I recently made the decision to file for Chapter 7. I met with a lawyer for a free consultation. He advised me that my income, combined with my husband's were over the median for a family of four in NY, so he would have to complete the means test, for which I would have to pay a non-refundable $500 fee.
We met yesterday and went over my budget - my attorney told me he was about 75% sure I would qualify for Chapter 7.
This afternoon I received a call and email from him, stating that unfortunately we are over the median income by $630, and I would have to file for Chapter 13 - my payment would be $572 a month for 60 months.
I was very shocked and upset and couldn't really think clearly when I called him back, but now I'm home from work and thinking to myself - once the means test is completed, is it set in stone, or can we go back and revise my budget to take up that $630? My mother is my "landlord" and I pay very little for rent - I could have her raise my rent to fair market value - that would take up $500 right there. My husband's four-wheeler is about to die and he has been talking about financing one. Yesterday at my meeting with the lawyer he was going to include tuition costs for my daughter's technical school that she will be attending (all out of pocket) but then removed it because he felt that the budget we had would put me where I needed to be to qualify for Chapter 7. It seems like I could very easily make up this $600 difference, and I'm wondering why he didn't offer to have me come back in so we could re-discuss my budget. That is what has me questioning if that would "not be allowed" after the means test had been completed.
A bit of background on my situation for reference:
I had my daughter at the age of 21 and have been a single parent my whole life. I never received child support and for the last 15 years my salary was very low to support myself and my daughter (started at $25,000 and made my way up to $36,000 over a 12 year span.) As a result I struggled financially over the years and had to put a lot onto credit cards. Then I got a debt consolidation loan several years back, with a high payment, and ended up still having to use credit cards for groceries, gas, (you get the picture) because by the time I paid the loan and all other living expenses, I had nothing left. Last year I finally got a good job and I now make $50,000, but the financial damage had long been done.
I got married three years ago. My husband is divorced and has two children from a previous marriage. He makes good money ($80,000), but he pays $17,000 a year in child support, $6000 a year for health insurance, and 65% of all of his children's unreimbursed medical and childcare expenses. So, at the end of the day, I bring home more per paycheck at $50k, than he does at $80k.
It frustrates me that his income counts toward my bankruptcy, as I'm only filing, he is not. He does not pay my debts, and we split the household expenses equally. It's just that he is almost debt free, and I am not.
$42,000 unsecured (credit cards, personal loans)
$15,000 student loan (which I know can't be included in BK)
$13,000 auto loan (current, which I want to keep)
All told, I am $70,000 in debt, and my monthly bills are more than my actual income.
So, back to my original question - can the means test be redone if my expenses increase?
Should I have my landlord raise my rent and see another lawyer? There is another bankruptcy attorney in my area, but I would have to pay them $350 to do another means test, and I just gave attorney #1 my "Christmas Money" to do the first means test. Oh, and he told me to stop paying my credit cards at our first meeting, so now everything is going past due, with late fees and larger than minimum payments due! (I had been current on everything!)
I can't afford the $576 payment for five years. They are saying my husband and I combined have $630 a month of disposable income and they expect me to pay $576 in CH 13. I don't want my husband to pay for my debts that I incurred before we were married....
Any thoughts and opinions would be appreciated!
I don't understand why it would cost $500 to do a means test calculation. To answer your question, you can prepare 1,000 versions of a means test for your situation. It's the one included in your bankruptcy filing that matters. For actual figures, your means test figures should also be able to be proven. If I recall correctly, housing cost is entered as a number from a local standard. If you are paying an amount that is less than market, consider if you shuold pay more for a few months before filing. If you do this, I would suggest paying your family member's mortgage directly, as opposed to transferring cash, which could seem like a fraudulent transfer.
I'd normally say you need to meet with at least two more attorneys. Given the cost of doing these means tests, here's what I would recommend instead:
I forgot to mention, I am assuming you are not in a community property state (Louisiana, Arizona, California, Texas, Washington, Idaho, Nevada, New Mexico, and Wisconsin). If you are in one of these states and your husband is not filing, you need to discuss the impacts of this with an attorney.
Also forgot: There's a difference between the means test and Schedule J (current expenses). Make sure to understand the differences -- what's allowable and what's not. Ideally, both the means test and your Schedule J should suggest you have insufficent funds to repay your creditors over the 3-5 year period a Chapter 13 would require.
Thank you for your thoughtful reply, leonel9.
I contacted two attorneys in my area - both told me they offered free consultations - Atty#1 offered an in person consultation, Firm#2 offered a free phone consultation with a paralegal - so I chose Atty#1 as he met with me personally, free of charge, for an hour. Both attorneys advised me that if I was over the median income (which for a family of 4 in NY is $99,943 and we are at $125,000) that I would be charged for them to complete a means test. Atty#1 advised it would be $500, Firm#2 advised I would then get to meet with an attorney who would calculate my means test after my free paralegal phone consultation, and the charge for that would be $350. Both advised the fee would be non-refundable, regardless of the results. So, I knew going into this that we would be above the median, but I really thought that after deducting the withholdings. The attorney sent me home with the Schedule J to complete on my own, but he did not explain that my schedule J should suggest that we essentially do not have any disposable income available at all after paying living expenses - and does not take into account my unsecured debts (however does take into account my husband's personal debts?) I am looking at a copy of my chapter 7 means test and it shows "Adjust your monthly income by subtracting any part of your spouse's income not used to pay for the household expenses of you or your dependents"
I see what you are talking about with the housing cost being entered as a local standard. "Based on information from the IRS the US trustee program had divided the IRS local standard for housing for bankruptcy purposes into two parts:
Housing and Utilities - Insurance and Operating Expenses
Housing and Utilities - Mortgage or Rent Expenses "
I see now that I should have done more research up front and not depended on my attorney to advise me of this information. I suppose I just learned a $500 lesson.
I will Google "Means Test Calculator" and get familiar with how the test works.
I just ordered the book you recommended, thank you!
I will educate myself further and then seek out free consultations with some other attorneys.
Another question I have thought of - do you have any thought on this? If I retain an attorney that is not in my local area (the closest larger city to me would be Syracuse, which is an hour away) would my actual bankrupty filing be handled in the city my attorney is located in, or my local courthouse? (My county's court is 10 minutes from where I live.)
The reason I ask, is that our local newspaper goes down to the courthouse and gets a list of all the names of the people filing for bankrupty, and prints it on a weekly basis. I know this should be the least of my concerns (and believe me it is at the bottom of my list) however I have family members who read the paper on a daily basis and would most definitely find out (and not be very supportive of my filing, regardless of my situation) Also, I work for a local insurance carrier and I just would not want my coworkers to know. It's a small town and everyone talks - I don't want to endure more humiliation on top of the tremendous amount of stress my financial situation is already causing me.
Thank you so much for your thoughtful responses - you have been immensely helpful!