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Making sense of attorney?

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  • Making sense of attorney?

    So I met with the BK attorney for the first time. I'm really confused about some things. I've asked for clarification but I'm not sure I understand.

    I'm going through divorce right now and filing BK right after. My net income is about 1700 a month. After car, gas, insurance, food, ect, there won't be much left even without credit card debt. But apparently it's a problem if there's ANY left. He says my basic expenses need to be taking up 100% of my income. I don't understand, how would people get credit if that were so? I'll have maybe $200-300 left each month in which I could budget towards clothes, car repairs, and things that are maintinance things. Greenpath tells me i would be $550 in the hole each month if we didn't count the mortgage and utilities I had with spouse.

    he also said it hurts me that I moved in with my parents for this divorce. I really need to have my own place. I can't afford rent and utilities in this area. Minimum that would be $1200/mo in the worst places and more in the winter with rent and utilities. The rest isn't enough to cover car, gas, phone, doctor copays, food, clothes, student loan payments, and my medications. I'm working on a degree and almost done. Then I could make a better wage. But I'm not going to run to sign a lease on my own or a random stranger at the moment. He said even with paying my parents as little as $200/mo rent, they'd be considered as helping me, so their income may have to be included for reference purposes. That doesn't even make sense. I pay for all my own everything, they just want to cut me some slack so I can get on my feet. I don't understand any of this?

    I'm in Michigan.
    Last edited by stormygate; 03-05-2018, 06:44 PM.

  • #2
    I would be shopping multiple bankruptcy attorneys and hopefully this was just your free consultation with one of several BK attorneys. The attorney is certainly being strict and your parents income would never come into play simply because it's not your or a spouses income.

    First, what really matters is your GROSS income, not your NET income. The median income for Michigan is $48,626. If you don't make that, then you complete only the first part of the Means Test and receive a "pass" (because you're under the median).

    Second, the IRS collection standards, used by the United States Trustee (UST) shows a single person gets $639 for food an clothing a month. If your $1,700 figure is correct, you're now at $1,060 left. I don't know if you have a car, or if that car has a loan, but that could add another $489 + another $200 to $300 (if it's Detroit it's $300) for car allowance. That leaves almost nothing left and I don't think it's a problem given that another $200 given to pay for your rent at your parent's home would put you $1,628 (using the $300 Detroit vehicle allowance). You would then pass the secondary look at your Schedule I and Schedule J.

    I would shop around some more. The attorney may have been speaking in broad a hypothetical sense because this was a free consult, or they don't have enough information to give you the bottom line. I hope you did shop around first!

    (You can have about $207 -- I don't know the current limit -- in disposable monthly income (DMI) in order to pass the presumption of abuse test. This means that you don't have to exhaust 100% of your income on expenses. It's always better to show that you're in the red, with a negative DMI, but you can have a positive DMI so long as it doesn't exceed the limit.)


    https://www.justice.gov/ust/eo/bapcp...come_table.htm
    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog


    I am not an attorney. Any advice provided is not legal advice.

    Comment


    • #3
      Ah ok. That's net, not gross, but I have health insurance, my works disability coverage, and retirement that comes out of my check. I make like 33k a year gross. I pass the means test but now I'm wondering if they are even going to let me declare. I don't make enough to work it out with the creditors but sounds like I make enough assuming I wasn't required to pay taxes and health insurance! I guess I'll have to send what I have and see what they say. This is all so confusing.

      Comment


      • #4
        It's pretty simple. You have income on Schedule I less any mandatory payments. Mandatory payments are taxes, union dues, disability coverage, and retirement (if the retirement amount is mandatory). You then take expenses based on the USTP Collection Standards. I did a quick thing on your non-mandatory expenses that would go on Schedule J. To me, you are below median income and you do not have the ability to pay a meaningful dividend to your creditors; you don't have the "means" to pay them -- which is what the Means Test is all about.
        Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
        Status: (Auto) Discharged and Closed! 5/10
        Visit My BKForum Blog: justbroke's Blog


        I am not an attorney. Any advice provided is not legal advice.

        Comment


        • #5
          Ok. I hope it will work out. :/ I tried to do everything else I could to make arrangements before looking at bankruptcy and got shot down. Now it sounds like the attorney has some doubt, but he doesn' have everything yet. It was just the consult. He's in the same office as my family law attorney and they are working closely on this. I've only paid him $100 so far. I pulled up the worksheet schedules on the us courts site, so I'll try and take a look at those too. Thanks for always helping answer my questions

          Comment


          • #6
            Please consult with at least 2 more attorneys. This attorney may be worried about an objection to discharge based on "totality of circumstances" because even though you have a rental allowance on the means test and pass the means test, you aren't actually paying rent so he is assuming that your Schedule J will not show any rent. But, if living rent free with your parents is a temporary situation, then your schedule J should look forward to what you expect to pay in the next 36 months. If this attorney thinks you are stuck living with your parents for 3 years and filing a Chap 13, he is not the right attorney for you.

            One thing you should consider is signing a lease with your parents and actually paying them rent. If they want to help you out, instead of giving you free rent they can help you with a security deposit when you are ready to rent your own place.
            LadyInTheRed is in the black!
            Filed Chap 13 April 2010. Discharged May 2015.
            $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

            Comment


            • #7
              Ok so if I sign a lease agreement with them and they can see in actually paying it and checks are coming out of my account, then it dies not matter their relation to me? I just don't understand why he's saying that it matters who my landlord is. He didn't explain to me what all my allowances are. I'll start calling around for more attorneys I guess.

