I don"t want to do anything illegal...

[StrawberrySu]

Hi again StrawberrySu,

Yup, in a non-consumer you don't mess with the means-test at all, a whole bunch of reasons for the UST to dismiss your case don't apply, its tough for a non-consumer to get dismissed.

Not sure, but I think classifying the debt as business or personal depends on the original purpose of the debt. If you bought a home for a rental it is business, if you move in to it later I think the debt stays business. Be sure to check this out...not sure where I read it, just something rattling around the cranium...

Tom in Colo

Yes, that is my understanding as well, Tom. Here is what I am hanging my hat on: Before we rented out our former residence we did a VA refi, because it was the only way to refi, then rent the property out, otherwise you had to live in the property for a specified time period. We did the refi because our payment was $1550 and we couldn't get any decent renters (just had dicey types who wanted to pay in cash and had no verifiable income). So by refinancing, we lowered the payment and got a great renter. His rental application is dated 5/27/09, refinance is dated 6/8/09, his lease agreement is dated 6/11/09. We did not want to sign a lease until our refi was in place.

Anyhow, the point of this is that I read the test to determine whether a former home now rented would be a business debt is the "intent" of the mortgage. Since the current mortgage is the one from 6/8/09, and we can demonstrate we were seeking renters via the rent appy, and that we rented it immediately after closing our refi, it should qualify. Will ask when I visit with attorneys this week. It sure doesn't seem fair that the government requires (allows?) me to treat this property as a business for tax purposes, but then turns around and says I can't do it that way for BK.

Very relieved about your info re non-consumer. My only concern is I have heard wildly fluctuating amounts of DMI for this. Some people on here say their lawyer wanted no more than $200 a month, someone said they had $4000 a month and trustee didn't blink, I pulled up in a google search "Yes, you can be a millionaire and file BK7 non-consumer" ... it's all over the map!

[tcreegan]

Hi again StrawberrySu,

Yup, in a non-consumer you don't mess with the means-test at all, a whole bunch of reasons for the UST to dismiss your case don't apply, its tough for a non-consumer to get dismissed.

Not sure, but I think classifying the debt as business or personal depends on the original purpose of the debt. If you bought a home for a rental it is business, if you move in to it later I think the debt stays business. Be sure to check this out...not sure where I read it, just something rattling around the cranium...

Tom in Colo

[StrawberrySu]

thanks again Tom! The only other idea I can think of is if we bought a house now then waited until the Ohio properties were foreclosed on, possibly two years or more, (since it was mentioned earlier about NCs wage garnishment rules), then filed BK7 .... would the time factor legitimize it?

if we could file a non-consumer BK7, our means test wouldn't matter, right? I just think the concern with that is one rental property was our former home, and I have read that may preclude it from being classified as a business debt. If both rentals can be classified business, the business loss would be around $293k vs. personal of $145k.

[tcreegan]

Did you mean a good bk attorney could help us figure out how to do this, or did you mean a good bk atty could keep us from doing something really stupid? lol

Both!!

You need a BK attorney to find out if Hubbys military retirement qualifies as a "veterans benefit" under the BK code.

Another tidbit for you: if you move to NC and end up using federal exemptions, if you don't use the homestead (having no equity) you get to use a ~10K wildcard. Questions for attorney: is this doubled for a joint filing? Can this be used to exempt cash in a bank account?

And, but only with a good BK attorney, no fast-talking, fly-by-night, shady lawyers, BK preplanning (such as moving assets around) is not expressly illegal. With care and a good BK attorney at your back, some borderline issues can tilt in your favor.

Keep us posted StrawberrySu,

Tom in Colo

[StrawberrySu]

based on the means test, using our $3100 income, and the standard deductions it provides for my area, including our car loan of $235 a month we are at -$1030 for DMI.

[StrawberrySu]

keepmine, thanks for the link will check it out right away...sorry if I seem scattered, this is all causing such a major upheaval in our life I am getting almost no sleep and spend most waking hours in front of the computer researching.

about the wage garnishment in NC, I thought I had read somewhere that out of state debts could allow garnishment, just not debts incurred in NC. Maybe I have that all wrong.

[keepmine]

Your husband will not be the first person on this site who quit a job or turned down OT in order to pass the means test.
You need to understand that the means test is just step 1. You also must fill out schedules I and J to see if yo have enough monthly dispsoable income to fund a Chapter 13.Currently, anything over $182/month will likely land you in a 13.
Here's a good link to help with those calculations. You can be under the median income but still land in a 13 if you have too much MDI.

http://www.legalconsumer.com/bankruptcy/means-test/index.php

FWIW, NC is a pretty debtor friendly state. No wage garnishments except for child support or student loans.

[StrawberrySu]

Oh, another question. you said
"You are going to take a large, non-exempt cash asset and transfer it into an exempt asset. From the BK trustee point of view, that cash should have gone to pay your creditors first, and they will want to pull that money back for distribution to the creditors. You work w/ a good BK attorney to prevent this from happening."

Did you mean a good bk attorney could help us figure out how to do this, or did you mean a good bk atty could keep us from doing something really stupid? lol

[StrawberrySu]

Hi StrawberrySue,

but in any case, does the HE only apply to the state we file in (IE we have to have a home we are exempting in OH), or can our home be in the state we have moved to, but using OH's exemtion amounts? ...yes, no, sort of...

