What To Do?

[Walnut]

I make about $71000/year for a family of 5 in Texas. Over the median by about $7000. So, I took the means test and am curious about under what circumstances you can add additional housing/living expenses. In Bexar county, the IRS guideline is a ridiculously low $904 or something like that. Our rent is $1395 and that is not considered all that high for a house on the Northside of town. I also owe the state of Ohio income tax for $2600 and have about $54000 in unsecured debt. Two cars at $433 and $395 per month. Also, there seems to be no place for auto insurance which is required in Texas. I want to do a 7. If they convert me to a 13, I'd just as soon not bother since some of my bills haven't seen a payment in over a year. In Texas there isn't much the creditors can do to you. I own no assets of any real value and wage garnishment is not legal here for credit debt collection. Sure, we get phone calls and letters, but that's it.

Have met with an attorney who thinks we are 90% likely to be granted a 7... but after reading horror stories here, I am a little rattled now. Are all trustees jerks? My lawyer seems very accomodating and I trust him.

[HHM]

Let me ask this...what do you think would happen if you just stopped paying your debts? Is that what you really want to do? Do you want to own a home at some point? etc. Sure, perhaps you are basically judgement proof, but do you really want to go through life with this debt hanging around your neck...in a few years, due to fees and interest, this debt will be $80,000 in a few more, over $100,000.

A chapter 13 is not that bad a deal. Also, if your attorney is 90% sure, those ar pretty good odds, and also, unless your disposable income in a chapter 13 would be $900 per month or more, you would end up paying back less than you owe, with the remainder of your debt being discharged.

How about this, could you get out of debt, on your own, in 5 years? If the answer is no, then you should probably consider BK regardless if its a 7 or 13.

In all honesty, there is very little benefit to you for letting the debt ride.

[Walnut]

Yeah, I just am scared of being completely enslaved to a plan I can't afford. I realize riding it out is kind of silly since I will be locked into rentals forever and such. I really want a fresh start. Due to some "lovesickness", I filed a Ch 7 in 1989 and it was a breeze. Now I am married and in 2004 lost a job I had for 12 years (downsized) -was forced to relocate to stay in my field, and wife lost her job then got pregnant with our third child (due any day now). Then as if that wasn't bad enough, minimum pmts doubled, interest rates hiked to 30% and $35 in late fees and $35 in OL fees every month. We owe a total of about $85000 if you include the cars.

[Walnut]

I also don't know who is a secured creditor and who isn't since all my accounts have been open for many years now. I guess the attorney will find out all that stuff. If I add in the extra we pay for rent, we easily pass the second part of the means test (we have -$140 in DI). As to Sch J, I don't know - how much is that scrutinized after you fill out the Means Test?

[HHM]

I see...

Regarding the cars...if you want to keep them, you will continue to make the monthly payments in either a chapter 7 or 13.

If you get a half way decent attorney, you will be able to afford the Chapter 13...and there is some flexibility for chapter 13's.

I think action is better than inaction, and unless you can come-up with some other plan to get out of debt that will get you out of debt in 5 years or less, you should take some action and prepare to file BK...shoot for a chapter 7.

[Walnut]

I fully intend to hire the atty on Monday and start the Ch 7 process. I can't believe I am in this mess again - but I never figured I'd lose my job and be out for six months. Anyway, I see that Best Buy, HRS, and stuff are sort of "secured". Do I list those as secured on the Means Test? Best Buy was for our refrigerator, HRS for our TV, and Sears for washer/dryer (one of which is long gone).

[SinkingFast]

When you ran the Means Test, did you include any medicals expenses AND the Trustee's %'age?

During a Consult, I mentioned running the Means Test but didn't include Medicals, and I didn't know what to put in for the Trustee's part. The attny asked how I came out. I told him $115/mo. The attny muttered under his breathe, "The Trustee's fee will eat that up and then some."

Best I can tell, from having met with more than a few attnys, as a renter, you cannot deduct the excess you pay over the Schedules allowable for Rent. If you were a homeowner, you'd get to deduct the excess as a mortgage is a Secured Loan. But that could vary State by State and District by District. So be sure and ask your attny.

Your cars are a different story. You'll probably get to deduct any excess on them as they are Secured Loans. Cars, house, those loans are Secured. Any loan that has collateral backing it is Secured.

You mentioned a baby on the way, so I'm sure you have monthly medicals expenses. You're just gonna have to sit down, look thru your checkbook and bank statements, or look at CC's Statements and see what doctors/hospitals/urgent care centers you've paid how much money to over the last year. Unless you're on State Aid, an OBGYN is not free. And I'd bet wife is gonna have a hospital bill as well.

We all start out not thinking about a lot of expenses. The more time you spend, the more you think about where your money does go.

[Walnut]

Thanks SF. Yeah I don't think I did much with med expenses. I need to go see the doc on a few things for myself that I've been putting off. ;) Seriously, yes in some months of the pregnancy plus some unxpected high dental costs for my daughter and MRI for my son, I need to go review all that. Is Auto Insurance part of operating costs? In Texas, if you have bad credit, your rates get jacked up.

[Walnut]

Whoops! In doing the means test, I only used Federal Tax. Completely forgot SS and MC Taxes! Now we're jamming! Recalc'd med expenses (forgot about all the damn drugs I take for allergies, GERD, etc) and came up to $200. So now, I took off the rent difference and it comes out to about $63 left. What was that about a Trustee Fee? I didn't see a place for it.

[SinkingFast]

There's 2 forms of the Means Test.

B22A is the Means Test for Ch 7. B22C is for Ch 13 filers.

The Trustee's %'age is figured on Line 45 of B22A and Line 50 of B22C.

[Walnut]

Thanks - the form on LegalConsumer.com has it precalculated at $565 x 10%. I have no clue what would be typical. Obviously, the higher the better. By the way, how many years of tax returns do I need? Sorry to ask so many questions. Seems everything has changed since I did this moons ago.

[legalconsumer]

The trustee percentage depends on the court district. The U.S. trustee's office publishes a table (which the LegalConsumer calculator links to). The calculator uses the percentage for your district, which, in your district, apparently, is 10%.