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cfortunato
cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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I live in Washington State and I think I have to file for chapter

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I live in Washington State and I think I have to file for chapter 7. I have more than 500k mostly in unsecured business lines of credit with about 10 banks which were given out so easily years ago with no documentation required. My business has closed a few years ago and I've been just barely making the payments til this month, when Bk of America closed my line and demanded repayment in full (100k). Even though my wife and I currently unemployed, we both plan on starting work shortly. With the exception of about 70k (joint w/ wife), it's all under my name and social security #. My wife wants to keep paying on our home (we have negative equity) and the accounts she's on, wanting me to declare bankruptcy ALONE, preserving her credit. In WA., the Means test income for family of five is $87,904 (7325/mo). Question: If I file for chapter 7 by myself, how is the means test affected? i.e. is it halved? So if I get a job making $5k/mo., and my wife makes $3k/mo, what is the latest I can file for Bk without being deemed as making too much. How do I calculate? (We have no employment income for past 6 months and our 2011 adjusted gross income is 66k on capital gains). In the past year and recent months, I've had a lot of transfers to and from the line of credit accounts, my personal bank and brokerage accounts (I was wiped out trading stocks and gambling). I know all the transactions may look suspicious to the trustee if I filed now. Question: Given my situation and amount of debt, about how far back will the trustee want to go in examining my brokerage and bank accounts? Someone told me to wait til after I had at least 6 months of very normal and obvious looking (no large transactions) statements. My dilemma is that I want to get this behind me (and before I am deemed as failing the means test); yet I want to wait until I have plenty of months of normal looking statements that the trustee or the creditor banks will not take issue with. And also trying to figure out the ramifications of filing Bk alone vs filing jointly w/wife in WA state, a community prop. state.
Submitted: 2 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 2 years ago.
Hi JACustomer,
Do you already have a job lined up, or are you still looking for work?
Did you personally guarantee those business loans?
Customer: replied 2 years ago.

Yes, I've been offered a job out of state starting next month at about 5k/month, and my wife will probably be making at least 2k/month in a few months.

The business lines of credit are all personal guaranteed by me as owner, as any credit account would be. When these credit accounts were readily available years ago, the only they looked at was the personal credit of the guarantor/owner of the business.

I've been told by others that I need to time the bk filing:

1. Before any possible judgments / garnishments;

2. Before my previous 6 months' income at time of filing disqualifies me on the means test;

3. But only after my financial and credit account statements look reasonable and don't show any large transfers to and from various accounts to which the trustee or creditors would object to as "preferred" creditor treatment or contestable transfers.

 

**If I am married and decide to file bk alone, is total household income threshold (around 89k/yr for family of 5) for the means test still valid?

 

Thanks

 

Expert:  cfortunato replied 2 years ago.

1) Yes - when a debtor files alone, without his or her spouse, the Bankruptcy court looks at both spouse's incomes in exactly the same manner for the Means Test as it does when both spouses file.

2) The Means Test is not the definitive determinant of whether or not a debtor can file a Bankruptcy - it is only a guide. You will also be asked if your income is expected to increase in the 12 months after filing, and if the answer is "yes", the Bankrutpcy court can base your Means Test on your income going forward.

3) The Bankruptcy trustee has the authority to reverse any "fraudulent transfers" during the 2 years before a Bankruptcy is filed, so it would not be relevant for a trustee to ask for bank records more than 2 years before a Bankruptcy is filed. Bankruptcy Stat. 548.

4) In Community Property states - such as Washington state - both spouses are generally liable for the debts incurred by only one spouse if those debts were incurred during the marriage. The fact that your wife will remain liable for the debts that are discharged for you if you file alone, would be a good reason for both of you to file.

 

I think this is what you wanted to know. If not, please let me know.
Thank you.

 

 

 

cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience: Bankruptcy professor.
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