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Apr 2013

Getting Sued After a Short Sale?

Posted by / in Before Bankruptcy, Chapter 7, The 2005 Bankruptcy Law / No comments yet

Getting Sued After Short Sale?

Getting sued after a short sale is highly probable.  Saw three couples this month who needed to file bankruptcy, because they were getting sued–garnished in one case–by the second mortgage after a short sale.

It was surprising that they were surprised.   At the peak of the crisis, four or five years ago, second mortgages would take what they could get at a short sale and let the rest of it go.  But they don’t often do that anymore.  (At least not without intense negotiation.  I’ve seen it once in the last year.)

And usually they make you sign that you KNOW that you still owe the money.  So, where’s the surprise?

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Mar 2013

Filing Bankruptcy and self employed? You need a “Profit and Loss”

Posted by / in The 2005 Bankruptcy Law / No comments yet

If you file bankruptcy, you need to send in proof of your income.  For most people, that means your pay stubs.   Section 521 of the Bankruptcy Code requires people to send in at least two month of their “payment advices“–meaning pay stubs–received from your “employer.”

What if you are self employed?   You don’t get a pay stubs and don’t have en employer.  Do you dodge that requirement?

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Sep 2011

Bankruptcy means test: how big families can pass

Posted by / in General Information About Bankruptcy Law, The 2005 Bankruptcy Law / 12 comments

The 2005 bankruptcy law is unfair to families.   If you have children, you need to fill out your bankruptcy means test budget very carefully.  Here’s why.

The means test in the 2005 bankruptcy law is easy on singles, and hard on big families.    Here’s an example:  a household of one is allowed $300 for food.  A family of four is allowed $757.   That’s ten dollars a day to feed the first person in the family–$5.07 a day each for the next three.  (When you go above four, it drops to $4.80.)

Congress set this up so that just trying to take care of your kids is called bankruptcy “abuse.”

There’s not much we can do about the unfairness of what the bankruptcy law allows for food and clothing.   But, other things you spend money on for your children, you are allowed to claim your real cost.

Those are the areas where you need to focus when you fill in your bankruptcy means test budget.

Child care.  Most families pay for child care by the week.  And then multiply by four to calculate the monthly.  But you should multiply by 4.333.  Because there  are more than twenty eight days in a month–usually thirty or thirty one.   So don’t short yourself.  Budgeting those extra three days could be the difference between having your bankruptcy approved and having it turned down.

Besides pre-school or after school care, budget for baby-sitting.  Most families, maybe once a month, both mom and dad have to go somewhere, together, and you need a sitter.   That twenty bucks or so goes in your bankruptcy means test budget, too.

Do you send the kids to summer camp?  That’s child care–and goes into your child care budget.

Are the kids lagging in school?  Let’s make sure we take advantage of that.  (In bankruptcy everything is upside down–bad is good; good is bad.)  So having trouble in school is an advantage in bankruptcy.

school boy

Kids struggling in school? Money for tutoring is allowed in your bankruptcy means test budget.

You are allowed to budget $125 per month to pay for schooling.  Now if the kids are in full time private school, at $125 a month doesn’t begin to cover it.  But if the children need tutoring to get through a tough class–or need to pay for summer school to catch up–that could be that $125 per month you are allowed in your bankruptcy budget.

(This schooling budget only covers kids up through age 17.  Congress says they are on their own for college.)

Are the kids having big trouble in school?  If the children are “challenged,” then the $125 per month cap doesn’t apply.  Your bankruptcy budget for education for employment of physically or mentally challenged children is unlimited.   (And goes past age 18, too.)

I see some parents who put their kids in private school because they couldn’t handle the public schools.  In that case, you can claim that whole expense.

Health and medical.   The bankruptcy means test allows you $60 per person for health and medical expenses.  Most people think they spend a lot less–but actually spend a lot more.

A lot of what you think of as grocery money can actually be counted at health care.  And for healthcare, unlike groceries, you can claim above the allowance.

Let’s start at Walgreens or CVS.    Vitamins–that’s health care.  Tylenol, allergy medication–health care.   Shampoo and toothpaste goes in the grocery budget–but anything stronger is health care.   Does your dentist recommend Listerine–that’s healthcare.

