Inflated Income, $100k unsecured, $36k assets

[FreekingOut]

My lawyer said that it was all good when I first contacted him in March (unemployed), but now, it’s a problem. He said that filing now, with an explanation that my job is seasonal, will result in the trustee saying that I can get another job before it ends; but that if I’m unemployed, they can’t force me to get a job at that moment.

[justbroke]

... here’s my question: is my lawyer correct that unemployment will quickly qualify me for Chapter 7?

Well, technically it could depend on the six-month lookback (since the Means Test is based on that). But it deepness on the tenacity of the United States Trustee (UST) and whether they want to look further in your case. I mean, someone without income and has debt is highly likely to be eligible for a discharge under Chapter 7 since they do not have the means (a/k/a "passes the means test") to afford to fund a Chapter 13. In the simplistic viewpoint, it would be hard for the UST to consider someone on unemployment to have the ability to pay a dividend to their creditors in a Chapter 13. (This doesn't consider the question as to whether the unemployed debtor has non-exempt, or partially exempt, assets which could be liquidated in a Chapter 7.)

My lawyer said that it was all good when I first contacted him in March (unemployed), but now, it’s a problem. He said that filing now, with an explanation that my job is seasonal, will result in the trustee saying that I can get another job before it ends; but that if I’m unemployed, they can’t force me to get a job at that moment.

And there's the rub. If the UST suspects that you could find gainful employment or will be re-employed soon, they could look to your average and, I suppose, argue that you could fund a Chapter 13. (Although seasonal employment would not allow you to meet the necessity to have "regular" income in a Chapter 13.)

Second question: I’m considering raising my internet bill by $100 and my car insurance by $100, to raise my monthly budget on-top of the unemployment in October. Could that raise a red flag? We’re not filing for another two months; and I don’t care about the money, because all cash beyond the $10,800 is getting taken anyway.

In most Districts, there is a customary allowance for certain expenses. Anything over $100 for internet or cellular service, is usually frowned upon. Trustee's are known to force this to be reduced to $100 (been there, done that... even though I needed the higher speed to work from home and generate income!).

If you're on unemployment most people are expected to do belt-tightening... not go on a spending splurge. Whether or not that would pique the UST's curiosity into your specific case, is too fact-specific. (By fact-specific, the UST "could" see that you had a well-paying job in the past but suddenly didn't have a job, and your expense increased for no reasonable reason. Would that "pique" their curiosity? I don't know.)

[FreekingOut]

justbroke Would you think that 6-months before re-employment would be considered soon? Would it make a difference if I filed in October (only recently unemployed) vs. next February (four months unemployed?). Also, I’ve seen people say on the forum that a request for a 12-month lookback could be made. Would that be enough, since my average annual income would be well below the Maryland Means Test income limit? ($35,000 vs. $58,000). My tax returns would also show a trending income of $35,000 for the past three years.

[justbroke]

justbroke Would you think that 6-months before re-employment would be considered soon? Would it make a difference if I filed in October (only recently unemployed) vs. next February (four months unemployed?). Also, I’ve seen people say on the forum that a request for a 12-month lookback could be made. Would that be enough, since my average annual income would be well below the Maryland Means Test income limit? ($35,000 vs. $58,000). My tax returns would also show a trending income of $35,000 for the past three years.

I can't say as that is speculation. I think the issue may be that the lookback, when done towards the end of your periodic employment, would show income approaching or surpassing $70,000. Think about it... if you work 6 months a year and make $35k, the means test would show $70K. This is because the means test take the 6 months, divides by 6, then multiplies by 12 to reach annual income. Of course the tax returns show that it's only $35K and that's during a seasonal employment.

Your case is certainly different and you will need to lean o your attorney. My personal thought is that I would hope that the UST doesn't care and that your attorney can argue that your income is periodic. However, as your attorney stated, does this bring up a bad faith question because you don't seek work during the off-season.

I'm not an expert. You could file and, worse case, don't convert to a Chapter 13 if the UST moves to dismiss your case.

[FreekingOut]

justbroke for the last sentence of your reply, did you mean “just convert” to Chapter 13 if the UST tries to dismiss the Chapter 7 case? Or maybe I don’t understand.

[justbroke]

Nope, I said don't convert... if you don't want to be in a Chapter 13.

I was trying to imply that a Chapter 13 is voluntary and you don't have to be in a Chapter 13. If you are trying to get rid of debt and you only work seasonally, a Chapter 13 is going to be a bear and difficult, in my opinion.

[FreekingOut]

justbroke oh lol, ok…. I’ve been back to freaking out. If they dismissed the case and I didn’t convert, what would happen then? I’d be garnished forever? Also, hypothetically, would it be “bad faith” if I continued working when the seasonal work ended, but was UNDER employed? Making far less than usual? Like equivalent to less than my budget? I’d use my cash to supplemental bills, but that’s proof that I’m trying to bring in income.

[flashoflight]

I think your lawyer is correct and not trying to do anything bad to you. When he does your schedule I, he needs to include the six months of seasonal work, six months of unemployment, and then divide all of that by 12. At least when he does it this way, you can claim that you can't find a job that pays more than unemployment during the other six months. Otherwise, you will be grilled on why you can't work the other six months. They grilled my wife on why she can't work at all and help pay the creditors.

[FreekingOut]

flashoflight Thank you! I’m going to apply for jobs every day until the 341 and keep a log as proof that I’ve been trying to find full-time work.