Question about quitting job to pass means test.

[berrymom31]

Hi, I've been on the chapter 13 thread for a few weeks and we are thinking of changing to chapter 7 as the stress of 13 is killing us...literally making us sick....I have had shingles...stomach problems, insomnia...it's just not worth keeping the house like we thought it was.

Our atty pushed 7 on us for one thing.....also we are thinking of getting a new atty even though we have paid this one $600 already. We had our first meeting on May 8th and have never heard from her again. We saw her at the county fair on Saturday and she didn't even know who we were. She won't answer phone calls, wont' return messages...she's busy but geesh..we don't even have an estimated 13 payment yet.

Here is the deal. We make about 108,000...last year. My income is variable as I am a self employed contractor and last year made 22,000. My husband has two jobs..one he makes about 56,000 and one 24,000. These are both stable and steady and we are thinking about me quitting my work and bringing our income down closer to the median. Our median is 71,976, we expect our income to drop to around 82,000 after I stop working. We are current on our mortgage and have already given up our new car and gotten a cheaper used vehicle. We are waiting to see how much extra we own on the car after it was sold...were hoping it's high as I know the more unsecured debt you have the better when it comes to passing the means test.

Our house payment is 2200 with 1st and 2nd combined. When I run the means test and legalconsumer.com without my income we pass the means test with flying colors...as we have a family of five and 70,000 in unsecured debt and 30,000 in student loans, 240,000 in home loan....car payments of 544 for two vehicles. I ran this means test using only IRS allowances and did not even add in extras such as my kid's dance, sports fees, entertainment and other allowable expenses.

How easy do you think 7 is going to be? I'm nervous that we are going to give up everything we have and then end up filing 13 anyway...that would be such a friggin drag....sorry this is so long...I'm just horrified at the thought of having my house foreclosed on, giving up my career, moving to another town and uprooting my kids and then end up having a 13 anyway.

[laurannm]

It certainly sounds like a new attorney is in order. If you can swing it financially I would dump the lawyer, forfeit the $600 and find a better attorney. If possible try to find an attorney that will run a means test as part of the consultation.

So are you saying that you would like to surrender the house and try to file a Ch 7? If so then you may or may not be able to count the $2200 mortgage payment on the means test. Some districts allow payments to be counted on the means test on property you are surrendering, some don't. Your attorney should be able to answer this for you.

As far as I know, expenses such as entertainment, kids dance and sports fees are not allowed on the means test (you can though try to add those to your schedule J).

Is the house payment causing the stress? It sounds like that no matter what Chapter you end up in, you don't feel like you can afford the house. So even if you gave up the house and moved away and still ended up in a 13, you might still be in a better situation in the long run.

[Help!]

The answer is... it depends. A 7 is never easy and there's no guarantee that you won't be pushed into a 13 if you're above median. In my opinion, the more willing you are to walk away from your possessions the easier it will be. It's good that you feel you pass the means test using only IRS allowances, because in reality, you are entitled to only "reasonable and necessary" expenses (these would not include kid's dance, sports fees, etc.). Schedules I and J are a different story, but you should know that you can be held to very minimal allowed expenses on the means test if the UST in your district feels you should be in a 13.

I wouldn't trust any attorney who makes it sound like a 7 is a slam dunk. Find a good one who can help you prepare for it (easier said than done). Good luck!

[berrymom31]

So, when taking the means test they don't use our mortgage? Crap...we are only 8,000 or so away from the median.....surely that will count for something!!!! I just want to avoid 13 soooo much as moving to a cheaper place will make our disposable income higher. If thats the case then we might as well keep making our large house payment right? If the money is going to the trustee to pay off our debts..we might as well stay here and make our 13 payment less....

I'm so frustrated...depressed...I've lost 10lbs because I just can't eat. If hubby quits his 2nd job we would be under, but we would be right were we are now...no extra money!!!!

