Another newbie question...paying bills before filing

[Rona123]

Hello all,

I'm just now starting to think seriously about filing for Chapter 7, but the first of what will likely be many questions is about paying my bills before I would file.

To date, I am still able to barely make the minimum payments on my debts, but have large student loans that are currently deferred, so once those kick in, I'll be in huge trouble. My question is, does the fact that I am currently up to date on all my bills make a difference in my ability to file? I don't have creditors hounding me yet, but would like to file before it reaches that point.

Thanks everyone!
Ron

[derf]

Hello all,

I'm just now starting to think seriously about filing for Chapter 7, but the first of what will likely be many questions is about paying my bills before I would file.

To date, I am still able to barely make the minimum payments on my debts, but have large student loans that are currently deferred, so once those kick in, I'll be in huge trouble. My question is, does the fact that I am currently up to date on all my bills make a difference in my ability to file? I don't have creditors hounding me yet, but would like to file before it reaches that point.

Thanks everyone!
Ron

No. Even if you are current on your minumum payments, you are still eligible to file.

I filed for Chapt. 7 with all bills current, and a credit score of nearly 700.


You really need to look into your own situation to determine if filing is the appropriate thing to do.

Since BK does not include School Loans, that may be all the answer you need.

However, if you are simply concerned that your school payments will create a significant additional hardship (I.E. -financial difficulty ) when added to your current bills, then BK would likely be more of a viable option.

Keep in mind though, when your first school payments become due. Is that time far enough down the road yet where you could have a better job or another significant source of income (inheritance, property sale. etc.) that would allow you to pay your bills on time each month?

If that's the case, you may want to exercise a little patience first, or possible seek a debt consolidation service instead of BK.

Bottom line:

Examine your financial situation presently, and in the future as soon as the shcool bill kicks in.

If your expenses exceede your income, then it's a good time to consider cutting back on non-essentials, and for filing BK.

Most importantly, make an appointment to speak with a BK Attourney. Typically they offer a no cost, no obligation, initial consultation; that can better help you decide if you should file.

Good Luck!

[Rona123]

Re: question...paying bills before filing.

Thanks a ton for the response and advice...

Unfortunately, I'll need to start repaying on my loans (60k worth) after the new year. I got a hardship deferrment after getting laid off in January, and didn't find another job until last month. At this moment, my income just barely covers my expenses, but once I have to start repaying on my loans, I'll be in a deep hole.

Long story short, I'm really running out of any options other than BK. Not to boo-hoo my situation, just to describe it: Bottom line summary is that I've got an income of 55k, and debts, including car (trying to sell, but I'm upside down and can't afford to pay off the note if it DID sell) and student loans, of 110k - pretty ugly business. I have no prospects for an increase in income for several years, no chance of windfall, no real assets to liquidate, and my credit is rather poor (score of 600) as a result damage done by my ex-wife post-divorce. All those factors have made it impossible to get any sort of loan, even with co-signers. I'm living pretty close to bare bones as it is, so I don't see any other way out. The way I figure it, my credit is going to be sour for years to come either way, but it can be sour with all this debt and nothing in the bank, or sour with half the debt and some light at the end of the tunnel.

I just had the impression that because I was diligent enough to have been able to keep up with my payments, that my only real option was to suffer for the next 7-8 years until they are paid off.

Thanks again!
Ron

[Minnymouth]

No one wants to claim bankruptcy, sometimes it is a necessity to survive.
If filing bankruptcy will solve a major problem for you and help wipe the slate free of excess debt (not including the school debt), then it may be the thing you need to do.

After bankruptcy, within a short time you can obtain credit cards, and within a year to 2 years you can even buy a home again with a downpayment.

Your interest rates may be a little high at first, but gradually you can refinance and get them back down to normal within 2-3 years, sometimes less.

Do a balance sheet without your school payment and then one with it.....see where you stand. If each month is going to be "touch and go" - "rob Peter to pay Paul" - then bankruptcy may be your best option.

Feel free to chat with us, ask questions, vent, maybe we can help and support you.

Many of us have been there, and done it......many are still going thru it.

