Should I file?

[mx812]

Should I file?

$25,000 credit card debt.
$36,000 car note, $18,000 KBB value

$65,000 student loans, currently in deferment.

$40k salary, with a possible $10k bonus in April (only if I do not file). Will also be receiving an additional $1,200 a month as a housing allowance for the next 36 months.

Credit score is 610. Never missed a payment, no derogatory marks. Credit cards are maxed, $3,000 in savings.

I would have to be on unemployment for a month or two to pass the means test, which would possibly cause issues with my current job offer.

Thoughts? I've been struggling with debt for the past eight years. I worked two jobs for six months and paid down some of the debt....Saw my credit score raise to 715, and then I had a gambling relapse and ran up another $13,000. This sucks...

[LadyInTheRed]

Do not give up gainful employment to pass the means test. That is short sighted. A Chapter 13 is not the end of the world.

Why do you only get a bonus if you do not file? Is that because you aren't going to take the job if you file? A Chapter 13 may very well be a better financial decision.

Your credit score is irrelevant in your decision to file BK.

Are you certain you can't pass the means test? What are you basing that conclusion on?

Make appointments for free consultations with a couple of bankruptcy attorneys to explore your options.

[spidge]

I might butcher what the meaning behind my intentions, but one must view the moneys given in a ch13 as the means to the end of the debt cycle that enslaves us. If you were fine without the bonus you will make it through. Look beyond the ch13 and set yourself up for the future. I know it sucks, but in time you will be a cash only individual who will wonder why you did what your did to get into the mess.
F#@k the credit score. You can rebuild it if you need to, but there are fewer and fewer reasons to concern yourself with it.

Cash is KING!

[TXskyblue]

25K in CC debt on a 40k salary is not realistic. Neither is a 36K loan on an 18K car. I think BK is realistic.

Are you *sure* you cannot pass the means test? There are people with twice your salary who get into chapter 7s. They have high allowable expenses, though. If you haven't yet, speak with a lawyer.

As I'm sure you are aware, that 65k in student loans isn't going anywhere.

[mx812]

The 10k bonus would come from enlisting in the Air National Guard. I'm in the process of transitioning from Active Duty, and have the option of joining the Guard. Currently, I don't pass the means test, but every month that passes I get closer. I had one consultation, and he thinks "it's close". I guess I should take everyone's advice and see a few more attorneys. My biggest fear is that the UST will want to take the bonus to pay my debts. How strict do they view future income? My annual income will be below the median, but the one time bonus payment will put me over. Thanks for the replies.

[ValleYum]

The 10k bonus would come from enlisting in the Air National Guard. I'm in the process of transitioning from Active Duty, and have the option of joining the Guard. Currently, I don't pass the means test, but every month that passes I get closer. I had one consultation, and he thinks "it's close". I guess I should take everyone's advice and see a few more attorneys. My biggest fear is that the UST will want to take the bonus to pay my debts. How strict do they view future income? My annual income will be below the median, but the one time bonus payment will put me over. Thanks for the replies.

From a BK attorney's website in Virginia who is considered a "Military BK Specialist" and where I received invaluable information during our BK7 filing in 2010:

Reenlistment Bonuses: Reenlistment bonuses are considered assets in a bankruptcy case just like furniture or a car. The payments that are still due to you need to be protected in the bankruptcy or they will have to be surrendered to the bankruptcy trustee. How they can be protected depends on which state law you are using. For this reason an experience military bankruptcy attorney is a necessity.

http://www.mernalaw.com/bankruptcy/military-jag/military-bankruptcy-special-considerations/

Find a BK attorney to speak with for a consult who has MILITARY experience in AZ. It will prove invaluable. Military folks definitely are dealing with lots of odd issues.

Please know that my next question/comment is said out of kindness and is not meant to be snarky in any way at all:

Are you seeking treatment for your gambling issues? You can only pull the trigger and use a BK filing so often. If you are not in treatment and have another 'relapse' what would happen then?

If you can't protect your filing bonus - could you wait to file until after you receive it and spend it - on your BK attorney's fees, stocking up the pantry, pre-paying rent, buying or putting a down payment on a used car whose equity is valued at less than the exemption for your state, etc. Ask your consult attorneys about this as well and don't spend any of it without consulting your attorney. He will know if what you plan to spend it on would put you in a jam with the Trustee.

Good luck to you!!

[mx812]

ValleYum, that is some very valuable information. Thanks for sharing. I realize my recovery is important. I've been attending meetings in my area, and will be seeking 1-on-1 treatment well before I file for BK. Thanks again for the reply.

[chrisdfw]

Do not file until the gambling is under control.

That is all I have to add.

[LadyInTheRed]

The bonus will be an asset if you are entitled to it or receive it and haven't spent before you file BK. But, it may also be considered income on your means test if received within 6 months before filing and on Schedule I if you receive it after filing. If the bonus is income, it could force you into a Chap 13. If you will be a Chap 13 anyway and the bonus is an asset you can't exempt, you can keep it as long as your unsecured creditors will receive at least $10,000 (or the non-exempt portion) during the life of your plan. If you qualify for a Chap 7 and can't exempt the bonus, $10K plus attorney and filing fees is a small price to pay to get rid of $25K in credit card debt and an $18k car loan deficiency.

Your best bet may be to delay filing until a few months after receiving the bonus. During that time, you could stop paying the car loan and use the money to buy another car. When you consult with attorneys, ask about this kind of strategy.

Valle Yum's suggestion to find an attorney who has military experience is an excellent one.