Quit job to become Ch7 eligible / reduce income??

[seanp951]

I have seen an attorney, he told me I can't qualify for a Ch 7 because I make too much money.

I work for the state in a professional capacity. If I wanted to, I could quit, and open up my own business/office - and become self employed.

I have always fantasized about quitting my job and going out on my own, but I'm held back by the fear that I won't make enough money to make ends meet.

Well... what would happen if I did just "go for it".. and quit my stable gov't job and opened up my own business. It would probably be very slow initially... but I bet in 6 months, things would be good enough that I would be getting by.

If I was to go out on my own.. I would suddenly have ZERO income... and what little amounts of money I could make in the beginning would be below the cutoffs for the means test and I'd qualify.

what do they look at in terms of income. do they go back 2 years or just look at a snapshot of what you make at the moment you file? I assume they may look at a period of time.. to prevent people from temporarily taking off work, taking a lower paying job.. filing BK.. then going back to a higher paying job...

but if there is a way I could pull that off.. it would be something to consider.

thanks for the info.

[LadyInTheRed]

Don't quit a stable job to avoid a 13. See another couple of attorneys. If they tell you the same thing, a Chap 13 isn't the end of the world. I am 16 months into a 13 and I'd much rather be where I am now than unemployed with my debts discharged and struggling to make a living off a new business.

[kjrmom911]

I agree with Lady on this one. In this crazy economy if you are lucky to have a stable job I would not quit simply to avoid a chapter 13. So far my chapter 13 has been very doable. Its early still (only 3 payments in), but we know there is an "end" to the payments, unlike when we were just robbing peter to pay paul. I'm sure your job provides more than just income. It probably gives you health insurance, as well as some type of retirement. As part of our family income comes from my husbands business I will tell you that running a business is not easy and not as "profitable" as some people think. Especially not right now. On the other hand if you really don't like your job and its always been your dream to start a business, why not start one on the side. As I said, chapter 13 is not the end of the world.

[AngelinaCatHub]

I also agree in this economy quitting a job when so many people can't even get a burger flipping job is not wise. Do the 13 and IF your job goes bad, then you can convert to a 7. You have the "bird in hand", your business plan is still "two in the bush". If it is your dream to make your own business, try it in your off time. If you are intent on this path, by all means "live your dream". My opinion is, at this time it is very dangerous to leave a stable job.

The standard look back is six months. The Court has a prerogative to look back much further if cause to do so is indicated by some question. Remember, once you file, you belong to the Trustee for that time period worked out, either 13 or 7, until discharge. 'Hub

[frogger]

I have always fantasized about quitting my job and going out on my own, but I'm held back by the fear that I won't make enough money to make ends meet.

It would probably be very slow initially... but I bet in 6 months, things would be good enough that I would be getting by.

If I was to go out on my own.. I would suddenly have ZERO income...

Go back and read these particular comments that you made. Fantasy and reality are two different things. Especially when you start getting hungry...

[AngelinaCatHub]

Go back and read these particular comments that you made. Fantasy and reality are two different things. Especially when you start getting hungry...

How true this is. Could not say it better. Here is a much more practical fantasy: Even if you hate your career job, depending on the time you have served that company/organization, real "paradise" comes when you cross that age or time frame that if you wished you could retire at any time. You then become no longer chattel of a company/organization, but true freedom occurs. You are then working by choice not need. I had that in the end of my real career, but I loved my job very much. However, knowing that you could kiss it off at will opens a wonderful feeling far better than a fantasy. 'Hub

[IamOld]

I just want to add one more "don't quit your job." The job market is BRUTAL - rather pay the 13 for a few years than have no job! Also consider that you may be giving up state pension, etc.

[newbie2]

I won't add to the wise advise about not quitting your job, but wanted to caution you about doing so on the eve of bankruptcy. With all the requirements there is still a little something about "good faith" (or bad faith..). You really don't want a trustee to question why all of a sudden you quit a job and then file for bankruptcy, as opposed to being laid off (or involuntarily lose your job) as so many people have been. They know how to sniff out a good faith filing from one in which the system is being played.

[forgotten]

I understand your feelings. My first thought when I found out I would be paying $60k to unsecured creditors over 5 years was to quit my job for 4-6 months, file, then after I was discharged start looking for a new job. *IF* I found a job right away I would have come out ahead and not been stuck in a CH13 for 5 years. In reality, finding a new job in this market is not easy, and starting your own business is even harder.
If you have a stable job I wouldn't give it up! As someone mentioned, don't forget health insurance. You can get private insurance but it is expensive and everyone in your family needs to healthy.

>> It would probably be very slow initially... but I bet in 6 months, things would be good enough that I would be getting by.

My wife and I told ourselves that about our small business for years. "Just a few more <product/service> and we will be fine!", "In a few months it'll turn around!", "In a few more months it'll be great!". Well, for us, and many many small business that almost there never got there. We instead just lost money every month.

[greenthinker]

Many great responses already, and I second them all. I would like to add that my wife and I are getting a small business off the ground, while working our full time jobs. It's hard work, but it can be done. Also keep in mind that starting a business requires time and money, usually a lot of both. Having a stable job will help fund your new business start-up costs and keep food on your table and a roof over your head while you are planning and setting up your business. Good luck!

[AngelinaCatHub]

I won't add to the wise advise about not quitting your job, but wanted to caution you about doing so on the eve of bankruptcy. With all the requirements there is still a little something about "good faith" (or bad faith..). You really don't want a trustee to question why all of a sudden you quit a job and then file for bankruptcy, as opposed to being laid off (or involuntarily lose your job) as so many people have been. They know how to sniff out a good faith filing from one in which the system is being played.

An excellent point. Kick out money coming in, so you don't have to pay money (that you owe) out? Reeks of fraud looking manipulation. (The appearance of guilt can harm as much as being guilty.) 'Hub

[catleg]

You would be better off taking a leave of absence or time off without pay, to reduce your income below the median to get the chapter 7.

"Family medical leave" time would probably work out well for this, if your situation permits.

[moe]

Catleg

I wondered about this. I've already taken 2 leaves from work in the past. I was thinking 'well if I have to do that again, then I would be well under median...' But the attorney I saw said they will still care about the fact you are going to make more $ in the future. This was a year ago. (I *think* I'm finding out the attorney was pushing me into a 13 incorrectly but can't tell.)

I did some research on that. It's called 'totality of circumstances.' You have to file an I-J (or something like that) that will ask you to tell them what you expect to happen in a year--do you expect to have more money in a year. If you say 'yes, I might be better and go back to part time work' I am sure they will consider this. How, I don't know. Perhaps they will pass you through, perhaps not.

But if you plan on going back to work after your leave, you have to tell them that.

It is interesting that bankruptcy is a very forward looking thing. We're all trapped by the past when we are in debt. And most of us it was circumstances beyond our control. You sort of get this window to a fresh start but if you are burdened by debt and you manage to make a living, you will have a tough time shaking off your debt. But being unemployed and unable to get credit and utterly penniless is worse than paying off debt.

[catleg]

Good points moe.

I guess one would have to be somewhat more discreet about how you go about doing this. Taking a few days off per month for 6 months or a year to care for an elderly parent, something like that. It has to pass the smell test.

[espo1357]

Ya, don't quit.

Just be sure to list all your expenses property and go on the high end for groceries, as food prices are up too.

A 13 is a good play for many reasons, and a BK allow YOU to control your creditors.