[Single Filers] How is it that you can exempt ~$12k cash in the bank but still declare bankruptcy?

[bbeagle]

The lawyer can't tell you to just fill in the blanks with the IRS values. You sign on the penalty of perjury that you actually spend those amounts. That is why none of us got a cheat sheet with the IRS amounts. Besides, you need to back every line in the budget with receipts so referring to the IRS values isn't that helpful. Incurring the expense with receipts is helpful. That's also why the lawyer doesn't want to tell you to finance a new car pre-petition because you could actually be low DMI and make your plan infeasible unless you give up your new wheels. Malpractice is bad and so is telling your clients to lie.

The way you do it as a lawyer is to tell your client to do the most detailed budget in his life and use bank statements and receipts to account for every single expense. That will reveal issues that the lawyer can address like pet expenses which are not listed anywhere. That's why you won't have a lawyer suggest you to buy a goldfish or a cat to suck up more DMI. That would not be ethical of course. But ask the same question here, I'd get a dog rather than pay Citibank.

Well, I guess reading these forums helped me.

I maxed my credit cards and couldn't pay one off with another (i.e. balance transfers for one), so I just couldn't pay my bills anymore - not enough money. Then I financed a new car. Then I stopped paying the credit cards. Then I lived reasonably for 3 months (within the IRS charts) before I talked to my lawyer for the first time. So, my expenses were correct when I filed.

If I didn't do this, I guess I would be stuck in a Chapter 13 I couldn't afford?

[flashoflight]

I think there might be a lot of bad lawyers. Because I looked into it all before I filed, and found that there are IRS tables for all expenditures. Maybe some lawyers aren't using those? It makes no sense that some people don't have enough money for basic expenditures and others do.

(My plan would have been around $1800 a month if my house and taxes were paid by the lawyer - but they let me pay for those myself).

Every BK lawyer knows about the IRS tables.

The lawyer can't tell you to just fill in the blanks with the IRS values. You sign on the penalty of perjury that you actually spend those amounts. That is why none of us got a cheat sheet with the IRS amounts. Besides, you need to back every line in the budget with receipts so referring to the IRS values isn't that helpful. Incurring the expense with receipts is helpful. That's also why the lawyer doesn't want to tell you to finance a new car pre-petition because you could actually be low DMI and make your plan infeasible unless you give up your new wheels. Malpractice is bad and so is telling your clients to lie.

The way you do it as a lawyer is to tell your client to do the most detailed budget in his life and use bank statements and receipts to account for every single expense. That will reveal issues that the lawyer can address like pet expenses which are not listed anywhere. That's why you won't have a lawyer suggest you to buy a goldfish or a cat to suck up more DMI. That would not be ethical of course. But ask the same question here, I'd get a dog rather than pay Citibank.

[shipo]

While I can sympathize on the college funding thing, I rather doubt there is much you can do about that. The whole cost of living thing is, from my amateur perspective, absurd.

[Vball]

Maybe I'm missing something, but if I recall correctly, just because one has an expensive rent/mortgage well beyond the "allowance", that does not preclude them from being able to justify the higher amount.

That may be so, but my trustee wouldn't budge. When my payment was set at $1050/mo, I had to borrow $300 from my mom just to pay for my tags. I literally didn't have ANY extra money.

On a side note, I think it's ironic that they won't let us use any money we pay towards tuition as an allowance, yet we don't get any more consideration for a Pell Grant (which we make too much for). So on one hand the government is saying I can't use my funds to pay for college, and oh we aren't going to help you either.

[shipo]

You must live in a state with different allowances. Where I live only $700 is allowed for rent/mortgage. Our rent is $1350 and where we rent is way below market value, simply because we have been there for so long.

Maybe I'm missing something, but if I recall correctly, just because one has an expensive rent/mortgage well beyond the "allowance", that does not preclude them from being able to justify the higher amount.

[Vball]

Chapter 13 was a godsend for us. We couldn't afford anything before we filed. Inspections, tires, clothing. Lived without TV, cuddled up in the cold as we couldn't afford heating our house above 60. Could only afford like $100 for groceries a week for a family of 4. Our credit card bills were $2000 a month on a $4000 a month income.

