreclosure Law:

- Judicial Foreclosure Available: Yes

- Non-Judicial Foreclosure Available: Yes

- Primary Security Instruments: Deed of Trust, Mortgage

- Timeline: Typically 60 days - VERY FAST

- Right of Redemption: No

- Deficiency Judgments Allowed: Yes



In Texas, lenders may foreclose on deeds of trusts or mortgages in default using either a judicial or non-judicial foreclosure process.



Judicial Foreclosure



The judicial process of foreclosure, which involves filing a lawsuit to obtain a court order to foreclose, is used when no power of sale is present in the mortgage or deed of trust. Generally, after the court declares a foreclosure, the property will be auctioned off to the highest bidder.



Non-Judicial Foreclosure



The non-judicial process of foreclosure is used when a power of sale clause exists in a mortgage or deed of trust. A "power of sale" clause is the clause in a deed of trust or mortgage, in which the borrower pre-authorizes the sale of property to pay off the balance on a loan in the event of the their default. In deeds of trust or mortgages where a power of sale exists, the power given to the lender to sell the property may be executed by the lender or their representative, typically referred to as the trustee. Regulations for this type of foreclosure process are outlined below in the "Power of Sale Foreclosure Guidelines".



Power of Sale Foreclosure Guidelines



If the deed of trust or mortgage contains a power of sale clause and specifies the time, place and terms of sale, then the specified procedure must be followed. Otherwise, the non-judicial power of sale foreclosure is carried out as follows:



Prior to proceeding with a foreclosure, Texas laws state that the lender must mail the borrower a letter of demand, informing the buyer he has twenty (20) days to pay the delinquent payments or foreclosure proceedings will begin.

At some point after the borrowers twenty (20) days have expired, but at least twenty one (21) days before the foreclosure sale, a foreclosure notice must be: 1) filed with the county clerk; 2) mailed to the borrower at their last known address; and 3) posted on the county courthouse door.

The foreclosure sale must take place on the first Tuesday of any month, even if said Tuesday falls on a legal holiday, but only after the proper preliminary notices have been given. The sale is on the courthouse steps by auction to the highest bidder for cash. Anyone may bid, including the lender, who bids by canceling out the balance due on the note, or some part of it.


Lenders may obtain deficiency judgments, but they are limited to the difference between the fair market value of the property at the time of sale and the balance of the loan in default.

[cathywhite4495]

I am also below the median but was showing disposable income in my schedules (my income was showing higher than usual bc of a bonus but I couldn't aford to wait either). After getting some advice from the forum, I went back and looked at the dollar amounts I had put down for my expenses. Check out the IRS allowances and make sure you're putting down the right amounts. I had forgotten a lot of little bills and seasonal things (winter coats & boots etc). You miight be able to whittle away at the excess income.