[laurannm]

Well again, if you want to surrender the home then they may or may not allow it on the means test. It really depends on they handle that in your district. As an example there has been case law in my district in which 2 BK judges have ruled that you are allowed to use your full mortgage payment on the means test even if you are surrendering. I think though there are other districts who I believe have ruled that you cannot use the payment if you are surrendering the asset.

[Flamingo]

'Our house payment is 2200 with 1st and 2nd combined. When I run the means test and legalconsumer.com without my income we pass the means test with flying colors...as we have a family of five and 70,000 in unsecured debt and 30,000 in student loans, 240,000 in home loan....car payments of 544 for two vehicles. I ran this means test using only IRS allowances and did not even add in extras such as my kid's dance, sports fees, entertainment and other allowable expenses."


Hope you didn't add in the $30,000 in student loans....they are not dischargeable except under situations of extreme hardship or disability.

[Flamingo]

So, when taking the means test they don't use our mortgage? Crap...we are only 8,000 or so away from the median.....surely that will count for something!!!! I just want to avoid 13 soooo much as moving to a cheaper place will make our disposable income higher. If thats the case then we might as well keep making our large house payment right? If the money is going to the trustee to pay off our debts..we might as well stay here and make our 13 payment less....

I'm so frustrated...depressed...I've lost 10lbs because I just can't eat. If hubby quits his 2nd job we would be under, but we would be right were we are now...no extra money!!!!

Berrymom...we all totally understand your last paragraph. Call your family doctor, advise him/her you are under severe financial problems and are experiencing tremendous anxiety with resulting depression. Anxiety can end up sending you to the ER thinking you are having a heart attack. I've been there and though I was going to have a nervous breakdown. This is a life event for you and your family. You feel like you are just out of or lost control of everything. Several months from now when this is all over you will look back and wonder why you were flipping out over all the details. Seriously, give your doctor a call or make an appointment very soon to get seen and with a mild anti-depressant or anti-anxiety medication, you will soon get things back in control and on track. Just remember all this too shall pass and believe it or not, it all will get resolved. Get good legal advice as to whether or not you should consider keeping your house.

[justplaintired]

Well, if quitting your job is something you are wanting to do anyway, then I say go ahead. Far as income remember it's a 6 month look back, so you would have to wait for awhile to reflect that income loss. Also, I don't know, but just in case how would you answer the question of why you lost that income? I mean I don't know if the trustee would even ask this, but best to be prepared. Could staying home with the kids to save on childcare be a reason? It appears from your post you have time, so don't get too worried if you have to put it off for a little while. Get everything in order and then file.

Far as losing the house payment on your means test, I think they would only count what your rent would be. I don't believe they will count the $2200 if you are no longer paying that. But remember you will be paying rent, so that figure would be counted.

I would look for another attorney. Right away. Ask about your job. Ask about letting the house go. Do the means test with a new attorney based on the change in your situation. Soon as you get this figured out you'll find your stress level will go down considerable, the attorney your using is only adding to the stress you're feeling.

[Help!]

We were only allowed the IRS Standard for housing on our means test. Our mortgage was $1400 more than that, and our rent was about $400 more. It depends on the district and it seems that what is or isn't allowed on the means test is totally subjective. So much for standardizing the BK process!

Surprisingly, our student loan payment listed as an expense on the means test wasn't questioned. It's my opinion that if the UST wants to kick a case out of a 7 and into a 13, they pick and choose which expenses to knock down. I think they go for the easy ones first that don't lie in any grey area (such as very expensive car payments). It really would have been nice in our case to have a *good* lawyer to advise us about the trends in our district. We would have done things very differently and would have had so much less stress. I hope you find a good one!

[Frogge]

Berrymom...we all totally understand your last paragraph. Call your family doctor, advise him/her you are under severe financial problems and are experiencing tremendous anxiety with resulting depression. Anxiety can end up sending you to the ER thinking you are having a heart attack. I've been there and though I was going to have a nervous breakdown. This is a life event for you and your family. You feel like you are just out of or lost control of everything. Several months from now when this is all over you will look back and wonder why you were flipping out over all the details. Seriously, give your doctor a call or make an appointment very soon to get seen and with a mild anti-depressant or anti-anxiety medication, you will soon get things back in control and on track. Just remember all this too shall pass and believe it or not, it all will get resolved. Get good legal advice as to whether or not you should consider keeping your house.

