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Finally Consulted With BK Attorney Today

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    Finally Consulted With BK Attorney Today

    My wife and I have $88,000 in unsecured consumer debt, gradually accumulated over the past 15 years. A REAL serious millstone around our necks. Last week she INSISTED that we seek legal advice. I've been balking for a long time on this because we've always been able to make minimum payments and as I've explained to her many times "what's the use anyhow since we can't pass the means test."

    My income is $85,000 & my wife makes $33,000. No significant assets to speak of aside from around $60,000 equity in our modest home and a 2009 Subaru Legacy which will be paid off September 2014.

    The attorney looked over our tax returns and informed us that we are well over the means test threshold for a family of five in our state, so a Chapter 7 is not an option. I will be eligible for a public teacher retirement as of May 2013, and have been contemplating a career change for some time, so I asked the attorney if I could retire to pass the means test, and without batting an eye she replies "Oh yes, that wouldn't be a problem. The means test is just a snapshot of your financial situation on the day you file. No one is going to try to divine your intent." My wife then asked if she could quit her job (not retire -- quit outright) so we can pass the means test even sooner, and her reply was "Not a problem. The two of you just have to keep your six month average household income below the threshold."

    I then asked the attorney if we'd be able to keep the car, stating that my rough estimate pegs its value to be probably 2-3 thousand dollars over the allowed vehicle exemption in our state, to which she replied "neither the bank nor the trustee want stuff like that. I might even be able to lower your payment through reaffirmation."

    This particular attorney has been practicing bankruptcy here since the 1970's, so surely she must have a sense of how local bankruptcy business is conducted, but this sounds almost too good to be true. We left her office with an agreement for her to handle our Ch 7 for $2100 ($175/month for 12 months) and I'm to check back with her in May when my retirement is official.

    My family may well be eating eating ramen noodles three times per day during summer/fall 2013, but that seems like a rather small price to pay for wiping out an absolutely crushing $88,000 debt.

    Feedback/insights/suggestions appreciated as I'm trying to make sense of all this and I'm gradually adapting to the notion that my financial situation is perhaps NOT hopeless!

    #2
    Why don't you just get started on a Chapter 13 instead of trying to engineer a Chapter 7 for the future? With $88K in unsecured debt, your minimum payments must be up near $2000 per month if you have (un)reasonable APR's. Having your wife quit her job and you retiring before you had intended is just cutting off your nose to spite your face. Stay busy and engaged in meaningful activity, make the monthly Chapter 13 payments and your debt will evaporate in time. If there ever comes a point in your Chapter 13 where your incomes drop through no fault of your own, you can always modify the plan.

    Chapter 13 is just like paying your debts, except there are no finance charges.

    Comment


      #3
      I agree with kornellred. Why do consumers always think it is all or nothing? If you end up paying 10 or 20 cents on the dollar through a 13 you still have discharged a ton of debt. I realize no one wants to be in a bk where "big brother" watches for 5 years but sometimes it makes more sense to opt for a 13 then try to "qualify" for the 7.

      Having said the above, I agree with the attny relating to the retirement. I do not necessarily agree as it relates to voluntarily quitting the job unless there is absolutely no intent to return to the workforce anytime soon. If your wife is not of retirement age and has a long history of employment, abruptly leaving the workforce and filing once the 6 month average works is a red flag. Remember, Schedule I asks if you expect any changes in income over the next year (see question 17 on Schedule I). Now, will the UST pick up on this issue? Maybe, maybe not. What happens if he/she does? You may be forced out of the 7. Is there any harm in trying? Probably not so long as you understand that you may have to dismiss or convert. If you try and lose, you are not losing the war. You are only losing the battle. The attny should have explained what I indicated in blue thus giving you the full picture of what can happen.

      As to the equity in the vehicle, certainly the attny would know what the Trustees in your district will look at. In mine $2-3k over an allowed exemption is absolutely enough to trigger an interest. Most of the time, the debtor can" buy back" the non-exempt equity and therefore does not risk losing the asset.

      If you are at all concerned over the advice given consult with other attnys. Since most consultations are free, there is no harm in consulting with as many attnys in your area as you can. You will eventually choose the one you are most comfortable with and if that’s the one that paints the brightest picture then, so be it. But shop around 1st.

      Des.

      Comment


        #4
        Hi Muggsy and welcome to the forum!
        Wisconsin residents are very lucky when it comes to this. You guys have something special called a Chapter 128. Look it up and ask about it. It may well be the answer for you. A kinder, gentler version of bk.
        Wisconsin Chapter 128 is an alternative to bankruptcy, Jeff Murrell been helping people prepare & file cases all over Wisconsin since 1998.

        Keep On Smilin'

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