The stress is starting to show! Bunch of questions

[Guest123]

Have a meeting with a bankruptcy lawyer ths coming week. The stress has just kicked in while I was preparing documents for the lawyer. Looking at the amount of credit card debt we owe and the amount of money we bring home.

Our background:

Husband, wife and 2 kids. Single income which is tricky. Make $69K but had months of overtime through out the year and bonuses that bumped us up to $125K a year.
The overtime is still there but is a shorter period than what it use to, the bonuses are unpredictable.
1. How does the OT and the bonuses effect the means test, how will that play out if we file a chapter13.

Living out of our means and relying on the OT to pay bills is what got us to this situation.
We currently have:
$58K in credit cards
$32K second mortgage
$180K mortgage but according to Zillow is estimated at $100K
We have 2 newer vehicles that we need, payments are around $1200 for both including insurance.
2. We need the cars and hope they are exempt in the BK as they are current, does this look to be a problem with the means test or a chapter7 or 13?

We have a 401K loan that will be paid off in 2 years, we pay $500 a month.
3. How does this effect the means test or a chapter7 or 13?

We would like to keep the house IF it will help us qualify for a chapter7...does that sound silly. I read that it could help to. We are just 1 month behind but can catch it up.
Mortage is $1350
4. Does this mortgage payment seem too high for the means test?
I know letting the house go will be the best thing to do but we do like living here and are worried about what we will do if we do.
5. If we did let the house go would there be a set limit on the house we could rent? There are rental houses in the area , which we want to stay for the kids school that are just as much as our mortage but alot more house.

Our bring home pay is under $5k a month. We definately don't have much to show for the amount of credit we have. It looks like we are very generous, but stupid people as we gave alot of stuff away as gifts.

Sorry for being so long. I hope I gave enough infor for some good feedback. I have quite a few more questions I'd like to ask here before I see the lawyer.

[newbie2]

Your overtime and bonuses will be considered part of your income, so if at all possible I suggest that you put a bit of distance between your higher amounts of pay and your filing date. If the bonuses and overtime are going to stop completely then make sure to inform your attorney about this so that it can be addressed during the "looking forward" part of your petition.

Your car expenses may be a bit high, but your attorney will know what is considered "out of range" for your district.
You shouldn't lose your cars unless you have a ton of equity in them that can't be exempted AND can't pay for that equity over the life of the plan.
(It's very rare for a Chapter 13'er to lose their vehicles because of the payback in to the plans.)

I can't answer your third question as we didn't have any 401K loans to deal with, others will chime in about this one.

No, the mortgage payment doesn't seem too high. However, if you are that underwater you may want to consider not keeping your home.
As far as rent, you will be allowed the standard rental expense for your area. Some people have been able to show the trustee that
the allowed rent isn't feasible and were allowed a higher allowance, others have had issues with this and have had to take money from other
expenses to pay for the higher rent. (IE not using all their grocery allowance and diverting part of it to rent, etc.)

Good luck to you.

[keepmine]

In a 13, since you have no equity to support the first morgage you should be able to strip the 2nd mortgage. Also, if you've owned the cars for over 910 days, you can cramdown the loan balance to the current market value.
Definitely a couple of things to consider but, I'd agree with Newbie2 and let that house go. Even with a leinstrip you're still underwater by a signficant amount.

[needanswers]

So many homes in AZ and CA are underwater right now. If it were me and I were happy there, I'd keep the house and strip the 2nd.

[Guest123]

Thanks for the replies.

I have a few questions on our personal effects.
I know they ask for an inventory of everything but wonder what all they will take.
We have 4 quads, 2 are being financed and are current the other 2 are kids quads and were bought with cash along with a trailer that is in my name but belongs to my father.
1. Is there anyway to keep these?
If they have to go, then they have to go. Just hate to lose the kids quads.
2. Does someone actually come out to do the inventory?
3. If we do let the house go do we just stay here until it is discharged?
4. Once we decide to file what do we do with all of the money that should have went to the bills?
Can we use it to pay ahead car payment, insurance, secure a rental house?
5. We have some furniture and stuff from the inlaws when they split, does this stuff have any effect in the BK?

Might be silly questios I just want to do this right and not be deceitful in anyway.

Thanks again

[newbie2]

You'll have to pull up your states exemptions to find out if the value of the quads & trailer is within the range of what you can exempt. Keep in mind just because you can't exempt something, doesn't mean you lose them. You can pay the trustee the value for them and keep them. (Doesn't matter if your Dad "owns" the trailer, it's in your name, therefore the trustee will see it as your asset).

No, no one actually comes out to your home to check on what you list, unless you are in a certain district in Florida. Haven't read about it in Arizona at all.

You can pay for reasonable expenses prior to filing: Securing the rental home, medical & dental expenses that perhaps you have been neglecting, etc. Not sure about paying ahead for your cars & insurance though, perhaps someone who has done this in your area will chime in.

If you are storing items for your inlaws, then those items are not yours and don't have to be reported. However if they gave you those items then they are part of your assets. (Remember to use "garage sale" values on your personal possessions, not "new" value.)

[Guest123]

Thanks for the replies.

I'll update this when we get back from the lawyer, I'm sure I will have a million questions after.

[Guest123]

Question on my mortgage.

I just thought of it while looking up a few things.

We owe $180K on our mortgage. Original purchase price was $135K so there was a 2nd that was taken out and added to the mortgage. We also have a 2nd through the mortgage company for $32K....Is this considered a 3rd?
I think what we did was refinanced and added the 2nd into the mortgage then took out another a few years later.

