Need to find some more expenses

[Klesko]

You may want a lawyer if you are close/over the median and you are close to the expenses and passing the median.

Time is dependent on your case. How many assets (property), how many things to exempt, how much money you have in banks (including 401(k), investment). If you're a no-asset case and a family of two (2), you could possibly file after several weeks of research and then completing the 50-75 page packet known as the Petition. Yes, it's really that thick, and thicker the more creditors and assets you have.

I'm worried because you haven't mentioned how much debt you seek to "discharge" in this Chapter 7. If your unsecured creditors are over $100K, you probably should be seeing a lawyer. The US Trustee will certainly look at everything when you get to (and/or surpass) that number! If your family size is really two (2 including yourself and wife), then you are right on that median income line. You may be scrutinized more.

I had planned on using a lawyer. I did a free consult with one a month ago and that set me off onto this plan of filing in Sept.

We have no secure property now, we moved from a house and let it FC into an apartment in march. We will be discharging about 180k in debt. It is a 3 person family, me, wife and 1 year old. The median income for my area with 3 people is about 57.5k or 28.75k in a 6 month time frame. When Sept comes we will be slightly over the median income by about 2.5k for that 6 months.

I could slightly reduce my hours and maybe squeak under the median income but I am afraid we may run out of money doing so and I have to come up with the 1800 t0 file BK with a lawyer also. If my case will trigger lots of flags because of the amount we are discharging and we are over the median income and if we were under the median income it would be smooth sailing then I can do whatever it takes to get under the median income.

[DeadManCrawling]

Also,

There are multitudes of expenses that you incur as a consultant. I am one, so I know some of them pretty well.

These are truly legitimate costs that you may have neglected because of your financial situation. And it is time to get caught up on them. They will help you in the future with business and will help you now with your goal of getting into a 7.

Marketing is always essential. You probably advertise in some fashion, whether it be newspaper, television, internet, or even through things like business cards and coffee cups or seminars and conventions. Go through all your marketing from the past and kickstart it back into shape.

Further education is a good bet. If you are in a technical field, get some more certs or beef up your software and tools. If it is a legitimate business expense that you can take care of now, it will be done and over. Use no credit, of course!

Make sure any purchases are either unique to your business and thus of no value (letterhead, etc) or that they fit into other exemptions so you don't risk losing them anyway (new tools).

Think froma future perspective on things that have been set aside to take care of creditors. Look over old checkbooks and previous projects for clues as to some things that can safely be resurrected to help your expenses.

Don't forget to count ongoing dues and memberships, insurance payments, things that only are paid once per year but that should be budgeted for monthly. This can be anything from union dues to car insurance and so on.

If oyu have a 401 k and have stopped making payments, you can restart that, within some limits, as long as you had a previous history of contributions.

Back taxes? Get em caught up. You may even be able to pay ahead, if you are anticipating quarterly payments.

As a consultant, you will have a more complex case than some. You really REALLY should talk to an attorney or you risk making serious mistakes. Even if its the free meeting with a couple attorneys, you will have the chance to get answers before filing pro se.

If you come away convinced you know the bk laws well enough to file pro se, that's an added level of confimation and confidence. If not, you know what to do.

Best wishes,

DMC

[LuciluS]

Personally, I wouldn't file Bankruptcy without at Attorney and I'm a Disabled Accountant. The paperwork & knowing the Laws is just too much for me. Plus if you are one who gets let's just say - the random audit which is supposed to be 1 in every 250 - will you be prepared to go to Wat with the UST?

Now with that said, there are Attornies in every town who offer Free Consultations. If I were in your shoes, I would set up at least 2 - 4 (depending on if you have time as to how many) consultations and take all your Documentation with you along with a List of Questions. You will be surprised and you might even get two different answers to the same question LOL!

That happened to DH and I. That's when DH found this forum. I've used the heck out of the 'Search' button here and have asked several questions. Just this week, I was using Google and found out where there is a Case in the 8th District Court (my district) who ruled that monthly withdrawals from your IRA account are Not considered in the Means Test as Income.

Point in case here. What may be an allowable expense in one's BK maynot be in another persons BK. Case in point - I posted about a Parent Loan monthly expense asking if it was an allowable expense. Hmmm, some posted they filed and used the expense and it was allowed...others, including a Moderator said it wasn't.

There are just so Many Different Scenarios in Bankruptcy as the Law is NOT 'cut and dried'. It's been suggested by other's to sign up for Pacer and look at other cases in your district. Be Careful with Pacer as researching is .08a page in most cases.

Good Luck

Luci

PS Got to your State's Bankruptcy website. Most have downloadable forms for 'Pro Se' filers.

