A ton of questions!

[jdenn47]

Hello all. I am brand new here! I have an appointment with a BK attorney on September the 10th, but the stress of this situation is killing me! I am hoping that some kind soles on here will answer at least some of the MANY questions I have!

To make a long story short, the Wife and I are getting divorced. I have moved out of the house. The house was quitclaimed to me in a prior separation. The house is worth around 20k-30k less than I owe. In addition to this, I have around 25k of unsecured debt. So, here are my questions. Most pertain to the means test, disposable income, etc.

1. Does reimbursed tuition expense count towards income? It's not taxable.
2. Would any type of reimbursement earned from traveling for your job count? For example, mileage money for driving. My gut tells me it wouldn't since you are merely being reimbursed for money you are spending.
3. If an annual bonus of around $5,000 was paid three months before BK, does the entire $5,000 need to be calculated into the monthly income, or would it only be $2500 since the bonus is paid annually.
4. In my situation, the house payments are around $1650 a month. This is well in excess off the amount allowed by the IRS. In addition to this, I have had to rent an apartment for $450/month in order to get away from my wife. Would I be able to add this amount to line 21 with an explanation?
5. How are taxes calculated for the means tests and budget? My taxes would be much higher now than in the past as I am now single. My paycheck withholding has changed from $400 a month to $800 a month. I can't find any data on this. Do they take the current checks taxes? The six month average? A projection of what you will likely pay for the entire year?
6. Three weeks ago, before this all started, I bought a new car. I want to keep it and re-affirm. Even so, can I include this in the means test as Vehicle 2, or is there some sort of waiting period? (I have a first vehicle that's paid off in full.)
7. As a condition of our divorce, it appears I am going to have to pay $200 a month for six months. The B22A seems to imply that I can include this as an expense even though it's only for six months.
8. I currently tithe $130/month to my church via Direct Debit. Can this continue and be factored into my expenses?

Again, I am sorry to overload everyone with the questions, but this is driving me nuts! I haven't been able to sleep for the past week!

Thanks,
John

[B12]

Regarding question 4: I am totally confused on this IRS allowance also when you already have a mortgage payment. Hopefully someone can explain this.

I am assuming they count a first and second lien as THE mortgage payment.

[lrprn]

Welcome, jdenn - glad you found us!

You have a lot going on here. Most bk lawyers will recommend that you divorce first, then file bankruptcy. Right now your assets are all mixed up with your soon-to-be-ex which makes the bankruptcy much more complicated than it needs to be. When do you expect the divorce to be final?

1. Does reimbursed tuition expense count towards income? It's not taxable.

There's no clear answer to this question, especially since the money you spent for the tuition is likely to lie outside the six-month lookback for generating income. A question for the 3-4 experienced bk lawyers you need to interview - most give free initial consultations.

2. Would any type of reimbursement earned from traveling for your job count?

Typically per diem does not count into your income for IRS purposes. Another good question for your lawyer interviews.

3. If an annual bonus of around $5,000 was paid three months before BK, does the entire $5,000 need to be calculated into the monthly income, or would it only be $2500 since the bonus is paid annually.

This one I'm sure about - if the bonus comes in the previous six full calendar months before you file, the entire $5K counts, then it will get doubled when your six-month income is taken X2 to get your annual income to compare against your state's median income. In this situation, it's best to wait to file until the bonus moves beyond six calendar months of filing.

4. In my situation, the house payments are around $1650 a month. This is well in excess off the amount allowed by the IRS. In addition to this, I have had to rent an apartment for $450/month in order to get away from my wife. Would I be able to add this amount to line 21 with an explanation? [/quote] Depends on if you are trying to file Ch 7 or Ch 13. Another lawyer opinion question.

5. How are taxes calculated for the means tests and budget? My taxes would be much higher now than in the past as I am now single. My paycheck withholding has changed from $400 a month to $800 a month. I can't find any data on this. Do they take the current checks taxes? The six month average? A projection of what you will likely pay for the entire year?

This is the perfect example of why it's best to wait to file until after the divorce is final.

