Filing 7, make good money, don't keep much

[leftyf]

This is Lefty again, just asking for some input on what I might do.

Facts:
1) I make about $12K/month over the median.
2) Schedules I - J very negative
3) Means test pretty close for filing a 7 according to my attorney.
Will be somewhat controversial, so he says.
4) Attorney advises that I may lose car because judge will want
to know how I can make payment when I'm so negative each
month.

Questions:
My attorney keeps prodding me to "report" lower expenses so my I-J doesn't look so negative. I'm reporting real numbers, but sure, I can improve them anytime I want. I am trying to file a 7, you know, so I've been keeping my expenses a little higher than I could get by on. Like I really need to spend $1,600.00/month on food? Yeah, right. Attorney has already lowered that to $1,000.00 which includes baby formula and diapers by the way.

1) Attorney advised me to stop 401K contributions so I look like I have more income....those should never have counted as expenses anyway since they're voluntary? I'm getting nervous about my attorney.
2) Anyone else out there been really on the border like this? I can do the following to make my budget balance:

[leftyf]

Sorry, this is a continuation:

1) Have the spouse get a job.
2) Stop sending the kids to daycare so spouse can go to school.
3) Move to cheaper apartment.
4) Stop 401k contributions
5) Do a better overall job of controlling expenses.

I've been living above my means with the idea of filing a 7, and now attorney tells me I spend too much? Give me a break. He told me I should be able to file a 7 in the first place and now seems really perturbed that it isn't a slam-dunk case. Oh well, I think I'm in deep doo-doo and will end up with some kind of problem in this filing...either due to my attorney's incompetence or my own stupid ideas of how this bk process works.

I apologize for the ramblings and thanks for putting up with this.
Lefty

[lrprn]

Lefty, I don't think your lawyer is incompetent at all. He's being smart and trying to help you achieve your goal of filing Ch 7 rather than 13 and with as few problems as possible.

Because you haven't cut back at all on your expenses trying to be really negative to file Ch 7, right now it looks like you haven't made an honest effort to reduce those expenses to repay your creditors before filing bankruptcy. He's trying to bring your expenses into the reasonable realm for your area. $1600/month on food is so unreasonable it isn't even funny.

Right now filing with your figures is like filing your IRS taxes and having way-out-of-the-ordinary deductions. What happens? Your filed tax return gets kicked out for extra close scrutiny or an IRS audit. Your lawyer is trying to get you to equalize your income-to-expenses balance on your Means Test and Schedules. He's saying that if they are left as-is, it's going to get your bk case kicked out for extra attention from your trustee and probably the US Trustee as well because it's so out-of-the-ordinary for both your high income AND your higher-than-average expenses. He's trying to get your case to look more 'average' like other cases filing in your local court.

[leftyf]

Thanks for the input Lrprn. We definitely are making a lot of improvements on our expense control...we used to eat out a lot and hardly do anymore. That was part of our outrageous food costs. I tended to take averages for the last 6 months rather than what I am spending today. I wasn't saying the attorney was incompetent, but I just threw the possibility out there for consideration. I am still confused about the 401K issue...I thought 401K would never be counted as an expense anyway so how will this improve my outlook by cutting the contribution? I think the attorney must be counting it against my monthly income right now...I'll have to check on that one.
Christmas is definitely making this cash only lifestyle very difficult.
Thanks,
Lefty

[ameliabedilia]

the 401k contributions aren't a living expense, but it is part of your income that you could be spending to pay back your debt or pay your living expenses. You can't put too much into a 401k since they are voluntary. Lots of people try to get away with making larger than normal 401k contributions if they are having a hard time with their expenses being too low for their take home pay. You have the opposite situation.

Also, this doesn't make any sense to me
1) Have the spouse get a job.
2) Stop sending the kids to daycare so spouse can go to school.

Why are your kids in daycare if your spouse doesn't have a job? That will not look good to anyone. And, if you want your spouse to go to school, that is when they do need daycare, right?

[uofaguy]

Hi Leftyf,

If you don't mind my asking, how on earth are you ~$12k/month over the state median income and close to passing the means test for a Ch. 7? Do you have very high $ secured debt you intend to reaffirm?

Just curious as our case is a biz debt Ch. 7 case (we are above our state's median income level - but not as high as an additional $12k per month) and our biz bk attorney feels we will likely be challenged by the trustee because of our income.

Thanks.

[leftyf]

Sorry, that's $12K/year. $12K/month above median would be very nice.

[CindyLou]

I was looking at this and thinking you were crazy trying to get a chapter 7 with 12,000 over! Yea wouldn't it be nice to make 12,000 over the median!!!! Thanks for clearing it up.

As far as the 401K. If you have been contributing for a long time with the same amount of money and your employer has a match program, I would only decrease it still get your maximum match! The only time a 401K is a problem is if you start taking out right before a BK or if you are taking out a large amount.

Also, if you have just become eligible for the 401 K (i.e. after 1 year of employement) then the trustee will most likely not blink an eye if you have recently joined when you became eligilbe and are only taking out the minimum to get your employer match.

I would not cancel completely!!

[leftyf]

Cindy, I am $12,000 over on an annual basis. Just not monthly. I make around $80K with a median of about $68K. 5th member of family recently moved out, so I was originally only about $5K above median. Great timing on the move out.

Just clearing this up if it helps.
Thanks,
lefty