Minny

[Rona123]

Re: newbie question...paying bills before filing

Thanks again for all the great information.

So when I do my balance sheet, how do I calculate my income? Is it gross or net? I've seen all sorts of conflicting information here on how the income you need to qualify is calculated. Is it just a snapshot of the income you have the day you file or is it based on previous tax returns? I also read that it's the annual extrapolation of the average of your previous six months of income. The reason I ask is that on the calculators I've used, based on my current gross monthly income, I may not qualify for BK7, but they seem to look at gross, not net, which seems silly. In addition, if they use a 6 month average, I would qualify because I was unemployed for a large portion of that time. Is there a calculator out there I can TRUST to give me an idea of where I stand with income and expenses? Hope my question makes sense!

Thanks!

[AAAArt]

The new law uses an "averaging" method. When we filed, we filed with my wife's net income (no 401K's or anything) and since ny income has no tax withheld (Medical disability from my employer) I had to file gross and then list taxes under expenses.
One more point. When you become sure that you are going to file, you can stop making payts. on unsecured debt (cc's mainly). They will call until you file, then you get an automatic stay. They will keep calliing, just tell them that you filed Bk. and they will take the info and stop calling. If they don't...post back and we'll point you to where to look for help.
You can no longer "cram down" the car to real value, bbut you can surrender it and look at getting another, more affordable one through 722redemption.
ood luck, Art

[Lightning]

If you're living alone and have no dependents, it's highly unlikely that you'll qualify for a Chapter 7 making $55,000 a year.

[Rona123]

Thanks Art, yeah I would surrender the car, as I'm about 3k upside down AND it needs 1k in repairs. I do have another beater that is worth maybe $1500, so I'm sure I'd be stuck with that.

Lightning, can you elaborate on why I would be unable to file just based on 55k and no dependents? Is it because my expenses wouldn't be high enough before taking into consideration my cc debt?

[bkfiler]

it all depends on your states/countys median income. 55 is even higher then californias. i hope you live in new york.

[Rona123]

That's why I was asking EXACTLY what constituted median income. I've seen so many different ways to calculate it, gross, net, 6 month average, etc...

[Lightning]

The current bankruptcy law has a means test. The first question is how much you make. If it's more than the median for your state, you'll almost surely have to file a Chapter 13. No state has a median income of $55,000 a year for one person.

Also, some of your expenses are also set according to IRS standards. You're limited in categories such as housing, food, and transportation.

[RickD]

Median Income and Allowed Expenses

Try this site out

http://www.bcande.com/servlet/Means22

[mlc]

This site may help you: http://www.moranlaw.net/means_test.htm

[FoolAndHisMoney]

If you're living alone and have no dependents, it's highly unlikely that you'll qualify for a Chapter 7 making $55,000 a year.

Not true if it's a place where taxes and rents are high, student loan payments are high, health insurance costs are high, utilities are high and the person has no dependents (no tax exemptions), no mortgage (no tax deductions). Keep in mind Lightning our tax code discriminates against single people that don't own homes or have kids. While it's true they don't have as many expenses as a married couple with kids they also pay a lot in taxes and pay ALL of their living expenses that aren't shared. In my neck of the woods 55k can't even buy 45k.


Rona123, the means test will best determine if you will qualify as you probably will. Good luck.

[FoolAndHisMoney]

The current bankruptcy law has a means test. The first question is how much you make. If it's more than the median for your state, you'll almost surely have to file a Chapter 13. No state has a median income of $55,000 a year for one person.

Also, some of your expenses are also set according to IRS standards. You're limited in categories such as housing, food, and transportation.

If you're at or under your states median income then a chapter 7 is usually automatic. If your expenses are within IRS standards and you have $100 a month or less then a chapter 7 is a done deal. If you have $101->$166 available per month times 60 and it's less then 25% of your total unsecured debt, then a chapter 7 can be done. If you have $167 or more left after IRS based expenses then you will be in a chapter 13.

Do the test and let us know...

http://www.uscourts.gov/rules/Revised_Rules_and_Forms/BK_Form_B22A101105.pdf