First I wanted to say that as soon as I read this, Flamingo, I called my Dr. and I have an appointment to see her tomorrow to get some anxiety meds. I've been battling serious stomach problems for weeks and I thought I had a parasite or something (tests were negative) but I realize now it's probably a STRESS bug..

Anyway, about the job - I am probably going to cut my hours/pay within the next few months leading up to a early '09 filing so we are closer to the median. My boss is on board with all of it and it's perfectly explainable. It is a common strategy.

[CH33 Paralegal]

#1. you don't want any type of cost like dance tuition, sports, activities, hobbies, etc....the court will deem these "not necessary for an effective reorganization". Don't ever...ever ever ever ever ever try to tell the court that you need an entertainment budget in a 13. They're not trying to hear it whatsoever.

#2. Your last 6 months of income are what's being taken into account, so even if you quit, you're going to need to wait 6 months to have your income totally drop off the means test.

#3. I'm not sure if you're confirmed yet or not, but if not, you could still surrender the house pretty easily. The thing is that in a 7, your creditors have a right not to reaffirm the secured debts with you if they don't want to and also the trustee may want to sell some assets to generate money for the creditors that won't be getting anything from you.

#4. Do you really want to cut your income?

#5. Get a new attorney

[laurannm]

Is #1 really true? I'm pretty sure just about every Ch 13 plan I saw filed in our district include an entertainment budget (somewhere around $100/month, depending on family size)

[berrymom31]

Yes, they do allow an entertainment expense and the do allow sports fees and things like dance classes.....as long as it does not appear you are abusing this...my daughter does dance and that is monthly, but my boys each do one sport per year with one yearly cost...my atty told us this was perfectly acceptable and that the trustee did not expect you to stop living and to make your kids stop every activity. The point is to help you rebuild a budget, not to punish your kids with never having a movie out or having to quit their activities......We were told that with a family of five trustees don't even look twice at $200 for an entertainment budget.

[MajorMike]

You just said you were dead broke, stressed out, sick over it and you're worried about being able to provide entertainment? That is something that needs to be eliminated temporarily or maybe you can find another means to make up that money ....how old are they? Can they get a paper route to support their sports and entertainment? I know when I was a kid, I had 3 paper routes, my sister helped me and she babysat, mowed the lawn etc... and we paid for our baseball and ballet. Kids these days don't know what it is to do this as their parents pay for everything even when they are bankrupt...

[Flamingo]

#1. you don't want any type of cost like dance tuition, sports, activities, hobbies, etc....the court will deem these "not necessary for an effective reorganization". Don't ever...ever ever ever ever ever try to tell the court that you need an entertainment budget in a 13. They're not trying to hear it whatsoever.

#2. Your last 6 months of income are what's being taken into account, so even if you quit, you're going to need to wait 6 months to have your income totally drop off the means test.

#3. I'm not sure if you're confirmed yet or not, but if not, you could still surrender the house pretty easily. The thing is that in a 7, your creditors have a right not to reaffirm the secured debts with you if they don't want to and also the trustee may want to sell some assets to generate money for the creditors that won't be getting anything from you.

#4. Do you really want to cut your income?

#5. Get a new attorney

I don't know where you are coming from as to #1 above in your posting. Entertainment is listed as an option on all form sheets provided to prospective filers to fill in. Our attorney upped our small amount that we listed on ours and we had no issues as to that whatsoever as to the Trustee or plan approval. If a child has long term dance classes or has been doing football and sports for a while, all that is taken into consideration so the child does not have to stop those activities. Too tight a budget not allowing anyone to basically not leave the house will result in Plan failure and no trustee or attorney wants that.