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Getting ready to file 7, hubby might get new job making more


Jenay
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Hi!

My husband and I have been planning on filing Chpt. 7 for about the last 8 months. We just turned everything in to our attorney on Thursday, she should be filing next week.

Husband was laid off from his job yesterday. He is in the construction industry, and in the last 2 years his sales have been 1/2 of what they have been. (I stayed home for years, he used to make 65k on his own)

Family of 5, WA state, our combined income for the last 2 years is about 65k. (I make 30k)

He has an interview on Monday with a company that offers a contract with a salary for the 1st year. (60k to 80k) After that year, it is straight commission only.

If he took the position, with my income, this would make us over the median range for filing Chpt. 7. Our attorney said the trustee goes by the last 2 years of income, but we would be worried that seeing the new income would change everything. 8 months ago it would have been fine, but everything it too far gone to even try and pay back.

Every CC is in collections, we have 4 judgements with 2 ready to garnish. (about 60k CC debt)

Can trustee look at our possible future earnings and nix the 7, even going to a 13? (which from what I have read, leaves us with very little money, they take most of it)

Thank you for any help.

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Thanks RA~

Didnt ask about the separate filing. Will do that.

Hubby just said... if he was offered the job~ would he NOT take it for fear of the BK issues? He would take it. We will worry about it when the time comes. I'm just impatient, and curious of the possibilities!

Just one more reason to stick with the same New Years Resolution every year...Stop procrastinating! If we had filed last year, when we first relized we needed to, it wouldnt matter.

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Be aware that the permanent bankruptcy injunction is not just a halt on collectors. The injunction is to prevent any negative action against you by a pre petition entity based on your finances.

Essentially it is illegal for an employer to discharge an employee (with some exceptions such as money handling and top-secret clearance jobs) because of filing bankruptcy. If your husband takes the job, assuming it is not an excepted field, and is later discharged due to filing the bankruptcy after becoming employed you can sue the employer.

But the fact is, it probably won't come to that. Most employers don't care about a BK filing and if you don't tell them, they likely will never know.

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I agree with Metthus. A few additional points:

First, if you are under the applicable state mean income threshold, you are EXEMPT from having your case dismissed or converted because of failure of the means test. If your income is above the state median, it certainly doesn't mean automatic failure. It just means you have to run through the entire test and start making deductions of your income.

Second, the means test goes by the last 6 months of income (you must disclose the previous two years of income on a separate form called the statement of financial affairs). Having more income in the future has nothing to do with the means test.

Third, the means test is not an income based means test. It is a disposable income based test. I personally know two couples with income well into six figures with NO kids that recently obtained a discharge of a Chapter 7 (no asset case). Why? Car loans, mortgage payments, health insurance, certain 401k payments, education monies, etc. are all deducted from your income to determine your disposable income. If you have more than $150/month in "play money" after all of your payments, then you fail the means test. If you have less than that, then you pass even if you have substantial income. Some filers have twice the income and still file a Chapter 7 with no problems. Again, I cannot stress this enough because this seems to be an enormous misconception.

Fourth,

the trustee WILL try to reach non-exempt assets so make sure you are in good shape to file.

I edited this post to add: the income issue above pertains to the means test which culminates in a bright-line pass/fail result. If the judge thinks you are abusing the system, the judge or US trustee can move to dismiss based on the subjective "totality of the circumstances" test. If the filers were managing to take a trip to Cabo San Lucas every year and drive two new BMWs, then the case may get dismissed regardless of means test failure.

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Thanks to both of you...

Methuss~ thanks for your info...that was a concern that we had; but mostly what I was asking was not his possbile new employer finding out about the BK~ but the fact that the salary they offer is at least 30k more a year than we make now. I was worried that filing BK in the same month we might have a huge jump in income would cause problems with being able to file a 7.

Thank you

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Bankruptcy is a "snapshot in time" and, as jq26 pointed out, based on the prior 6 months of income. What you are making a month after you file is not computed into wether you qualify to file.

I have heard of some trustees arguing about the post filing income increase, but so far every judge has shot it down. The law changes in 2005 were designed with certain absolutes in them. Those absolute definitions mean no matter how unfair it may be to one side or the other it cannot be changed.

One of those absolutes is how your income is figured; which is unfair to creditors when the debtor knows their income will go up. Another is what debts are dischargeable: Like the fact that student loans cannot be discharged no matter the debtor's ability to pay and post discharge HOA dues are not dischargeable even if you loose the house. So their are "unfair" provisions going both ways.

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