New Law Questions:

[concerned]

1. If my husband & I separate before we file, will this help or hurt us under the new law?

2. How does the means test work with a separation under the new law?

3. We will have to do Ch. 13 with new law if the bank doesn't agree to deed in leiu. What are the chances after Oct. 17 that both our original mortgage & a second mortgage will agree to a deed in leiu? This is really what we want to do. We don't want to file bk.

4. Our attorney most likely can't file us before the Oct. 17 deadline. Are we better off waiting to see if banks will agree to deed in leiu, or finding another attorney to file a ch. 7 or 13 now? (not sure which we will have to do). Our income is high, but our debts exceed our income by about $200.

Any feedback is greatly appreciated. We are extremely stessed right now.

[HHM]

I assume by your question, that it will only be you that is filing bankruptcy?

1. There will be no difference...at a minimum, you should have a seperation agreement, otherwise, joint assets and joint debt will still be considered joint; having said that, if the ultimate goal is a Divorce, its better to get divorced first, then file bankruptcy.

2. Honestly, I don't know, it depends on the nature of the seperation I suppose.

3. Why must you do a chapter 13 if the bank will not accept deed in leiu, you can still simply surrender the house in a chapter 7 under the new law as well.

4. It will definately be better if you file under the current law...but I think you will find that most attorneys will be hard pressed to get you filed by Oct 17.

[concerned]

Attn--HHM:

I'm sorry I should have specified--my husband and I will both be filing bk, but we are also separating (not legally yet) due to the financial stress.

I thought we couldn't file a ch. 7 under the new law because of our income ($87,000).

Does the new law allow us to use a budget based on debts we have NOW of will it use our new debts: apartment rent, etc.? I believe I asked you this once before but then I was referring to the old law. Is the answer still the same?

Could we file on our own in time (pro se)? Do you recommend this in our situation?

[StaciMM]

The new laws impose maximum expense levels based on county/state you live in, family size, etc. Most likely $87,000 (unless its a large family) will put you over the median in most states. (No ch. 7 would be allowed.) I don't know how it would be handled if you have 2 households but were not legally separated at the time of filing. (HMM-what do you think???)

Under the current law, you can count actual expenses, and the median income is not an issue. From other posts you've made, you indicated you have found an apartment. I'm assuming you would need to include the apartment rent, utilities, etc. and not the house, 2nd mortgage, etc. living expenses because you're plan is to surrender those in the BK. You can't count expenses you are discharging.

Yes, you can file on your own by Oct. 14th. You could actually just complete an emergency petition, submit that by Oct. 14th, and have 2 weeks or so to get all schedules in. If you reach the point that you decide to file by the deadline, though, tell your attorney that if he can't file for you in time that you'll file yourself and he won't get his fee. (Your case is complicated enough that it probably is good to have an attorney present you, and if he realizes he will lose money, he might just pull through.) If you go that route though, give him a deadline of Tue. or Wed. so you can still get the petition in on Friday if you need to.

[HHM]

I suspect that without some clear legal seperation, either by a seperation agreement that is filed in your family court (or however they do it), or the initiation of a divorce proceeding, the trustee may see the seperation as a sham, especially since you would be filing jointly.

Unless there is some reason to move more quickly on the bankruptcy (aside from the new law going into affect), I would wait until you have divorced or otherwise legally seperated, the main reason is that it makes the bankruptcy much cleaner, and then the only income that is a factor in your bankruptcy is your income and not his.

[concerned]

Hhm:

Under the current law, you can count actual expenses, and the median income is not an issue. From other posts you've made, you indicated you have found an apartment. I'm assuming you would need to include the apartment rent, utilities, etc. and not the house, 2nd mortgage, etc. living expenses because you're plan is to surrender those in the BK. You can't count expenses you are discharging.

I guess I thought they based the Ch. 7 on our current budget (in the house). I didn't realize that it would be based on us renting an apartment. Yes, I realize that we will no longer have these debts because they will be discharged, but I thought if you gave up your home, it was an automatic Ch. 7???

Are our chances of deed in leiu slim?

If we legally separate and then file a bankruptcy, wouldn't they still look at both our incomes??? My husband makes $51,500 & I make $36,000. How would they decide what we have to pay back? Do we separately come in under the means test for our incomes? Mine would be for a family of 2 and his would be for a family of 1. Is a complete divorce better than a separation, but again, we still owe the house and all the other debt jointly--what a mess. I guess I'm really confused. I just envision us having to pay back $1500/month if they base our expenses on the apartment I just leased, and if that's the case, I would have been better off staying in our home. Our attorney is the one who told us to look for another place to live. I am seriously getting sick over all of this. It sounds like we may have to file on our own if he doesn't pull through. It's so hard to know what way we would be better off.

[StaciMM]

If you legally separate, then the main difference is you can claim your expenses (rent, utilities, groceries, etc.) against your income, and he can claim his expenses (rent, utilities, groceries, etc.) against his.

At $36,000 for a family of 2, you will likely fall below the median income after the laws change. At $51,000 for a family of 1, he will likely still be above the median. (Depends on what state you're in.) But if he entered into a ch. 13 at that point, he would likely be commiting to payback less than if you & he jointly do a 13 now. (And if he were to pay your child support, that would be considered I'm sure.)

(Most medians seem to be in the $40's or $50's for a family of 2, and $32k-39k for a family of 1.)

[StaciMM]

Note added, if your state's median incomes are on the higher side, you *might* be able to both fall under the median's if your husband is the family of 2 and you are the family of 1. Also, I don't know if the median incomes will change at the beginning of 2006. It would seem sensible they should get updated yearly, but I don't know when that would happen.

[concerned]

If we separate and I am below the median income with our son and he is above it, can one of us file Ch. 7 and the other file Ch. 13?

Thanks for the suggestion about him taking our son, but that will NEVER happen! Logistically with his schedule he just can't care for our son right now. I think this would look questionable to even try it.

What happens if we get back together? I'm not trying to work the system, but I'm still not sure how things will turn out either.

[StaciMM]

If you're legally separated or divorced, then yes, you could each file different chapters if that is what you qualified for.