6. Three weeks ago, before this all started, I bought a new car. I want to keep it and re-affirm. Even so, can I include this in the means test as Vehicle 2, or is there some sort of waiting period? (I have a first vehicle that's paid off in full.)

If you file alone (which I assume is your plan), then you get one car. As far as the new car goes, it's going to be hard to explain to your trustee why you needed a new car when you have a car that's paid off that you kept as well. If the paid-off car has any value, you are likely going to lose it to your trustee who will sell it to get more money for your creditors.

7. As a condition of our divorce, it appears I am going to have to pay $200 a month for six months. The B22A seems to imply that I can include this as an expense even though it's only for six months.

You get to count whatever you pay during the six calendar months before you file.

8. I currently tithe $130/month to my church via Direct Debit. Can this continue and be factored into my expenses?

Congress passed a special law to ensure tithing at 10% of your net income can be included as a legitimate expense in bankruptcy.

Hope this helps, John. My guess is that the lawyers you meet with are going to tell you to wait until your divorce is final to ensure you know exactly what your marital obligations and expenses are going to be before you file. Buying a new car 3 weeks ago is yet another reason to wait to file as well.

[jdenn47]

Thanks a bunch for the reply! I do plan to wait until the divorce is final before I file! Sorry if I didn't make that clear! The tax question is more about the fact that it will change after I divorce. If I divorce in October and File in november, I will only have a couple of paychecks at my "new" higher tax bracket. I also have to figure out how the taxes I paid on my bonus figure in here. Gosh, this is complex!

That really stinks about the bonus being doubled. The bonus was paid on July 11th, so I think I would have to wait until February to file! That's a long time ;). Isn't there any way to explain to the court that this is an Annual bonus? I have read a couple of prior cases where a filer had left out a 20,000 bonus that was paid before the six month time period. The court ruled that it should have been included in the calculations. If that's the case, shouldn't it go the other way? I am quite a bit above the median income, so I don't think that scenario will apply.

Here's a link to the details on the Annual bonus before the six months case:
http://www.************************/...ear-end-bonus/



I also didn't know that you only got "one car." The forms were ambiguous. I searched google high and low for something that advised if you could file alone and claim two cars. I guess you answered it ;).

The paid off car really has no value. It's a 2000 VW Jetta with 250,000 miles on it. I drive a lot for work, so a new car was overdue! Especially before my credit is wrecked!

The main thing I am trying to get in all of this is away from the House. Kentucky allows summary judgements. I have had it on the market for a $10,000 loss and have not had one single call in over a month. It sucks paying $1600 a month (Plus utilities) for a house that nobody is going to live in.

This brings up another question. If you are going to get rid of the house debt, is the "new" $1600/month factored into the disposable income equation?

Interesting advice on interviewing 3-4 people. I was going to get two opinions, but 3-4 sounds like a smart idea!

Thanks again,
John

Welcome, jdenn - glad you found us!

You have a lot going on here. Most bk lawyers will recommend that you divorce first, then file bankruptcy. Right now your assets are all mixed up with your soon-to-be-ex which makes the bankruptcy much more complicated than it needs to be. When do you expect the divorce to be final?

There's no clear answer to this question, especially since the money you spent for the tuition is likely to lie outside the six-month lookback for generating income. A question for the 3-4 experienced bk lawyers you need to interview - most give free initial consultations.

Typically per diem does not count into your income for IRS purposes. Another good question for your lawyer interviews.

This one I'm sure about - if the bonus comes in the previous six full calendar months before you file, the entire $5K counts, then it will get doubled when your six-month income is taken X2 to get your annual income to compare against your state's median income. In this situation, it's best to wait to file until the bonus moves beyond six calendar months of filing.

4. In my situation, the house payments are around $1650 a month. This is well in excess off the amount allowed by the IRS. In addition to this, I have had to rent an apartment for $450/month in order to get away from my wife. Would I be able to add this amount to line 21 with an explanation? Depends on if you are trying to file Ch 7 or Ch 13. Another lawyer opinion question.

This is the perfect example of why it's best to wait to file until after the divorce is final.

