Question Newbie Nervous and Optimistic

[wesleyh09]

Good Morning Everyone. I am really learning A LOT from this site and thank you to all who have posted. Here is where I am at and need some advice:

44k CC debt
26k in Personal Loans
113k in student loans
825 /month of car lease payments

Now, let me start off by saying that no one is at fault here other than myself and that the blame is solely on me. With that being said, I have retained counsel but I had a couple questions.

1. I seemed to have passed the means test not by income (make about 90k) but by discretionary income afterwards. Here is the tricky part. My wife is a stay at home mom and makes different amounts of cash under the table and we are worried that would put us over the threshold. I want to comply with all the rules but is there some limit to what should be claimed? She just started doing this about 3 months ago. Just curious.

2. We have two car leases with about 30 months left on them. Should I keep and assume I SHOULD be able to get some sort of loan in 2.5 years or should I go out and get two car loans now (I still have good credit) and then let the bank have the leases back?

3. Any other advice for me? Anyone been through this type of scenario and have some suggestions?

Thanks so much!!

-Wes

[keepmine]

You should have disclosed your wife's income to your attorney.
Let him run the numbers again and if it is going to prevent a Chapter 7 filing, your wife needs to stop her under the table business until after discharge. You may also need to delay filing for a few months until the 6 month lookback isn't affected by that income. For sure, disclose it.

2.5 years post bk, you can get auto loans. If you need that lease payment as an expense to qualify for a 7, you probably need to keep them in place. Just be sure you can afford them comfortably post bk. Looks like the majority off your debt is student loans and they'll survive bk.

Just let your attorney know the complete picture.

[wesleyh09]

Thanks and that is exactly right. I want to make sure everyone has the open picture. I have read horror stories about people who didn't go "by the book" and they had MAJOR trouble. With that, two things:

1. Are 401k hardship withdrawals counted towards the means test?
2. If my wifes income is from her "business" can she take the "business expense" deduction in the means test? There are some reasonable expenses she incurs.

[keepmine]

If your wife is filing with you, I don't see why she can't deduct business expenses.

Have no idea as to the 401K withdrawal.

[kornellred]

If your wife has an established business it cannot be "under the table" - not legally, anyway. If it is entirely discrete, there is no reason to even mention it to your attorney. In order to deduct business expenses, her business would need to be registered and making quarterly estimated federal tax payments.
How in the world could you get a 401K hardship withdrawal making $90K/year?

[wesleyh09]

Great questions There is not much you need to do receive a hardship. As long as the company signs off you are good. Now as for the wife's income two things come to mind. First, does child support she RECEIVES count as income in a chapter 7? Also, she just started the business and there is no paper trail yet OTHER THAN deposits into our account. Her income may be less than 800 per month, but it is still deposited. I have not filed even a quarterly yet.

[AngelinaCat]

Are 401k hardship withdrawals counted towards the means test?

If you haven't already touched your 401K--DON'T DO IT!!! Forget that you even have it. That is an exempt item in BK and cannot be touched. If you do, and don't pay that money back within a certain period of time, there WILL be income tax consequences.

'Hub and I been there and done that.

[ValleYum]

Child Support DOES count as income.




Loan proceeds DO NOT count as income.




This is from a manual for trustees. It very helpful except it was BEFORE the Supreme Court announced the Ransom decision so some of the info about automobiles may no longer be correct - be sure to ask your attorney about it.

http://www.justice.gov/ust/eo/bapcpa/docs/ch7_line_by_line.pdf

Hope this helps but, please, be super specific with your questions to your attorney for your sake.

[LadyInTheRed]

If your wife has an established business it cannot be "under the table" - not legally, anyway. If it is entirely discrete, there is no reason to even mention it to your attorney.

Do not hide anything from your attorney! No good can come from it and the consequences can be huge!

ETA: Omitting income from your bankruptcy petition is fraud and can land you in jail, not to mention having all of your pre-petition debts be forever non-dischargeable. It's not worth it. Encouraging fraud is also not allowed on BKforum.

[wesleyh09]

Thanks so much for all the info. We are so extremely close to the means test line that it could go either way. Another question came up, is, we have a horse that we board that costs us 250 a month. Is that deductible on the means test? I am just making sure I have all the deductions I can within the law to allow me to qualify for chapter 7.

[LadyInTheRed]

Thanks so much for all the info. We are so extremely close to the means test line that it could go either way. Another question came up, is, we have a horse that we board that costs us 250 a month. Is that deductible on the means test? I am just making sure I have all the deductions I can within the law to allow me to qualify for chapter 7.

Probably not, but some trustees may not object. Give your attorney a list of all of your expenses, whether you think they will be allowed on the means test or not. Let your attorney decide what is and is not allowed. That's what you pay him for.

[frogger]

Complete & total honesty are the only way to do a bankruptcy. If you do that, you will have no problems that can not be corrected.

On the other hand, if a person is not totally honest and is found out, it won't be a pretty site and could haunt you forever.

Don't worry about how much you're making. Think about how much you're discharging.........

[kornellred]

I was not suggesting that the OP be less than honest with the trustee with respect to his wife's "under the table" income. If that income is to be applied to the mathematical formula determining disposable monthly income, there is no way that the trustee can accept the accuracy of the numbers without proof. It is a major concern, inasmuch as it will probably lead to having to file under Chapter 13 when the hope is obviously to dump the unsecured debt all at once in Chapter 7.

Once you let the cat out of the bag, it is going to dash who knows where......

[wesleyh09]

Agreed on everything. Met with the attorney yesterday and we are going to file in Nov. He said they will look at three months of Bank Statements and DO NOT USE the credit cards anymore. And also, do not make any more payments to the unsecured debt. I asked him about the wife's income and he agreed that we should be open and honest but we are in a tough spot since this is a new thing she is doing and it doesn't really yield much money at all. He said do your best to document and the hearing should be fine. Not sure how to document my wife's childcare income though. Any thoughts?

[keepmine]

Ask her customers to pay with a check?
Open a bank account soley in her name and deposit all receipts from the daycare business in that account.