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High Income Chapter 7

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  • High Income Chapter 7

    I setup a consultation with an attorney, on the phone I mentioned I was looking at a Chapter 13, but he said he would really like to get me in to a Chapter 7 if possible.

    I told him I made 106,000 a year, I have about 120k in unsecured debt. 40k of this came from a business. I have one spouse (same sex marriage, not sure how this will be treated in Texas). Spouse has no income and I cover all of his expenses.

    What are the chances I can get a chapter 7? What strategies would help me get a chapter 7 over a chapter 13? I have a $1750/mo mortgage payment and one $700/mo car payment. We do need a second car.

    Other than my home and my car I have no real other assets other than a small 401k and the things in my house (TV, computer etc).
    Last edited by Txdebt; 11-12-2014, 01:09 PM.

  • #2
    Whether you can get a Chap 7 discharge depends on how much income you have left after paying your necessary and reasonable living expenses. It has nothing to do with how much unsecured debt you have. Your car payment and mortgage payment will help.

    It sounds like the attorney you will consult is a good one. Bring as much financial info as you can. I suggest a simple spreadsheet listing your monthly income and expenses so he can quickly get a view of your financial situation. For expenses you pay once a month, divide them by twelve. Do not include payments on dischargeable unsecured debt.

    A big question will be whether you can claim to have a 2 person household. I suspect that since TX does not currently recognize same sex marriage, you will be treated as if you are not married. Hopefully the attorney will know for sure. If not, try to find a BK attorney with experience in filing BK for debtors with same sex spouses. You may need to look for attorneys who specialize in LBGT issues in several areas of law including BK. If it makes a difference and you can hold off filing a few months, you might want to see what happens in the courts and legislature in the first half of next year. From what I read, it seems that your marriage may soon be recognized by state law.
    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


    • #3
      LitR is right on, as usual. Your spouse isn't legally recognized so he's a roommate as far as the court is concerned, I imagine. It would be best to talk to a few local BK attorneys and ask them specifically about this issue. Maybe there is some provision.

      For reference, I was more than double the median income for my zip code and I am single. My attorneys told me I would be in a 13 due to my income, period. The last attorney I spoke to, however, advised me that my house payment was pretty high and that helped a ton, so I should consider my allowable expenses and consider working less OT to bring my income down. I did both, increased my allowable expenses and stopped working OT for 6 months, and I squeezed into a 7.

      Do you have life insurance? Life insurance is an allowable expense. There's no law that says you have to keep your life insurance policy after you are discharged. What are your auto and house deductibles? Why not decrease those? Going from $1000 deductible to $0 deductible increases your auto insurance payment a lot.

      This is strategic planning. Still, your income at 106k is going to be difficult to mitigate. What is your base salary? If you were to work the minimum for 6 months, how much would your income be? If you're salary at 106k, you may be out of luck and have to file 13. If you're hourly, maybe you can work less.
      Chapter 7, above median, no asset. Discharged with no UST involvement.

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      • #4
        What about a second car payment for my spouse? Would this be allowable at all? I know you can have a second car for a dependent, could I swing qualifying him as that? We do file taxes jointly.

        I have no immediate need to file, I have not yet missed a payment but am draining savings.

        I definitely think I will be getting life insurance, and increasing my charitable contributions. These are things I did before the debt got bad and I plan to do once I can afford it.

        Also, can I increase the amount of taxes withheld from paycheck to help offset?

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        • #5
          Also, I think I definitely need to talk to an attorney about the marriage specific issues. I googled gay marriage texas bankruptcy and saw several lawyer blogs saying I will be treated as a normal gay couple.

          Comment


          • #6
            Originally posted by Txdebt View Post
            What about a second car payment for my spouse? Would this be allowable at all? I know you can have a second car for a dependent, could I swing qualifying him as that? We do file taxes jointly.

            I have no immediate need to file, I have not yet missed a payment but am draining savings.

            I definitely think I will be getting life insurance, and increasing my charitable contributions. These are things I did before the debt got bad and I plan to do once I can afford it.

            Also, can I increase the amount of taxes withheld from paycheck to help offset?
            A second car for a spouse that works is allowed. If the BK court recognizes your spouse, you still have the obstacle of him not working. Talk to the lawyers about this when you ask them about the same sex thing.

            Charitable contributions are a thing to do now, because it shows a trend. Life insurance you can get on the eve of BK.

            Increasing taxes withheld will do nothing. However, I increased my employer 401k contributions from 3 to 6%. My lawyer said the trustee may object to it, but nothing was said and it was allowed to be claimed as an expense.

            If your employer offers tiered health insurance plans, there's no reason you can't get the most comprehensive/expensive plan they offer. Every little bit helps.

            I was lucky to squeeze into a 7. Maybe you will be, too. The worst case scenario is that you will be in a 13. It wouldn't be the end of the world.
            Chapter 7, above median, no asset. Discharged with no UST involvement.

            Comment


            • #7
              Txdebt, please run your plans by a BK lawyer who knows your local trustee and judge and how they will react to certain expenses.

              I suggest you do a search for "LGBT" attorneys and actually go for consultations with more than one attorney. The laws is in flux right now and I don't think you should rely on blogs or any articles on the internet. It doesn't sound like you have any reason to rush. So, don't change anything until you get some good advice on your situation.
              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


              • #8
                Originally posted by LadyInTheRed View Post
                Txdebt, please run your plans by a BK lawyer who knows your local trustee and judge and how they will react to certain expenses.

                I suggest you do a search for "LGBT" attorneys and actually go for consultations with more than one attorney. The laws is in flux right now and I don't think you should rely on blogs or any articles on the internet. It doesn't sound like you have any reason to rush. So, don't change anything until you get some good advice on your situation.
                Thats the plan. I have two consultations setup right now. I am relieved I have the opportunity to enter this with good planning and forethought to emerge from this in the best possible situation.

                Comment

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