Ohio has a "domiciled" requirement on their exemptions. You can't use OH exemptions if you move out-of-state. But you can't use NC exemptions until you have been there 2 years. So, if you file after moving to NC but before 2 years, you would use the federal exemptions.

so can we use that total, like 43k, and buy a house in NC? Actually, we will probably only be able to accumulate around 30k

The homestead exemption is for equity in your primary residence, which if underwater, equity = zero. =zero to buy a new house

What you are saying is you will save up 30K or so and put it down on a new house in NC, then file, then exempt it. Here is where you really need a good BK attorney. You are going to take a large, non-exempt cash asset and transfer it into an exempt asset. From the BK trustee point of view, that cash should have gone to pay your creditors first, and they will want to pull that money back for distribution to the creditors. You work w/ a good BK attorney to prevent this from happening.

Good luck with everything, hopefully it all works out and you can enjoy the grandkids in NC !

Tom in Colo

Tom thanks for answering me! I have pretty much come to the same conclusion, that is would be gambling with exemptions, and I am not a gambler, as I said, I don't want to do anything wrong.

So, if we cannot take the cash and buy someplace, we can spend it on dental, health care, etc. But we will have 1600 from retirement, 2600 take home from hubby's job and rental income of 1500 from the two properties. Yikes! No way to legally get rid of it. Does it make sense to have husband quit his job and move to new state, our income would then be 3100 mo/ at least as long as renters paid. this puts us under the means test for bk7, and we could survive on that. We could file bk7 in September, then start to recover next year.

We have to get the bk going soon, don't want to wait a few years to file .. it will limit my husbands ability to earn a better income in our last few years before retirement. We have the two investment properties tied up in short sale, wish I hadn't done that now. Need to be able to file bk before feb 2012 in order to avoid 1099s, right, assuming ss go thru this year.

[tcreegan]

Hi StrawberrySue,

but in any case, does the HE only apply to the state we file in (IE we have to have a home we are exempting in OH), or can our home be in the state we have moved to, but using OH's exemtion amounts? ...yes, no, sort of...

Ohio has a "domiciled" requirement on their exemptions. You can't use OH exemptions if you move out-of-state. But you can't use NC exemptions until you have been there 2 years. So, if you file after moving to NC but before 2 years, you would use the federal exemptions.

so can we use that total, like 43k, and buy a house in NC? Actually, we will probably only be able to accumulate around 30k

The homestead exemption is for equity in your primary residence, which if underwater, equity = zero. =zero to buy a new house

What you are saying is you will save up 30K or so and put it down on a new house in NC, then file, then exempt it. Here is where you really need a good BK attorney. You are going to take a large, non-exempt cash asset and transfer it into an exempt asset. From the BK trustee point of view, that cash should have gone to pay your creditors first, and they will want to pull that money back for distribution to the creditors. You work w/ a good BK attorney to prevent this from happening.

Good luck with everything, hopefully it all works out and you can enjoy the grandkids in NC !

Tom in Colo

[StrawberrySu]

Our former home that is now a rental (and is in the short sale process) has a VA loan. I had read that if we moved, our BK filing was based on where we had lived the majority of the last 180 days, but I midssed the part about the 2 year requirement on homestead exemptions.

I just found out that Ohio's homestead exemption is $21,625 (per person), so can we use that total, like 43k, and buy a house in NC? Actually, we will probably only be able to accumulate around 30k, but in any case, does the HE only apply to the state we file in (IE we have to have a home we are exempting in OH), or can our home be in the state we have moved to, but using OH's exemtion amounts?

[StrawberrySu]

It's 8 years between filing dates-not discharge dates. You can file this fall.

thanks so much, I must have missed that as well, good to know!

[keepmine]

well here is the problem with that .... we filed for BK7 in fall 2003, it was completed in Jan. 2004, due to a failed business, so my understanding is we can't file again till Jan 2012. yeah, I know, one BK should be enough for anyone, didn't expect this economy to collapse.

It's 8 years between filing dates-not discharge dates. You can file this fall.

[StrawberrySu]

Thanks for everyone's advice! I guess I am looking to pre-plan the bankruptcy. take advantage of every avenue but also stay legal, and not do anything to land in hot water. We don't pass the means test (especially if we let go of our home), and it sounds like only one of the properties can be classified "business", since the second was our former home. Therefore I don't think we qualify for a non-consumer BK7.

If my husband quits his job and we move to NC and rent, and he takes a lower paying job so we can pass the means test, is this fraud? Can we take the several thousand we may have saved by then and pay 6 months on a rental? I expect our credit will be shot by this summer, and it may be necessary to pre-pay to get someone to rent to us. Everyone says to use the mortgage money you aren't paying to get a fresh start, but then don't you have to worry that the BK court will say "So you didn't make the house payment or pay the credit cards even tho you worked..where is that money?"

We feel like we are in a catch 22 situation. We want to move, and we are going to be unable to make payments on both rentals next month. Gotta stop paying the mortgages and credit cards to get short sales considered, but we still have decent income .... just not enough to pay all of it.

[StrawberrySu]

well here is the problem with that .... we filed for BK7 in fall 2003, it was completed in Jan. 2004, due to a failed business, so my understanding is we can't file again till Jan 2012. yeah, I know, one BK should be enough for anyone, didn't expect this economy to collapse.