Once we filed, all our credit card bills were gone, and we paid less than $300 a month for the chapter 13 bankruptcy. We had an extra $1700 to buy stuff we needed. It was like winning the lottery in the sense that we became normal people. We could buy new underwear, have internet, have TV, go to a theme park in the summer once in a while. We could go out to movies occasionally. We could heat our house and buy A/Cs in the summer.

Given my situation, I don't get how some people are suffering barely able to get by. Our lawyers took into account how much it cost to pay for our housing, taxes and cars (which we paid outside of the bankruptcy payment), clothing, gas, baby diapers, groceries, sanitary, internet, tv, electricity, heating, cooling, maintenance, etc. We were living on way below what the minimum standard of living was for a family of 4 in our state, and that was all taken into account.

You must live in a state with different allowances. Where I live only $700 is allowed for rent/mortgage. Our rent is $1350 and where we rent is way below market value, simply because we have been there for so long. So there's $650 off that bat that we have to pay yet can't get a proper allowance for. (Our state is very low income, however, we live in a high cost of living part of that state). We also have a daughter in college that we have to pay about $5,000 a year for tuition - but tuition is not "allowed" for anyone over 17. That's just crazy! I get that you shouldn't be able to afford to pay your kid's way through Harvard Law while bankrupt, but a reasonable amount like $5k/year should be fine.

Our lawyer set our payment at $1050 - which hurt a lot - and the trustee kept denying it, wanting over $1,500/mo. We converted to a chapter 7 after 6 months.

[shipo]

If there's one thing I've learned from this site, there are BK lawyers, and then there are BK lawyers who know how to help their clients. I was fortunate in that, even though I didn't know what I didn't know regarding Chapter 13, I interviewed a few lawyers and chose the one who seemed most interested in me and my issues. She got my monthly down to a manageable point where I only had one "drama" moment in the entire five years. Even then, the issue was relatively trivial, I was driving down to New Jersey when the alternator in my car croaked. I stopped at the closest Honda dealer, who just happened to have a brand new alternator in stock and had time to get my car in the shop, and of course they had time to charge me over $700 for the freakin' alternator. Gulp! Fortunately I was able to use my online banking app to move some money from my "rainy day fund" into my checking account and then use my debit card to pay for the repair.

[justbroke]

I think there might be a lot of bad lawyers. Because I looked into it all before I filed, and found that there are IRS tables for all expenditures. Maybe some lawyers aren't using those? It makes no sense that some people don't have enough money for basic expenditures and others do.

The bankruptcy attorneys 100% use these. In fact, nearly every single bankruptcy attorney and the Trustees use either a program called Best Case Bankruptcy or Bankrupter. Those programs import the latest "United States Trustee Program" (USTP) allowances. The allowances are based on the IRS Financial Collection Standards (FCS). In general they are the same, but the USTP breaks out the mortgage/rent from the "non-mortgage"/"non-rent" expenditures. Otherwise they're the same.

Now, where some bankruptcy attorneys may not be as "seasoned" or as creative is in cases where there is little to no disposable monthly income (DMI). In those cases, where the secured debt has no missed payments and has no arrears, the attorney should motion to pay them outside the plan. That will save the 10% premium that it costs to have the Trustee pay this. Over the course of a 60-month plan (or even a 36-month plan), that can add up when you otherwise don't have any DMI. Having no DMI means that this comes out of the debtor(s) pocket and not from any surplus.

The other problem is that people, even in a Chapter 13, are trying to keep things that they really can't afford. While Chapter 13 can be a blessing, having outrageous costs and little to no DMI means that the debtor is already on the verge of having just one major expense topple the entire Chapter 13.

Additionally, there are some things that are pure strategy and only a very seasoned attorney will know this. For example, I kept 2 cars (one for the family) because I got to claim the operating allowance and the ownership allowance. This created room in the budget for any vehicle event, and also helped with other major events (e.g. my sewer line needing to be dug up -- it was under concrete -- and replaced).

Each Chapter 13 case and plan is unique. That's why there are differences. A Chapter 13 plan is part experience and part black magic. It's also convincing the Trustee that the expenses are in line with your income, area you live, commuting, work, family matters (children, daycare, other expense), and your general "non-luxurious" lifestyle. The latter is one area where the Trustees are not forgiving.

