becoming qualified for chapter 7

[snodrop13]

What is the name of your state? NY
My husband and i were advised in late September that we should file for chapter 13 in January after we file our 2004 taxes. We originally sought legal advice with the understanding that we could file chapter 7 but were told by our lawyer that because we were wage earners that we would probably only qualify for chapter 13. We have a large amount of unsecured credit card debt as well as a mounting tax liability because our income increased after his retirement from the military and a new job was added to our income - at the same time we did not adjust our witholding accordingly. We currently owe the IRS 13000 and expect to owe another 11000 in january. We were advised to reorganize in january to pay off our tax debt in 36 months and at the same time pay what would amount to 10 percent of our unsecured debt. Meanwhile my husbands temporary decent job will end in mid november and he has the opportunity for a permanent job in the nyc area that would pay reasonably well and offer benefits. We live in northern ny where there is little opportunity. If he were to relocate and we were to establish 2 households because I would remain in upstate ny at my job ( my 3 college students live at home) obviously our expenses would drastically increase....would we then be able to qualify for chapter 7? (i do know that taxes are not dischargeable in chapter 7). We are very anxious to proceed with some action.

 

[olgethorpe]

No clear answer...

First, being wage earners does not automatically equal BK13...its actually the other way around...you can ONLY file 13 IF you are a wage earner. But on the other hand, expenses related to maintaining two households would probably not be looked on as a good thing by the BK trustee.

So...I guess I'd suggest talking with another BK attorney. This isn't going to be simple, and you need someone with a little more creative thinking. For example, it is possible to include personnal income tax liability in a Chap 13...it takes a little more work on the part of the attorney. On the other, Chap 7 doesn't do you any good tax wise.

You definitely need something more than a "fill in blanks, file the papers" attorney.

 

[Ladynred]

Actually, taxes CAN be discharged in a CH 7, but the stipulation there is that they have to be 3 or more years old. If this tax liability has only come about in the last year, you'll be stuck with it.

Ch 13 vs. Ch 7 comes down to disposable income and assets. If you have little or no disposable income after paying all necessary living expenses, then Ch 7 might work for you. However, if you have more equity in your home than you can exempt, you'd want a Ch 13 to keep your home.

Definitely see another attorney or 2. Lawyers get LOTS more money for a Ch 13, so you need to be careful when they start pushing a 13 w/o looking at ALL of your financial data.

 

[snodrop13]

We own no property and have no assets to speak of but we do have disposable income...we have a monstrous unsecured debt of 91000. we have avoided bankruptcy for years despite the urging of friends and family members who filed without problem. We plugged away paying the minimums religiously,but when we finally after 27 yars of fighting a losing battle decided to give up - we are being told chapter 7 is not an option. My brother was a rather wealthy wall street broker who filed chapter 7 without a problem. We don't make nearly the money he does, where are we going wrong? By the way thanks for all the great feedback, it has really helped

 

[Ladynred]

How MUCH disposable income are we talking about here ?? Are you certain you're including ALL normal living expenses ? Most people seriously underestimate their true expenses. If you weren't scraping by to make minimum payments what would your usual expenses be ??

Could you pay off 25% of your unsecured debt in 3 years with that disposable income ?? That's just one of the general yardsticks used.