Seeking Chapter 7 advice- New York

[apathetic]

Hello all. Quite the forum here, a lot of great information and reading regarding BK.

A bit of background. I am a 27 year old residing in NYC, married with a child on the way. Our income is about 90k (60k me, ~30k wife), well above the median for a family of 2 in New York of $57,000.

We are current on all of our bills, have never missed a payment, but in the red every month due to living expenditures. Every month we are in the red about 800 dollars. I have excellent credit and high credit limits, which facilitates this deficit each month. My debt to credit ratio is about 40% now, and we have a lot of accounts even with 0% interest. Most accounts are 9-11% if interest is accruing. The writing is on the wall though, that this cannot be sustained forever. We have no meaningful savings at all (3,000 dollars), and if something were to happen or one of us lose our job it would be big trouble.

Luckily, all of the unsecured credit card debts of about 37k are in my name, so I have already confirmed with an attorney that I can file for BK without involving her, which is great. We have 55k in student loan debt, and about 25k owed on a truck which we will be keeping as it is a joint account. Another car is a lease solely in my wifes names so it wont be involved.

Every lawyer I have spoken has a different story about us passing the means test. Either they are confident 100% (without actually running the numbers) that we will pass the means test. I can't see how being almost 32k over the median.. 2 lawyers also said they wouldn't even bother running the numbers and chapter 13 would be our only option..

My questions are general.

When can I claim 3 members of the household ($10,000 increase in the median), is it the month the baby is born? Can't get a clear answer on this.

Will my best option be to wait until my wife is out of the work for the 3 months maternity so we will be closer to the means test level and probably pass the test a lot easier? How is this viewed by the trustee since maternity is like disability and she will likely be returning to work after the 3 months(or does it matter to them?)

Lawyers here in NYC tend to not want to give out much concrete information unless you sign a retainer them. We are really on the fence about whether to go through with this at all in the end, since we are both college educated and just starting out. With that said though, it would be awesome to start on a fresh financial slate with the baby coming. This debt is slowly going up month after month.. and we would really be in a good position if we didn't have this debt to service.

Reading all of the candid stories on here makes me almost feel guilty about our what seem to be paltry debt amounts. But in the end, the cost of living in NYC is absolutely horrible, and although we do have a decent lifestyle, its nothing extravagent, and we are eeking by. 90k may sound like a lot, but in NYC this does not go a long way..

Sorry if this seems jumbled, as we are just beginning to explore this Chapter 7 stuff. Thanks for any suggestions.

[keepinitreal]

When can I claim 3 members of the household ($10,000 increase in the median), is it the month the baby is born? Can't get a clear answer on this.

Will my best option be to wait until my wife is out of the work for the 3 months maternity so we will be closer to the means test level and probably pass the test a lot easier? How is this viewed by the trustee since maternity is like disability and she will likely be returning to work after the 3 months(or does it matter to them?)

You can file bankruptcy claiming a family size of 3 the day after your child is born.

Will your wife be receiving money while she is on maternity leave? If so, it may not matter too much if you wait 3 months after your child's birth or not.

I would suggest you print off the means test and Schedules I and J that can be found on-line and fill them out yourselves. It may show that you would be better off cutting down your expenses $800 or more per month and not filing bankruptcy after all.

What ever you decide, good luck!

[apathetic]

Thanks for the response. We have already cut our expenses as low as they can go. For example, we have switched from Cable to FIOS saving $100.00 a month. We have cancelled our home phone saving $50.00. We eat out once a week for dinner (not talking 5 star restaurants either..) and cook nightly. We brown bag lunch.

It is kind of hard to find $800.00 a month in our budget in this retchid city. For example, our car insurance is $420.00 a month for our cars. Between renter's insurance, car insurance, and term life policies, we spend $530.00 a month just on insurance. Groceries are also astronomical. Trade offs of living in the city.. high priced everything.

My wife will receive the balance of her vacation/personal time (probably two weeks pay), then $160.00 a week in state disability for 6 weeks. This means no income from her for at least a month. That is going to be a rough patch, which is another reason for us even considering chapter 7.

I want to move but its not an option, as my family will provide child car for at least 2 years when our first is born. Child care would be $1,400-$1,600 a month if we didn't have that. Plus my wife likes being close to family.

Regarding my wife's income being out for 3 months, will the trustee disregard this temporary decrease as her income will return to her normal level after the 3 months elapse?

[drowning123]

Hi, Apathetic. I'm in NY, too. I totally understand the cost of living. I say take a chance on Chapter 7 even though you're over the median. Why? Your are so in the red with your expenses, so this is why I think you may have a chance. I was only $900 below the median for a family of 4, but I was waaaay in the red with my expenses by about $1800. Yes! The trustees aren't idiots. They know that even though the median is based on your gross salary, they still need to consider your net. Your combined $90,000 income is probably really $50,000 after payroll deductions. Did you really add up you and your wife's gross paychecks from the last 6 months, then divide by 6 and multiply by 2? If there's any overtime in the past 6 months, unfortunately, that will also be included. If the attorneys are trying to guide you into a 13, why not try to file pro se (without an attorney) on a 7? Worst case scenario is that the 7 gets converted to 13.

[apathetic]

Our net is around $55,000, ya. Medical insurance/taxes etc are killer.

To be honest, I don't think pro se would be worth the time and effort. I have found lawyers all willing to do a chapter 7 if I qualify for 1,500-2,000 all inclusive, which isn't too much.

Out of curiosity, what are the amount of debts you are discharging in your 7 Drowning123?

[drowning123]

Unsecured - 31,883.38

Secured - 184,775.58 (1st Mortgage)

Other stuff - 173,114.44 (not sure what this includes-HELOC/Car maybe)

Total - 389,773.40


And according to my income at the time of filing I make 81,200

[tcreegan]

Hi apathetic,

I hear you on staying close to family w/ the baby on the way, NYC is overpriced, taxes/insurance are killer,
.....but I don't think filing BK is going to help unless your unsecured debt payments are over $1200 a month.

You are already $800 in the red, baby on the way = $300+ additional monthly expenses, possibly higher in the city

Even after Mom gets back to work full-time, you are going to have to cut approx $1200 a month to break a little above even.

The student loans aren't going anywhere.

Time to rethink the truck.

I am afraid you will file BK and in a few years be right back in the same position you are in now, but with no BK option.

Like you said, what happens if one of you loses their job?

Don't use the BK in the first round, keep it as your 'ace in the hole'

Tom in Colo

[apathetic]

Hi apathetic,

I hear you on staying close to family w/ the baby on the way, NYC is overpriced, taxes/insurance are killer,
.....but I don't think filing BK is going to help unless your unsecured debt payments are over $1200 a month.

You are already $800 in the red, baby on the way = $300+ additional monthly expenses, possibly higher in the city

Even after Mom gets back to work full-time, you are going to have to cut approx $1200 a month to break a little above even.

The student loans aren't going anywhere.

Time to rethink the truck.

I am afraid you will file BK and in a few years be right back in the same position you are in now, but with no BK option.

Like you said, what happens if one of you loses their job?

Don't use the BK in the first round, keep it as your 'ace in the hole'

Tom in Colo

Thanks Tom, this is good advice. I'm on the fence about the whole thing.