I'm looking at stripping down a mortgage and was wondering if this would strip the $45K on the mortage and the $32K 2nd?

Sorry if I made that confussing.

I have alittle bit of me that wants to keep the house and I wouldn't mine if those two 2nds were off.

Thanks

[newbie2]

I think I know what you're saying...You had a first mortgage, added to it, and it was combined in to one mortgage. Then you took out another, and it's considered a "2nd". If that's the case then no, you can't strip the 45K from the first go around, but you can strip the 2nd if you meet the guidelines for it.

[Freddy03]

You'll have to pull up your states exemptions to find out if the value of the quads & trailer is within the range of what you can exempt. Keep in mind just because you can't exempt something, doesn't mean you lose them. You can pay the trustee the value for them and keep them. (Doesn't matter if your Dad "owns" the trailer, it's in your name, therefore the trustee will see it as your asset).

No, no one actually comes out to your home to check on what you list, unless you are in a certain district in Florida. Haven't read about it in Arizona at all.

You can pay for reasonable expenses prior to filing: Securing the rental home, medical & dental expenses that perhaps you have been neglecting, etc. Not sure about paying ahead for your cars & insurance though, perhaps someone who has done this in your area will chime in.

If you are storing items for your inlaws, then those items are not yours and don't have to be reported. However if they gave you those items then they are part of your assets. (Remember to use "garage sale" values on your personal possessions, not "new" value.)

Would you happen to know what district???

Thanks!

[Guest123]

Thanks.

Ok I need to get my expenses in order for the consultation.
I seen alot refer to justice.gov/ust/eo/bapcpa/20080101/meanstesting site that list reasonable living expenses.

A few questions:
I have just a few as I need to average up my utilities.
1. Is it correct that $996 is a reasonable food expense for a family of 4?
2. We just got new insurance for our cars and to keep the payments down we opted for the basic coverage, we have $500 deductibles. We would like to have some of the other coverages higher. Will this hurt us?
3. We also have been taking out less taxes to have more income to pay the bills. Will this hurt us also?

I just thought of these now after trying to do the expenses.

We are in a bad spot as we are about to work some overtime for the next 2 months. We are looking to make an extra $9k.
We were hoping to use this money to secure a rental property, pay back some family members, tires for a vehicle and pay the lawyer if we can file.
5. Will this overtime and what we plan to do with the extra be an issue?

This what I have so far on our expenses for a family of 4. If there is anything questionable please let me know.

PERSONAL EXPENSES

MORTGAGE $1,338.00
2nd MORTAGE $214.00
UTILITIES $269.00
VEHICLES $1,079.00
INSURANCE $120.00
HOA $50.00
GAS $200.00
FOOD & CLOTHING $996.00
UPKEEP ON CARS $100.00
UPKEEP ON HOME $100.00
HEALTH CARE $240.00
ENTERTAINMENT $100.00
CELL PHONES $159.00
INTERNET $20.00

TOTAL $4,985.00

Thanks again for the help.

[LaurieM]

You do realize that you're spending more on your car payments than you are on feeding and clothing your family? I know that the trustees in our area would take issue with that. I find that ppl greatly underestimate their medical expenses (things to remember... cost of glasses/contacts, dental, co-pays, braces if you have children, medication co-pays; diabetic supplies). Pet expense? School supplies, activities, tuition? Personal hygiene expense/hair cuts? No expense for your own education?

You question about the tax with holdings.... were you getting a refund every year before you changed the at source deductions? So many ppl opt to have tons extra taken off, resulting in a huge refund annually. Wake up people! You're giving the government ALL that money months early and getting not one cent in interest in return for that!

[Guest123]

You do realize that you're spending more on your car payments than you are on feeding and clothing your family? I know that the trustees in our area would take issue with that. I find that ppl greatly underestimate their medical expenses (things to remember... cost of glasses/contacts, dental, co-pays, braces if you have children, medication co-pays; diabetic supplies). Pet expense? School supplies, activities, tuition? Personal hygiene expense/hair cuts? No expense for your own education?

You question about the tax with holdings.... were you getting a refund every year before you changed the at source deductions? So many ppl opt to have tons extra taken off, resulting in a huge refund annually. Wake up people! You're giving the government ALL that money months early and getting not one cent in interest in return for that!

Yeah I realize that, but I only listed it as it is what was considered the reasonable living expense for food and clothes. And actually the reasonable living expense for car payments for two cars here is $992. I fail to see a problem as I have never seen anything that said you had to eat more than what you pay in car payments....LOL

Medical expenses are hard for us to predict as we rarely have any. In a year $240 a month would be more then enough and that also is a considered the reasonable living expense.

No pets. I did forget school supplies and activities. Only one kid in school so no need for tuition.

We have always gotten a refund with a job were your yearly income varies from $80K to $128K it is hard to have just enough taxes taken out to break even.
We don't look forward to the refund as much as we look forward not having to pay. But that might change this year.

So when I do my expense report should I add all of these extra expenses that we have not used but could use in the future. I just didn't want to list something I couldn't prove.
But stuff like eyeglasses, dentist appointments and others are something I don't know if was included in ones I listed.

Thanks for the reply.

[LaurieM]

Absolutely only use expenses you can verify if asked. Too funny ... your comment about food expense versus car payments.... that's probably why I belong to Curves but don't have any car payments at all lolol.