Reducing work hours or quitting job....

[CPO]

Has anyone considered reducing their work hours or quit their job to secure a median income level that qualifies for a Chapter 7?

I have a pension that I collect as part of military service. The job I have plus pension places me over the median income level for Texas....

However, I have the option of reducing my hours at work in the name of higher education...I have a past history of reducing my hours, with approval of my employer, to attend class. I'm currently attending classes but working full time as tough as it is...

Reducing my hours would quailfy me for Chapter 7.

Could this be seen as abuse? Could the Trustee and/or creditors object, claiming I should be working full time?

Consider that I would plan this to start the beginning of the year, would be attending classes, and then would file the end of June 2007. That would be my 6 month income period.

As it stands now, I'm would be stuck in a Chapter 13.

Comments, advice...

Thanks in advance.

[HHM]

Instead of reducing hours at work...

Have you looked into the exemption status of your Pension? Your pension is probably exempt and therefore "may" not be counted as income for median income/means test. I am not 100% how it works under the new law, but under the old law, the Pension, if exempt, would not have been counted as income. If I were you, I would ask a lawyer about it.

[CPO]

I gotcha, I was under the impression that my pension, qualified under ERISA is free from attachment, but is still reported as income.

In the NOLO manual, the worksheets all state to report income from ALL sources, including pensions...as on Schedule I....

In Chapter 3, (Exemptions) it states that my pension would not be in my bankruptsy estate, so the trustee cannot take it to pay my debts.

But I don't see where it is deducted from my income calculation. Schedule C is where you would list it as exempt, but nowhere do I see a reduction in income from a quailfied pension.

Perhaps I'm being to cautious here, and can't see the forest for the trees...

This term "Bankruptsy estate" has me thrown abit. Since I collect my pension/disability monthly, I look it as income(perhaps incorrectly). If it was a big cash deposit sitting in a bank somewhere earning interest as a 401k or something, and not being distributed to me on a monthly basis then it would not be in my "estate."

I must be missing something... Help me understand this....

Thanks.

[lrprn]

I gotcha, I was under the impression that my pension, qualified under ERISA is free from attachment, but is still reported as income.

In the NOLO manual, the worksheets all state to report income from ALL sources, including pensions...as on Schedule I....

In Chapter 3, (Exemptions) it states that my pension would not be in my bankruptsy estate, so the trustee cannot take it to pay my debts.

But I don't see where it is deducted from my income calculation. Schedule C is where you would list it as exempt, but nowhere do I see a reduction in income from a quailfied pension.

Perhaps I'm being to cautious here, and can't see the forest for the trees...

This term "Bankruptsy estate" has me thrown abit. Since I collect my pension/disability monthly, I look it as income(perhaps incorrectly). If it was a big cash deposit sitting in a bank somewhere earning interest as a 401k or something, and not being distributed to me on a monthly basis then it would not be in my "estate."

I must be missing something... Help me understand this....

Thanks.

We know your pension income is safe from seizure or garnishment by your creditors, the trustee, and bk court. But whether it has to be counted as income on your bk forms.....that's another story.

I did some research online and found there is one precedent bk court case that does show that pension income needs to be counted as income - it's Schnabel, 153B.R. 809 (Bankr. N.D. Ill. 1993)In re Schnabel, 153 B.R. 809 (Bankr. N.D. Ill. 1993). In Schnabel it was held that a debtor's social security and pension income, which was exempt under state law, must be considered in determining the amount of the debtor's disposable income." (From http://www.katzlawoffice.com/c13.primer.html , scroll down to section (4) (i))

Of course, whatever your lawyer says is what really matters in your situation. Keep us posted on what happens, ok? Good luck with your case!

[HHM]

I merely pointed it out as an option, I don't know for sure if it will work.

However, the cases you cite relate to chapter 13. In a chapter 13, you can claim pension income as a "source" of income to qualify for a chapter 13 to satisfy the "regular source" requirement of a chapter 13, if you are in a situation where you MUST file a chapter 13.

However, after looking at Section 101(10A) of the BK code (the definition of "current monthly income"), you might be out of luck on my idea. Social Security is the only category that is excepted from the definition of current monthly income. (as are a few things related to victims of terrorism, etc). But I still think you should at least schedule a consultation with an attorney to discuss the issue...the consultation is typically free and there is no expectation that you need to hire the attorney.

So back to your original question, if you can wait until June 7 to file, you can reduce your hours. In generally, I typicall don't recommend someone substantially changing their life just to qualify for a chapter 7. So if you go this route, make sure you have enough money to live and you will need to stop using all credit cards during this time.

[CPO]

I truly thank you for the info. I hope I did not come off obtuse. I will schedule consultations with local attorneys and learn the scoop on this issue.

I'll post back here when I get a definitive answer.

Thanks again.