How about this scenario....

[seanf12]

Currently I have a primary job (about $93k a year) and a secondary (about $6k a year) job that I claim as self-employment (I receive a 1099 from the employer).

this current income level leaves me just over the median income for my area for Chapter 7 (family of 5 in MA). I am thinking that a potential option would be for me to quit my 2nd job, wait 6 months so that the secondary income is no longer relevant and then file for Chapter 7. Does this sound reasonable? any potential drawbacks to this?

Thanks

[keepmine]

You may have enough expenses that, you qualify for a Chapter 7 discharge even if you are over the median. Speak with a few bk lawyers and fill out schedules I and J and see what your disposable income looks like.
Quitting the 2nd job is a viable option. Several on here have done that.

[danaf]

I agree with keepmine. The expenses may put you under the median. However - 6k a year is not alot at all for a second job.....sounds more like a hobby and the question arises, can you deduct expenses for a hobby job?

[yoyoma51]

seanf12-

We closed our company, dissolved the corporation and sold the assets to our business parters.

I went to work at a gas station for a friend in June, even though I had some other options.

Basically, I took a huge pay cut because I 'lost my job' and the gas station 28 hours per week was the best I could do...By the time we filed in November, our household wages were so low we didn't have a problem. PLUS, I get to work at a truly 'stress free' job that I honestly enjoy (even if I only make $8/hr!).

Now I am just getting ready to jump back in working at a 'real' job. Probably in another month or so.

[seanf12]

thanks...where can I get a schedule I & J to fill out?

[diviaruba]

Median inc and expense numbers going up after March 17

Median income for family of 5 in MA goes to $98,792 for cases filed after March 17. Financial standards for expenses go up then, too. You just might make it.

http://www.usdoj.gov/ust/eo/bapcpa/20080317/meanstesting.htm

[seanf12]

I noticed that today...but now I am confused. When an attorney is crunching the numbers on a means test, do they use a schedule I & J (which if I understand correctly is my actual expenses) or do they use the IRS Standards (something similar to the calculator on legalconsumer.com)?

Thanks!

[seanf12]

I also found this on a web site:

Test 1. "Median Income"

This is a very simple test that compares your average household income for the past six calendar months to the median income for your state, If your income is below the median, you qualify for Chapter 7. If it is above the median, you must pass Test 2.
Test 2. "Disposable Income"

This test deducts expenses from your income to determine how much you can pay your unsecured creditors over the next five years: for example if you lived in Harris county;

* If you can pay at least $10,000 ($167 per month), you can't file for Chapter 7.
* If you can pay at least $6,000 ($100 per month) and that is at least 25% of what you currently owe your unsecured creditors, you can't file for Chapter 7.
* If your disposable income is less than $100 per month, you can file for Chapter 7.

Is this true? If it turns out that I can pay more than $100/month, but that $6k is way less than 25% of what I owe in unsecured debt, does mean I can file Ch 7?

[keepmine]

I also found this on a web site:

Test 1. "Median Income"

This is a very simple test that compares your average household income for the past six calendar months to the median income for your state, If your income is below the median, you qualify for Chapter 7. If it is above the median, you must pass Test 2.
Test 2. "Disposable Income"

This test deducts expenses from your income to determine how much you can pay your unsecured creditors over the next five years: for example if you lived in Harris county;

* If you can pay at least $10,000 ($167 per month), you can't file for Chapter 7.
* If you can pay at least $6,000 ($100 per month) and that is at least 25% of what you currently owe your unsecured creditors, you can't file for Chapter 7.
* If your disposable income is less than $100 per month, you can file for Chapter 7.

Is this true? If it turns out that I can pay more than $100/month, but that $6k is way less than 25% of what I owe in unsecured debt, does mean I can file Ch 7?

Yep, there are 2 hurdles to pass. While you may be forced to use IRS standards for things like food and gasoline, most districts allow you to use true expenses for secured debts like mortgages and auto loans. Your best bet is to see a few bk lawyers and get all of your options explained.

[Michigan1951]

What happens if all of your income is exempt? Lawyer says we do not have any disposable income (but we have mil.ret,va comp,soc.sec) over median by 6k.
Been told now that we can't be forced into a c13 either.

[keepmine]

What happens if all of your income is exempt? Lawyer says we do not have any disposable income (but we have mil.ret,va comp,soc.sec) over median by 6k.
Been told now that we can't be forced into a c13 either.

You still have to fill out I and J to determine if you have sufficent disposable income.
Do a search for a poster named Floridian and see the issues he's having with retirement income.

There is at least one district where SS income is totally exempt.

http://www.bkforum.com/showthread.php?t=42630