If you file alone (which I assume is your plan), then you get one car. As far as the new car goes, it's going to be hard to explain to your trustee why you needed a new car when you have a car that's paid off that you kept as well. If the paid-off car has any value, you are likely going to lose it to your trustee who will sell it to get more money for your creditors.

You get to count whatever you pay during the six calendar months before you file.

Congress passed a special law to ensure tithing at 10% of your net income can be included as a legitimate expense in bankruptcy.

Hope this helps, John. My guess is that the lawyers you meet with are going to tell you to wait until your divorce is final to ensure you know exactly what your marital obligations and expenses are going to be before you file. Buying a new car 3 weeks ago is yet another reason to wait to file as well.

[lrprn]

Thanks a bunch for the reply! I do plan to wait until the divorce is final before I file!

That's good - will make things much, much simpler!

Gosh, this is complex!

Since you are an above-income filer, an even better reason to find the best bankruptcy lawyer you can to figure all this out for you

I also didn't know that you only got "one car." ... The paid off car really has no value. It's a 2000 VW Jetta with 250,000 miles on it. I drive a lot for work, so a new car was overdue! Especially before my credit is wrecked!

Given the age and mileage on your second car, your trustee is likely not going to be very interested in it. You may end up getting to keep it.

If you are going to get rid of the house debt, is the "new" $1600/month factored into the disposable income equation?

Do you intend to surrender the house when you file?

[jdenn47]

That's good - will make things much, much simpler!

Since you are an above-income filer, an even better reason to find the best bankruptcy lawyer you can to figure all this out for you

Given the age and mileage on your second car, your trustee is likely not going to be very interested in it. You may end up getting to keep it.

Do you intend to surrender the house when you file?

Yes, I would like to, but I don't know if it's the right thing for me. How does this affect me in a chapter 7 vs. Chapter 13 case. With the house, I am way in the negative on the disposable income. Without it, I go positive by a bit. I don't really like the house, but if living in it is the difference between a fresh start and five years of payments... Well....

Thanks,
John.

EDIT:

I just did a search and found the following. Seems sort of like an answer, but it still leaves the possibility of "other" abuse.

Thans to Judge Homer Drake, we have an answer to this question in the Northern District of Georgia. In the Walker case (2006 Bankr. LEXIS 845, Case No. 05-15010 (Bankr. N.D. Ga. May 1, 2006), Judge Drake overruled an objection by the U.S. Trustee. In this case, the debtor's Chapter 7 Statement of Intentions provided for the surrender of his house and vehicle. The Means Test filed by the debtor had allocations for payments to both the mortgage and vehicle lenders. The Trustee objected to the inclusion of these allocations when the debtor intended to surrender the collateral.

Judge Drake found that the Means Test was intended as a snapshot of the debtor's financial situation at the instant of filing and that at the time of filing, these payments were contractually due to the lenders. Further, Judge Drake found that since the Means Test could potentially penalize the debtor by using a six month lookback as evidence of future income then the Means Test is by its nature is not intended to reflect the debtor's current reality.

Judge Drake also noted that the trustee can still object to discharge under Section 707(b)(3) which allows the Court to consider the totality of the circumstances.

From http://www.thebklawyer.com/thebkblog...he-collateral/

[Boscoe]

to keep your income as low as possible, then do not file until 6 months passes from your bonus payment. That is, if the bonus occurred on 6/15/07, you will need to wait until January 1st to file, as the look back is the 6 calendar months prior to file date. Your attorney will tell you when.

Keep all bank, credit card, mtg, utility etc. statements beginning now, and try to find everything back 1 year, or at least 6 months. Will make things alot less stressful when your attorney asks you for them so you can complete the bk forms.

[jdenn47]

to keep your income as low as possible, then do not file until 6 months passes from your bonus payment. That is, if the bonus occurred on 6/15/07, you will need to wait until January 1st to file, as the look back is the 6 calendar months prior to file date. Your attorney will tell you when.

Keep all bank, credit card, mtg, utility etc. statements beginning now, and try to find everything back 1 year, or at least 6 months. Will make things alot less stressful when your attorney asks you for them so you can complete the bk forms.

I have been getting all those things together. I don't know if I would be able to wait until February. The house might be gone by then.

Thanks,
John