[Klesko]

Is that with adding some of things that I mentioned in my reply?

No, the form says to use the default amount for my area. Anything you claim over that amount must be proved, the default amount is allowed even if you dont actually spend that.

The default utilities, health care cost were about what we spend per month anyway. The only things I added in addition was health insurance, life insurance, and a few other things.

[justbroke]

(As an aside, I understand consulting, as that's what I do (just back from a client in Michigan)! I understand precisely what DeadManCrawling is writing about.)

While there are legitimate (business) expenses, the mere fact that you consulted a Bankruptcy lawyer... now means that you know you're insolvent. Everything you do from this point forward can't even have a shadow of doubt as to whether you are attempting to defraud the system or work the system. As DeadManCrawling also suggested, you need legal counsel, probably, solely due to your business organization. If you're operating as a sole-proprietor (1099), you will have more things (documentation) to provide the Trustee/UST.

Having wrote all that, I want to go back to the median income issues. If you are discharging > $100K in unsecured debt, it will not matter if you're over or under the median. The U.S. Trustee him/herself will be looking at your case. It's just a policy that triggers this review.

I'm just letting you know up front, that even with your income (over/under/on) you will more than likely receive the full review of the U.S. Trustee. There is nothing you can do in your expenses to make that go away.

For those reasons, I really do encourage you to seek counsel, and to be able to back up all your expenses with receipts, tax returns, and patterns documenting the same.

[Klesko]

I am employed with a consulting agency. I get my checks from them, they take out taxes etc so I do not get 1099 forms.

So no matter what I do, it sounds like I will see the UST in my case because of the amount we are discharging. Now, would it be better if I were under the median income? Would it make things alot easier and smooth? Or will it not matter at this point.

[DeadManCrawling]

Being under median helps, for sure, but you can be over median and be fine in Ch 7 if the expenses justify it.

You can also be below median and not have enough expenses, so you can end up in 13.

If you have any control over the matter, being under median is probably beneficial.

Are any of your hours considered overtime? Different districts view overtime differently, so it may be worth looking into if you have anything that could be considered overtime.

In some areas it is not counted for purposes of means-testing and is regarded as an uncertain picture of income moving forward. Not so in other places, but it may help you, if needed.

You may also consider lowering deductibles on insurance for different things. The reality is post-bk, you don't want high deductibles anyway, so your costs will increase in premiums (expenses now) which may help you get a 7. Of course, on the other end of bk, you can put em back if it makes sense to do so.

If your expenses and income are pretty much cut and dried, there's not much to be done except working less, finding ways to increase the expenses, or just going for it with fingers crossed.

[Klesko]

Being under median helps, for sure, but you can be over median and be fine in Ch 7 if the expenses justify it.

You can also be below median and not have enough expenses, so you can end up in 13.

If you have any control over the matter, being under median is probably beneficial.

I do have control over my hours. I can work less hours so I can reduce my income. Of course I have to be careful so we can actually afford to live.

Are any of your hours considered overtime? Different districts view overtime differently, so it may be worth looking into if you have anything that could be considered overtime.

In some areas it is not counted for purposes of means-testing and is regarded as an uncertain picture of income moving forward. Not so in other places, but it may help you, if needed.

None of my hours are counted as overtime. Right now I am not working more then 25-30 hours a week anyway.

You may also consider lowering deductibles on insurance for different things. The reality is post-bk, you don't want high deductibles anyway, so your costs will increase in premiums (expenses now) which may help you get a 7. Of course, on the other end of bk, you can put em back if it makes sense to do so.

Right now my health insurance is $420 a month with a 2500 deductible. I cant change it until July but I was thinking about lowering the deductible which would end up costing me about $570 a month. But I didnt want to raise any flags by changing this so close to BK.

If your expenses and income are pretty much cut and dried, there's not much to be done except working less, finding ways to increase the expenses, or just going for it with fingers crossed.

Like everyone I just want to make sure I fall into BK7 and everything is smooth and quick so we can move onto rebuilding.

[justbroke]

I am employed with a consulting agency. I get my checks from them, they take out taxes etc so I do not get 1099 forms.

Excellent, so you're a W-2 consultant... perfect.

So no matter what I do, it sounds like I will see the UST in my case because of the amount we are discharging. Now, would it be better if I were under the median income? Would it make things alot easier and smooth? Or will it not matter at this point.

Yes. I haven't read a single case where a debtor was attempting to discharge > $100K without the U.S. Trustee taking a peek.

