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Chapter 7 Question. We met with 2 lawyers and have 2 views on filing. We are facing foreclosure in a couple weeks.

Orlando, FL |

Family of 3, and I am the only one working. Wife is a perm. disabled vet. My salary is just below means test and even if we add wife's $500 a month benefits we are still just under. Problem is we had a side business in 2012 and we had very unusual payment of about $14000 income late last year. It was for work done in 2012. Both lawyers have same means test results - we are over based on 6 months and waiting it out will be after we lose house. One lawyer is more cautious about filing. Other lawyer is more optimistic that we will slide because no way we can do 13 going fwd and it really was unusual income, but he does say there is a risk and it is our call. We are about $800 over monthly income means test as it is. Is this risky? We like both lawyers and dont want to see more.

Ch. 13 is not an option as we are over limits and we would like to stay in the house if possible and either get a mod or move if we have to. Question is only this - based on exp will case definitely be targeted by trustee for dismissal when means test only failed by a single very unusual item of income that will never happen again? Thanks

Attorney Answers 6

  1. I am trying to understand your need to qualify for chapter 7 and your desire to file before losing the house.

    Are you trying to keep the house or simply buy more time in the home as a result of filing chapter 7?

  2. You will have to clearly decide what your goal is to make the correct legal choices. Your post does not clearly state a goal

  3. I agree with the other postings that your posting does not state an ultimate goal. If your goal is to save the house and you have other debts I would advise filing followed by a loan modification application. If you are trying to buy time and have other debts it might be worth filing. If you have no other debts and don't want to keep the house and have assets I would advise against filing. I don't view the receipt of the business income as an issue.

  4. There are ways of dealing with unusual income during the 6 months prior to filing bankruptcy. In a Chapter 13 based on Supreme Court authority you are not absolutely bound by the 6 months prior income. In Fort Lauderdale Chapter 13 cases, we use a "Lanning" clause based on this case to provide that the income that will not be repeated should not be held against you in the plan. Even in a chapter 7, if the case had to be filed now, there is a procedure with a Rebuttal of the Presumption of Abuse. If you are trying to save your home with a chapter 13 plan including a mortgage modification procedure, then you have no choice but to try before the foreclosure sale if a reasonable plan can be submitted.

    The questions and answers posted on AVVO are for general information and should not be treated as legal advice or establishing an attorney-client relationship.

  5. IN the ND Georgia, based only on the facts and question stated, I'd give it greater than 50% the US Trustee would not object and even if they did the Judges here are usually pro-debtor to an extent. "Good faith" is the key term.

  6. In Tampa, you have a 50/50 shot of the Trustee taking this before the Judge. If the income was very, very unusual, and will not happen again, then there are places to state that in the petition. Do so very carefully and you really might be OK, because the alternative, is the Trustees pushing you in to 13, then your 13 getting dismissed for failure to pay and you being right back in 7 world. If you explain that the income oddity well enough, the Trustees here probably wouldn't to go through all the time and effort to end up in the same place.

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