              Comment


              • #8
                I looked at the schedules and it allows me to deduct things like employer health insurance, taxes, retirement, ect, and it looks like I can deduct things like car payment and car insurance. It also asked for car maintinance and clothes which I really don't have budgeted at the moment so I guessed a figure, and it probably isn't actually enough for regukar maintinece and repairs. If I paid my folks $200 rent on top of the other things listed on the schedule, it leaves $100 left a month. I didn't even put in deductions for things like entertainment. I know it' on there, it just doesn' seem like something that would be deductible as an expense when filing bankruptcy. I guess I need to find what the actual exemptable allowances are for each category

                Comment


                • #9
                  You need to include every expense, including a reasonable entertainment expense. I used $60 per person in the household for entertainment. (Bankruptcy courts have determined that "all work and no play, makes for a debtor that will fail" -- not a real quote.)

                  This doesn't answer your question but it goes to the underlying bankruptcy issue. As debtors, we never really account for every expense and go day-to-day, paycheck-to-paycheck hoping that some known, but suppressed, expense doesn't arise. A perfect example is entertainment, and regular maintenance on your home and vehicles. What about light bulbs for the house? Cleaning products? A haircut or grooming? You may not often buy clothes, because you can't afford to now, but the average person pays about $75/month on apparel and apparel service (see the UST Program allowances link). What happens when your clothes are too tattered and torn and you haven't accounted for new clothes? How about shoes? Now your car needs four new tires.

                  We must account for all these expenses on Schedule J regardless of how we feel about them or whether we think that we don't "usually" pay that much. For most debtors, buying new clothes is a luxury so we instantly say that we don't spend "much" on clothes. However, Schedule J is forward looking to what the average person (or you personally) would spend given a normal situation.
                  Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
                  Status: (Auto) Discharged and Closed! 5/10
                  Visit My BKForum Blog: justbroke's Blog


                  I am not an attorney. Any advice provided is not legal advice.

                  Comment


                  • #10
                    Originally posted by stormygate View Post
                    Ok so if I sign a lease agreement with them and they can see in actually paying it and checks are coming out of my account, then it dies not matter their relation to me? I just don't understand why he's saying that it matters who my landlord is. He didn't explain to me what all my allowances are. I'll start calling around for more attorneys I guess.
                    The family relationship will cause more scrutiny, but there is nothing that disallows a required living expense because the payee is a relative. Documentation is important.
                    LadyInTheRed is in the black!
                    Filed Chap 13 April 2010. Discharged May 2015.
                    $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

                    Comment


                    • #11
                      Originally posted by LadyInTheRed View Post

                      The family relationship will cause more scrutiny, but there is nothing that disallows a required living expense because the payee is a relative. Documentation is important.

                      If I write them a check each month and it's coming out of my account, do you mean that kind of documentation? What other kind of documentation would they need? I do basically everything out of a bank account so it should be pretty easy for them to see where everything goes. I'm not really sure what else I'd be able to show them other than the copy of the cashed checks. My folks made it explicitly clear they are not disclosing anything on behalf of my bankruptcy from their end. Not income or anything. I don't really blame them. If I can show that rent is coming out, and what things I'm paying, they really shouldn't have any business knowing anything about my parents, especially when I have only been living here 2 months. I filed the divorce within 3 weeks of moving out from my mobile home I own jointly with my spouse :/ Of the few things I expected to be an issue of concern, this was not one.

                      Comment


                      • #12
                        Checks and a written lease should do it.

                        There is no reason your parents' financial information will be needed for your BK. You would only have to report if they are regularly contributing to your support.
                        LadyInTheRed is in the black!
                        Filed Chap 13 April 2010. Discharged May 2015.
                        $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

                        Comment


                        • stormygate
                          stormygate commented
                          Editing a comment
                          Thanks Lady. I made a lease agreement and am going to pay them starting now. It was supposed to start next month anyway. I don't really know what I'm going to do because I don't have enough money to allocate to all this. I probably won't be able to file as soon as the attorney was wanting to anyway because I have to pay his fee. The only thing that really helps is the "extra" paycheck in March :/

                      • #13
                        I agree with justbroke's post on 3/6. I often have to give my clients a list of "often forgotten expenses" to get them to remember and list expenses on Schedule J, and also tell them they get to list what they should be spending and not just what they've been spending because they're short of money. But like the poster's attorney, I also like to see no money remaining after doing the Schedule I minus Schedule J calculation.

                        Comment


                        • #14
                          I talked to the attorney today. He said the reason he said that is he had a client before making decent money who had credit card debt, and lived at home with no expenses, no car, or anything. I have enough expenses to technically run me negative after I went through it. My healthcare alone the last 3 months has been murdering me. I only included ongoing medical that I will have monthly on me schedule, but I've had $2500 out of pocket since January and my HSA is gone.

                          Comment


                          • #15
                            I would look into asking another attorney.
                            In the state I live in, the relative I live with didn't count towards my BK. I earn almost as much as you do, and I had more than $200 left over after my bills, but didn't have a problem getting the BK. I'd probably wait till well after the divorce before filing, because those lawyers bills can add up unexpectedly!

                            Comment

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