Initial Consultation Scheduled for Monday...

[Odie]

Hi all... The title pretty much states it all, and yet nothing...

Short version:
I have about 25K unsecured debt, but I am not behind in any of the payments.
I have a mortgage on my house (purchase price 122K) but I'm not behind in the payments.
I pay about $400 a month in minimum payments (more, if you count the $125 my ex pays on a card in my name that I let him ring up... )
We own both of our cars.
I am filing married but single filer. My husband did a Chatper 7 about three years ago, right before his divorce was finalized with his ex.

A few questions:
The lawyer I spoke to stated that since my husband's girls live with us half-time, I can claim a household of four. Can anyone else independantly verify that?
Does it matter that I'm current on my bills? Even though I can pay them, I'm still living paycheck to paycheck, and my husband isn't in any better shape with his bank account I simply don't have any extra money to pay them down quicker, and we're NEVER going to get anywhere in life (I'm 31, he's 32) if we have to pay my debts off for the next 25 years.
I need to re-finance my house before 12 years from now, when the balloon payment on the down payment loan is due. If I file Chapter 7 (or even 13) now, will that be a reasonable thing? The house is in my name only, if that matters.

I'm sure I have more questions... thank you for reading...

[keepmine]

The problem you'll likely have is, disposable income. You can't count the payment on the debt you wish to discharge as an expense.
It'll all come down to how your lawyer can use the I and J schedules {Income and Expenses} to show minimal disposable income.


Are you still using credit cards? What sort of equity do you have in your house and, is that below what your state exempts? Also, where do you stand with the median income for your state-above or below?

[Odie]

If I can file under a household of four, then yes, we're under the median income.

I only credit cards rarely, and when I get the money at the next paycheck I pay off whatever I put on there (never over about $40 or so)

Very little equity in the house. A few thousand at most.

[Odie]

Talked to a lawyer today (had to reschedule Monday's meeting)

He said that I should "easily" pass the means test. Being that that's the case, how much do they scrutinize your income?
He said the few things (less than $600 by far! which was the number he gave me) I've charged in the past 70 days won't matter.
He said I can stop paying the minimums on my cards if I intend to file.
He says the house should be safe, as well as my car. My husband's car doesn't enter into it, because he owns it outright and purchased it before we were married. He also said our household goods should be exempt as well.

I just read horror stories on here about audits and bank accounts being cleaned out, and questions about purchases down to the $5 you spent at McDonalds!! These stories worry me.

Mr Lawyer Man also said it would cost $1300 including filing fees, which I can come up with if I raid our emergency fund and stop paying on my cards. I'm going to use the money that would have gone to CCs to rebuild said emergency fund in the next few months.

The lawyer seemed to know his stuff... but like I said, the stories I read on here! I worry that he's simplifying the truth. Should I be worried? Does disposible income matter if you pass the means test based on income alone?

[Phillymanhere]

Odie,
Congrats on your first meeting.

Schedule some more lawyer visits. That way, you can make comparisons and you'll get a better sense of who's sharp and who's not.

How much do they scrutinize your income? ... Not sure what you mean ... they require 6 months of paycheck stubs, so yes, they scrutinize it closely.

I'm thinking you may mean how much do they scrutinize the amount of money you have left over at end of month--even when you qualify under trhe means test? ... Well, according to folks here, you need to get your leftover income down to something like $150 a month or less to qualify for chapter 7. There is a form you have to fill out for chapter 7, Schedule J, and on that form you have to list your expenses, and yes, apparently that does get scrutinized in some cases.

If you're living paycheck to paycheck, there's a good chance that you are scrimping on things such as clothes, dental appointments, car repairs, occasional (reasonable) entertainment, needed appliances, etc. Heck, you might be scrimping on food even. A lot of us who've been so out of whack financially that we have lost perspective on reasonable expenses as in we think everything is unreasonable. By the way, good lawyers know how the bk courts in their area tend to interpret things.

So I'm guessing you could get your disposable income into the needed level. That's one thing chapter 7 lawyers do: they guide clients in how to fill out the forms.

I don't think your guy was necessarily oversimplifying things, but again, I'd visit several attorneys to get other views.

I'm not sure I agree with you about all the horror stories here--I think we (myself included) freak out when we read a horror story, but I don't think horror stories are the norm.

But I think it's good to be prepared for the worst in some sense, and reading on this board has helped me do this. I'm most likely filing in July. (I stopped paying on my cards in April once I decided on the lawyer I wanted). And reading here has made me realize I need to be clear on records, my spending history, etc.

Hope this helps. Good luck.

[Odie]

Thanks Philly

You make an interesting point about "other" expenses... recently I sat down and figured out our monthly "necessities" budget - utilities, credit cards, mortgage, etc, and figured out that we each need to save $75 a paycheck in order to be able to afford annual expenses like Christmas gifts, vehicle registrations, car repairs... oh, I forget what else, but there was a bunch of stuff on there But, of course, none of that takes any of those even longer term expenses into account.

When I say "scrutinize" I've heard stories of the trustee requiring your BANK STATEMENTS not just your paystubs for the past 6 months, and you have to explain why you spent your money the way you did rather than paying down your balances... and I wanted to know if that would be the case if you qualify for Chapter 7 simply based off your income. I've also heard about people being required to pay back their tax returns and/or stimulus payment, neither of which we will have once I file (the last of it will be going to the laywer)

From the searching I've done, I think this guy is one of the better BK lawyers in town. A lot of other firms do X, Y and Z and also bankruptcy. This guy pretty much only handles bankruptcies. And, he's not a strip mall lawyer like my husband hired for his bankruptcy when he and his ex-wife split... and his divorce... don't get me started.

I took my pre-counceling class last night, and I should be able to come up with the $1300 fee if I raid our emergency fund, which I can refill within a few months if I take the money we were spending on CC to do so.