Being under the median income level will not make it go any smoother

Look at it from their perspective. You are getting the freshest of fresh starts when shedding, in less than 4 months, over $100K in debt. The Trustee protects the creditor (and his/her own wallet) first. That's their job. They can't scrutinize every single case, but there are certain ones that just say "hey look at me". Amongst those cases, the $100K+ discharge cases have almost consistently been the ones the Trustee likes to poke at. You will get more questions about the "how" you got into debt than a person shedding, say, $30K in debt.

This is a message of being prepared, not a message of "don't file".

[Klesko]

I think our story is simple and alot like others.

Lets see, good jobs made good money. Got married, bought a house with a bad loan, went overboard on fixing it up using credit cards, putting everything on plastic not thinking about how hard they would be to pay off, thought we could refinance the house, then the finance market died, then had a kid, started being negative income vs expenses, started using cards to pay cards, credit rating crashed, started falling behind.

Then right after Christmas we talked knew we were in trouble so we decided to take drastic actions. We let the house FC, stop paying on our cards, let a auto get repoed, moved to an apartment. We reduced our expenses from about 12k a month to about 4.5k now.

Thought we could make deals with the CC companies and settle but came to the realization that with about 120k in recent CC debt (all mainly from Aug 2007 to May 2008) it just wasn't possible so that's when we started thinking about BK.

[jessegirl]

Yup justbroke is right - Thats why the UST got involved within the 1st 2 weeks after we filed. My attorney says when you are over 100K in cc debt the UST always gets involved. They want nothing more then to push you into a 13 so that the creditors get something.

So make sure that you are on the up an up. Cause they will look at all your expenses and will require proof of those expenses. They also will request atleast 2 years of bank statements as well as i whole bunch of other paperwork. Ours was well over 4000 sheets of paper. We had to delliver to his office cause it was so much. They scanned everything and gave it back to us because it ws taking to much room....

I would tell you to defiantely get an attorney You wouldn't want to go thru all of this without one Although, I have nothing against filing pro se, but with that much debt you know the UST will be looking..

Now, talking about the UST - I have to say that ours was really super nice and very sympatheic towards us. He knew we were not hiding anything and answered every question honestly. In th end he shook our hands and said thanks for answering all of our questions honestly. See they already know the answer to the questions that they ask you.

[justbroke]

See they already know the answer to the questions that they ask you.

Made me chuckle! No good (opposing) attorney asks a question, he doesn't already know the answer to. They ask the question, to see if your answer is inconsistent with what they "know".

[Klesko]

So what would the UST be looking for? Fraud? Hidden assets?

Just wondering because like I said our finances were a mess the past two years.

[justbroke]

So what would the UST be looking for? Fraud? Hidden assets?

I think most people forget what the job of the U.S. Trustee is. They are there to find exactly what you just asked about. That's their job. However, of the thousands and thousands of cases each year... compounded with millions of documents... they can't just look at everything because it would drag the system down to a crawl (slower than the criminal justice system). Plus, Congress wanted this process to be streamlined and "fast".

So, you take that duty, as Trustee, and then you ask yourself, how can I be more effective? Well, you look for red flags. Based on statistics, you find certain things that have consistently shown that debtors aren't being truthful in their schedules, or that they are misusing the Bankruptcy Code. No different than you taking a certain IRS deduction that you believe you can, but the IRS later catching you and calling you out on it. The IRS has patterns (red flags) too, which helps them monitor and police the system.

Does this catch everyone? No.

Do most people lie and abuse the system? Absolutely no!

The $100K unsecured debt flag is one of those red flags. It tells the U.S. Trustee that this is a significant case and that closer scrutiny is warranted.

(Some Trustees actually post what their red flags are!)

[Klesko]

I think most people forget what the job of the U.S. Trustee is. They are there to find exactly what you just asked about. That's their job. However, of the thousands and thousands of cases each year... compounded with millions of documents... they can't just look at everything because it would drag the system down to a crawl (slower than the criminal justice system). Plus, Congress wanted this process to be streamlined and "fast".

So, you take that duty, as Trustee, and then you ask yourself, how can I be more effective? Well, you look for red flags. Based on statistics, you find certain things that have consistently shown that debtors aren't being truthful in their schedules, or that they are misusing the Bankruptcy Code. No different than you taking a certain IRS deduction that you believe you can, but the IRS later catching you and calling you out on it. The IRS has patterns (red flags) too, which helps them monitor and police the system.

Does this catch everyone? No.

Do most people lie and abuse the system? Absolutely no!

The $100K unsecured debt flag is one of those red flags. It tells the U.S. Trustee that this is a significant case and that closer scrutiny is warranted.

(Some Trustees actually post what their red flags are!)

Gotcha, well I have nothing to hide and none of it was due to fraud just being stupid mainly.