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Law Suit Filed While Waiting to Qualify for Chapter 7 - Am I screwed?

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  • Law Suit Filed While Waiting to Qualify for Chapter 7 - Am I screwed?

    I have been unemployed since February 2012. In May/June, I realized that I would not be able to continue to pay my creditors and would need to file bankruptcy, so I stopped paying any unsecured debts to focus on my mortgage, cars, utilities, student loans, etc. My unemployment benefits are ending this week.

    At issue is that my unemployment benefits combined with my wife's income put us well over the median income for Chapter 7 enough to make us fail the means test by a wide margin. In fact, when my unemployment benefits end, my wife's income alone puts us significantly over median. However, after deductions, we will be able to pass the means test with her income alone. Therefore, we will need to wait January 2013 through June 2013 (6 months) with no unemployment income in order to qualify for Chapter 7, and then file in July 2013.

    Unfortunately, I've waited too long in ignorance, and upon searching the local court records, I've discovered that American Express has filed a law suit against me in October. And now, I suspect that someone is trying to serve me (first attempt tonight), and I can only assume it's related to this case. I do not think I will be able to avoid being served.

    In addition, I have NUMEROUS other creditors who I've not paid for 8-9 months at this point, and who I assume won't be far behind. You name it, I've got them after me: Amex, Discover, Capital One, GE Capital, Bank of America, Credit One Bank, NCO, American Recovery Svc (the ones suing me), etc. etc. etc.

    Unfortunately, I've not responded AT ALL to any collection attempts thus far (my phone is great at blocking them), and I was ignorant until today that I could've/should've bought some time by sending validation request letters inside of 30 days. In addition, I've only recently read that I probably should've retained an attorney a long time ago, as I've been told that creditors are less likely to pursue litigation if they know you have retained an attorney and plan to file bankruptcy anyway.

    My question is this: is it realistic to think I can avoid what I need to avoid (i.e., judgements, liens, garnishments (wife's pay), etc.) in order to put off my bankruptcy filing until July 2013 when I can pass the Chapter 7 means test? If so, then what should I do to ensure that this happens?

    We have a house and two cars, which we want to keep, about $75K in unsecured consumer debt, and about $150,000 in non-dischargeable student loan debt. As you can imagine, we've decided to try to file a Chapter 7 both due to my employment situation and so that we will be able to better afford the ~$1100-1200/mo in student loan payments.

    I met with a bankruptcy attorney back in May but have not retained him. I wasn't entirely comfortable that he would pay attention to the details of my case. Obviously, it's (past) time to retain someone, and I'm meeting with a few other attorneys this week. However, I'd like to go into these meetings knowing what my expectations should be at this point.

    I appreciate any advice that this community might be able to offer.

  • #2
    July 2013 is probably pushing it. Even if you filed an answer to the lawsuit and went to court, odds are, the trial would occur, and a judgment entered before July 2013. But that is really a matter of how quickly your local court gets through cases. However, to buy time, once you are served, you should file an Answer. That will buy you time.

    You need to retain an attorney now...if you are over median with just your wife's income...odds are, you are going to be a 13. Yes, it is "possible" to pass the means test if you have certain expenses that show you have no disposable income, but that is by no means certain. You should hire an attorney now, and figure out if your plan will actually work. There is a big difference between filling out the form and actually having the case survive the US trustee objection. So, even though you think you will pass in July 2013, you should get with an experienced bankruptcy attorney that knows how to litigate over median debtor cases.

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    • #3
      I agree you need legal advice, but have some comments, questions you should ask your attorney right away.

      Avoiding service is rarely a good strategy. You should consider accepting service and answering.

      Look at how your assets are set up. Perhaps you shouldn't have a joint account with your wife's income deposited to an account in joint name. This is an element of "judgement proofing". If you don't have bank accounts or an income stream they can garnish, even if the suit advances to judgement you can discharge it in BK.
      Chapter 7 Filed 8/11/2009, Discharged 11/23/2009

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      • #4
        Since Nevada is one of the community property states, it is likely that you will gain nothing by "separating" finances, etc. I support HHM's recommendation that you seek a bankruptcy attorney for consultation.

        Life in the civil court system in community property states can be much different than life for the the other 41 non-community property states.

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        • #5
          Noone can tell you how long before they get a judgement, but capital one sued me in June 2008 and I did nothing, they got their judgment in dec 30. No others sued me after 18 mos of not paying. My hubby is in same boat now, Discover is suing him and he is with attorney now trying to pass means test just barely .
          chpt 7 ,5-2009

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          • #6
            It is illegal to avoid a process server, however, you are not obligated to make it easy for them. Perhaps filing a 13 now and when things get leaner, convert to a 7. A bit more trouble but will give you protection from an immediate suit. Just a thought. 'Hub
            If I knew it all, would I be here?? Hang in there = Retained attorney 8-06, Filed 12-28-07, Discharge 8-13-08, Finally CLOSED 11-3-09, 3-31-10 AP Dismissed, Informed by incompetent lawyer of CLOSED status, October 14, 2010.

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