Here's a perfect example of dealing with the Chapter 13 Trustee. I travel for work. The Trustee wanted me to back out my personal meals and transportation expense from my means test (or count it as additional income). I countered that I'd remove that but I'm going to claim the 5% exception. So we both won and it was nearly even. She got to get me to back out my meals, and I got to still claim the 5% exception. But that took "knowing" the system and I became very good with caselaw and dealing with the special exceptions. Not every attorney is going to know this and will likely tell the debtor to just comply (e.g. back out the meals).

At least, that has been my personal experience combined with the thousands of members here on BKForum.

[bbeagle]

bbeagle - I'm happy to read that your plan has worked out well for you. I think, as with everything, everyone's situation is different - how much they pay into the plan, exmptions, expenses, etc. A lot of people pay a lot more than $300/month. Budgeting is the key to success but some people's budgets are a lot tighter than others.

I think there might be a lot of bad lawyers. Because I looked into it all before I filed, and found that there are IRS tables for all expenditures. Maybe some lawyers aren't using those? It makes no sense that some people don't have enough money for basic expenditures and others do.

(My plan would have been around $1800 a month if my house and taxes were paid by the lawyer - but they let me pay for those myself).

[sophieanne]

bbeagle - I'm happy to read that your plan has worked out well for you. I think, as with everything, everyone's situation is different - how much they pay into the plan, exmptions, expenses, etc. A lot of people pay a lot more than $300/month. Budgeting is the key to success but some people's budgets are a lot tighter than others.

[bbeagle]

It sure feels like it! I'm in a chapter 13 with no savings, and we pay out ALL our disposable income. I have no idea how we will pay for our car tags next month. And it's not like over the next 5 years that we won't have extra expenses, at my last oil change I was told I need two more tires - well, I can't! We are a month behind on electric and internet (needed for my job).

I feel like C13 was designed for people to fail, I just don't see how we will be able to do it when we have no room for emergencies. And I just love (sarcasm) how the plan doesn't allow us to help with college expenses for our 17 year old daughter, yet the FAFSA figures that we can pay a ton of money.

Sorry to vent, but we are only a couple months in and feeling like we'll never make it

Chapter 13 was a godsend for us. We couldn't afford anything before we filed. Inspections, tires, clothing. Lived without TV, cuddled up in the cold as we couldn't afford heating our house above 60. Could only afford like $100 for groceries a week for a family of 4. Our credit card bills were $2000 a month on a $4000 a month income.

Once we filed, all our credit card bills were gone, and we paid less than $300 a month for the chapter 13 bankruptcy. We had an extra $1700 to buy stuff we needed. It was like winning the lottery in the sense that we became normal people. We could buy new underwear, have internet, have TV, go to a theme park in the summer once in a while. We could go out to movies occasionally. We could heat our house and buy A/Cs in the summer.

Given my situation, I don't get how some people are suffering barely able to get by. Our lawyers took into account how much it cost to pay for our housing, taxes and cars (which we paid outside of the bankruptcy payment), clothing, gas, baby diapers, groceries, sanitary, internet, tv, electricity, heating, cooling, maintenance, etc. We were living on way below what the minimum standard of living was for a family of 4 in our state, and that was all taken into account.

[sarra1833]

Vball sounds like you need to convert to ch7 asap. Ch 13 is for people with good jobs apparently. Ch 7 will save your butts. Id change to ch 7 asap.

[Vball]

You aren't expected to become destitute to file BK.

It sure feels like it! I'm in a chapter 13 with no savings, and we pay out ALL our disposable income. I have no idea how we will pay for our car tags next month. And it's not like over the next 5 years that we won't have extra expenses, at my last oil change I was told I need two more tires - well, I can't! We are a month behind on electric and internet (needed for my job).

I feel like C13 was designed for people to fail, I just don't see how we will be able to do it when we have no room for emergencies. And I just love (sarcasm) how the plan doesn't allow us to help with college expenses for our 17 year old daughter, yet the FAFSA figures that we can pay a ton of money.

Sorry to vent, but we are only a couple months in and feeling like we'll never make it

[rjmwx81]

I don't think many states have an exemption for that much cash. People protecting that much cash are likely renters who don't own a home, and can thus use their homestead exemption (up to a certain amount) to protect other assets.

[bcohen]

When I filed in Arizona, the exemptions at the time allowed only a paltry $300 in cash or cash equivalent for a single person, or $600 for a married couple. This was in 2013, although the exemptions have now increased somewhat. I believe I had about $800 to $1000, but fortunately, the trustee did not bother going after the additional money.