1st meeting Friday; question about income

[marcymcgee]

Hello everyone .. I'm still not 100% sure we're going the correct route here, but we have a free consult w/ a lawyer this Friday to discuss possible bankruptcy. I have a few questions:

1. My husband and I make over 100K/year together. We married each other 3 years ago (tomorrow) and both brought in quite a bit of CC debt, and of course have accumulated more since. Seems like we've been struggling since we married, just making min monthly payments. My daughter found herself out of a job in May and we have been helping her, which has hurt us financially. I have been able to work my full-time job, which had a rush of overtime the past 3 months (but has since stopped), and I was also able to pick up a shift/week at the local hospital. My health is now suffering and I don't know how much longer I can keep up this pace. How I would love to just work my 40 hours/week. I know when we provide our last 6 months paystubs, I am assuming that I need to provide even the moonlighting job stubs. My question is, I'm not sure my health will allow me to continue this extra job much longer. How will that figure into repayment? (IF we even qualify for BK) Also, something I did back in June ... I changed my tax status to exempt, as I was just trying to avoid overdraft charges and didn't know what else to do in my failing attempt to stay afloat, so needed the extra income briefly. So, again, this will look like more income. Clearly, I can not stay in this exempt status and plan to change it back immediately. One more thing, my husband's job just announced yesterday that they would be cutting them back to 32 hours/week instead of 40, though they were not sure when this would go into effect.

2. What if our income exceeds the median for Georgia? What happens?

I'm sorry for the lengthy question, but do appreciate any help here.

Thanks!

[Never_Again]

If you are over the median income, and don't have enough expenses under the schedules after your discharge to consume most of your disposable income, you will be required to file a chapter 13 bankruptcy.

I would say that you are over the median.

Being over the median will also invite more scrutiny from the US trustee.

I don't see a question in #1, so I will comment. It is difficult to know if you are bankrupt or not, as I do not know your debt payments and asset situation. A few things pop into my mind:

• Immediately (if you haven't already) stop the support payments to your daughter. It is good to help family, but you can only do it when you are strong.
• Change your status immediately to the correct amount of witholding. This will require some calculation on your part, as to what your income will be for the year, and what your tax liability will be for the year. You want to end up the year with either a $200 refund or paying up to $200. The extra withholding will not look like extra income, as they should be calculating based upon your gross.
• Yes, you will need to provide all pay statements, showing all of your income, for the last six months. You can cut out all of your extra shifts for six months, and reduce your income to make yourself qualify better in six months, if that would work for your situation.
• You do not say if you are behind on your payments now, simply that you are making the minimum payments. If you are not behind, and are looking at the possibility of reduced income in the future, you may need to plan for those concerns. Does planning include proactive bankruptcy? I personally don't think so. I see many on here who file before they have any late payments, to "Save their credit," but I don't think that is right.
• Do you have any home equity? Is it expemptable? If it is not, be prepared for a chapter 13 (where you may be heading anyway), or to sell your home.

There is a great deal to consider. While a lawyer has an ethical obligation to advise you correctly, bankruptcy is often the only tool that they have to help you. Perhaps financial counseling would be better? It will be the same with much of the advise you may receive from some on here. It has to be tailored to your personal situation, and not a one-answer-fits-all-situations answer.

A chapter 13 could be 100% repayment based upon your situation. If you are going to give control to a trustee for this for up to five years, would you be better off doing it yourself?

One other, extremely important question: Have you made the lifestyle changes necessary to keep this from happening again? Do you know where your income is going? Do you live on a budget? Sometimes, when these issues haven't been addressed, bankruptcy is viewed as a quick fix, and people end up right where they were before.

Good luck to you, in the decisions you have to make.

[marcymcgee]

Never_Again, thank you for taking the time to reply to me. I will clarify some things.

As for my debt/income situation ... our income is (without working extra at all) about $5700/mo. Our debts (just CC, mortgage, child support, car payments) is about $5400/mo. Now, this does not include utilities, car insurance, cell phone, groceries, gas, prescriptions, etc. That is why I've been having to work extra, just to stay afloat, and I am beginning to fall behind on CC, which has increased my interest rates, which in turn, has increased my min monthly payments. I have managed to stay current on mortgage and car payments. I'm afraid if I cut out all the extra shifts for the next 6 months, we would default on our mortgage and vehicle payments.

I have cut my daughter off, with the exception of making her car payment, only because the car is in our name.

As far as lifestyle changes, yes ... we have not charged on our CC in quite a long time, we rarely eat out anymore, shop at the discount stores, buy in bulk. We had considered credit consumer counseling, and the lawyer very well may suggest that once we talk to him on Friday. We will see. We have ourselves in such a mess, and are so disappointed in ourselves for being here.

Could you clarify this statement, as I am not understanding what you mean by "expenses under the schedules after your discharge to consume most of your disposable income".

Any further comments and/or advice is greatly appreciated!

[Never_Again]

Your schedule of post discharge expenses (your allowable living expenses plus any re-affirmed debt payments) when subtracted from your income should only allow less than $100 in surplus income. If you have any extra income over that, the trustee will view that as you having the ability to make a chapter 13 payment.

I would guess that this is where you will end up, and end up in a chapter 13, especially with you over the median. It is OK... you still have the protection of the courts against collections, but you do have to pay back a portion (or all) of your debts. It is basically a court mandated form of consumer credit counseling.

[marcymcgee]

In all honesty, I am OK with 13. At least the debts will be forgiven/paid/discharged by the end of the 3-5 year period, whereas, the way things are going now, we will NEVER get anywhere with them.

Thanks for your input.