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Saw a BK Lawyer, only wants me to have $50 left over

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    Saw a BK Lawyer, only wants me to have $50 left over

    I am hoping to declare chapter 7 in Tennessee. I want to move out of my brothers house and pay rent some place, then declare.

    The lawyer got a list of my monthly income and expenses and said I need to spend all of it on something legit and have only $50 left over each month, or the trustee won't let me go Bankrupt.

    Is that the law? I wanted to have enough left over to put away savings and pay more than the minimum on my Student Loans.


    #2
    Your lawyer wants you to have as little assets as possible heading into the time you file. Especially if you don’t live in a state which lets you use the federal exemptions. You CAN file even if you have more than that but you risk losing that excess to the trustee, which will not help you with paying your student debt.

    Also, things to avoid: paying your creditors including your student loans more than the minimum, paying EXTRA money into your utilities (those technically count as money that should be listed), and things of that nature.

    Best of luck

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      #3
      That makes sense. thank you!

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        #4
        Actually, your lawyer wants your scheduled income to exceed your scheduled expenses by no more than $50. This is so the trustee has no reason to challenge you filing as a Ch7.

        Your total exemptions are something else entirely and assuming you don't have some hefty assets won't impact whether you qualify for a Chapter 7.

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          #5
          ^ OK, thanks!

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            #6
            Also, the issue isn't whether you can "go bankrupt", it's whether you can qualify for a Chap 7 discharge. If your disposable income (gross income less required deductions and reasonable and necessary living expenses) is too high, you may not be able to get a Chap 7 discharge, but would still have the option of filing a Chap 13. It is very rare that a debtor can't qualify for either a Chap 7 or Chap 13 discharge.
            LadyInTheRed is in the black!
            Filed Chap 13 April 2010. Discharged May 2015.
            $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

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              #7
              Keep in mind though if your lawyer wants you to do that it is likely because you are very close to not passing some sort of test like the means test or such. This probably means that there is a much higher chance that your bankruptcy gets converted to a Chapter 13 and that you have very little "slack". Make sure to ask your lawyer about the risks to your assets and income prior to filing. Once you file you can lose a lot of control depending on the circumstances and might not be able to just dismiss the case as if it were never filed.

              Depending on your exact circumstances, having your case converted to a C13 could be absolute disaster for you (or it could be the best thing that ever happened to you). I've read some stories of this happening to people and causing them a lot of issues where they did not seem to know the risk.

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