Hello...New Here...New to the Process

[mdl]

We are just getting started on our Chapter 13. Working up all the paperwork for the Atty.
My question is this - In figuring the household standards, its me and my husband...BUT.....my 26 year old unemployed (for a year) is still living at home, eating my food, using my hot water, ect., ect. I havent claimed him on my income tax because he did have income in 2010...Can I claim him as an occupant and therefore use the standards for Three People in the house? I also have paid his truck payment for almost 2 years (severely underemployed at the time)....

[AngelinaCat]

Hi mdl: welcome to the forum. Yes you have to include your son in your paperwork. I am not a Ch13 person, but others who are, will chime in. But your son is living with you and using your resources, food, electricity, etc. Does he contribute to your household at all? As in rent (either money, or 'sweat equity'--as in doing handyman type jobs around the place helping you to maintain your household, and earn his keep)?

[LadyInTheRed]

I just spent some time researching this issue and the law seems to be unsettled. The Bankruptcy code does not define "household" and I only found court rulings at the district court level. Until there is a higher court ruling, it is going to depend on your district. Here's the most recent district court ruling I found on the topic of household size. It doesn't directly address the issue of whether an adult child is considered a member of the household and the ruling doesn't have to be followed by judges in other districts. But, it does discuss the cases that seem to be cited most often. http://www1.ncmb.uscourts.gov/opinio...s/morrison.pdf

Your attorney should know how this issue is handled in your district.

[mdl]

Thanks for the answers! I just did the "free initial interview" with the attorney and in my bumfuzzled state I didnt mention it. But we just ran rough numbers. Here's my story, if this is an ok place for it.
DH had a stroke in 2007 - went from $70K a year as a diesel mechanic for CAT to drawing SSDI at $1800 a month - he also has a LTD that pays him $531 a month until age 65 (he's 57).
I make $44K a year. So, part of his SSDI is taxed - THAT sucks. Anyway, we have continued to try to live as we did (not extravagant, but not frugal). We had a 401K loan when he had his stroke, so that started our problems. We had to pay taxes on that in 2008, and did so in an installment plan. We have continually had to draw from his 401K/IRA to "keep up". AND stupidly, did not take out taxes in 2009. So in 2010, $16K in taxes. Added that to the installment plan. In 2010 we had them take out 10% taxes, again, STUPIDLY thinking this was enough. NOT. When I did our taxes this year, here comes $12K due in taxes. We have drawn his IRA down to $50K and I KNEW we couldnt keep on. Then, I began researching, and dammit, I wished I had known that we DID NOT have to pull from his IRA to pay our bills!!!!!!!!
So here we stand with $34K in taxes that I KNOW are Priority - I dont have a problem with that. At least the interest and penalties will be eliminated...
Add $54K in F****** credit cards - AND I THOUGHT WE WERE INTELLIGENT PEOPLE...........
And my car I still owe $16K on -
We are going 13 to keep the house and car and deal with whatever is left to pay.
But my son has never left home, does not pay rent, has never paid rent. The economy sucks so bad that he has never been able to afford to leave. He is also a diesel mechanic and when he did make decent money, he bought a truck that at the time he COULD pay for while still living at home. Then the economy tanked, he lost his job and his employment has been sporadic since. I have made his truck payments since we couldnt afford for him to have the bank take it back because then he would not have a vehicle. There ARE NO JOBS around here ANYWHERE.
So, that is why I ask if I can list him as a member of the household. I will talk to the attorney next trip.
I am just so embarassed that I have let this happen to us. But I cant continue.
THanks for listening!
MDL

[kjrmom911]

MDL. I don't have the answer to your question, but I feel for you. We also took the money out of my husband's 401k in the vain hope that we could make it through. With the economy tanking his business took a big hit. We thought the 401k would hold us over. We had them take 20% out in taxes, but still not enough. I wish I would have considered bankruptcy before we did this, but I was raised that one always paid one's bills, no matter what. I started to see the handwriting back in march and we just filed 13 last month. I have 2 17 year old boys and a 13 year old girl living at home. I despair of the boys being to find anything to help pay their college expenses (they just graduated). I am urging them to consider the military, even though thats really the last thing I want for them. It is tough out there, no more "moving out at 19"

[ValleYum]

In many cases (not all), the problem with an early withdrawal (not a loan) from a 401k prior to age 59.5 is that there is a penalty of 10% of the total amount taken PLUS the amount of the withdrawal is added to your taxable income and will therefore increase your tax liability. It usually requires setting aside 20-25% (and sometimes more!) of the amount you take out (dependent upon your tax bracket) in order to pay the liability owed to the IRS for the early withdrawal and penalty. You will receive a Form 1099-R that will show the early withdrawal/distribution amount.

Some 401(k) plan administrators automatically withhold 20% from early withdrawal/distribution amounts for the IRS. You again will receive a Form 1099-R which will show the amount of the early withdrawal/distribution as well as the amount withheld and paid to the IRS on your behalf. The 20% withheld by the plan will not always be enough to cover the amount you may owe the IRS so caveat emptor!

There are some circumstances in which the 10% penalty is waived - but the amount of the early withdrawal/distribution will ALWAYS be added to your taxable income.