Lots of families are spending $20 or more per person on over-the-counter stuff that you can claim in your health care budget.

Prescriptions.  Should be obvious, but don’t leave it out.

Glasses or contacts.  According to the Vision Council of America, approximately 75% of adults use some sort of vision correction.   I’m spending over four hundred dollars a year–thirty five dollars a month–on glasses.  Your children may be spending more–because they lose or break them.

The dentist.  Just routine dental check ups can cost a couple hundred dollars a year.  Maybe half the people I talk to about bankruptcy tell me they are avoiding the dentist because they can’t afford what it will cost.  Budget that in.

You are allowed to claim the dental work you’ve been putting off  as health care.

Braces.  Approximately 4 million people are in braces in the US at any one time.    Orthodontics can cost a couple hundred dollars a month.  If the children need braces, put it in your budget.

Runny noses and broken arms.  In addition to preventive care, children (and adults) catch cold and flu, break their arms, and end up at the doctor’s one way or another.  Allow something for the unexpected in your bankruptcy health care budget.

Mental health.   A Gallup-Healthways Well-Being Index survey conducted in 2009 revealed that about 40 million American adults had recently been diagnosed with depression.

When life knocks you down, there can be changes in the chemistry of your brain.  People need help–counselling or medications or both–to get back to their right mind.  Things that caused your financial problems–unemployment, break-ups, other health problems–can also bring on depression.

If depression is impacting your family, be sure to add that to your health care budget.  (And be sure to take care of it, too.)

Don’t forget these categories

Charitable giving.  Most people have a good handle on what they give to their church, their favorite cause, or other regular commitment.

But if you have children (or even if you don’t), you get hit for donations for Girl Scout cookies, the high school band, and that kind of thing.  I’m guessing most families spend at ten dollars a month on these neighbor-to-neighbor charities.

Elderlies.  Along with the family in your home, many of us are helping out parents or grandparents.  One of the very few good changes in the 2005 bankruptcy law, help for elderly (or disabled) family members is now expressly ok.  (This includes family overseas.)  

To get your bankruptcy approved, we need to show the court where you need to spend your money.  People who come to talk to me about bankruptcy have been living from paycheck to paycheck–usually for a long time.  But they are often so stressed, they really don’t know where the money has been going.

I hope this article helps you think clearly about your budget–so we can get your bankruptcy approved.



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Sep 2011

Bankruptcy means test: Watch out for January 2012!

Posted by / in The 2005 Bankruptcy Law / 8 comments

Your bankruptcy means test may be too high if you file your bankruptcy case in January 2012.

People with bi-weekly paychecks get 26 paychecks a year.  Usually you will have 13 paychecks in the six months look-back period of the bankruptcy means test.    But some people will have 14 paychecks instead of 13 for the six months of July – December 2011.  If your first September paycheck was dated September 9, you will be one of those people.  (It’s no problem if you got paid on September 2.)

Bankruptcy lawyer Robert Weed: If you got paid September 9, 2011, filing bankruptcy January 2012 could be a mistake.

Most people on bi-weekly pay look forward to those months with three checks.  They usually come every six months.  But this year, if you got paid September 9, both July and December will be three check months.  (Your next three check month will be June 2012.)  But in bankruptcy, good is bad.  That 14th paycheck could force you into a five year Chapter 13 bankruptcy repayment plan, because your income could be just a little too high.)

Here’s one example:

Take a single parent supporting one child in Virginia making exactly $30.00 a hour, no overtime, renting, one paid for car, no medical issues, no child care.    That family is means test eligible for a Chapter 7 bankruptcy, if the parent files in October 2011 or November 2011, or December 2011, or February 2012, or March 2012.  But in January 2012:  not eligible. Mandatory five year Chapter 13 payment plan.

This problem can be fixed with proper planning.  I had to change the bankruptcy filing date for a client I met yesterday, to avoid that problem.  Otherwise, it would cost him $300 per month for 60 months–an $18,000 mistake.

The 2005 Bankruptcy Reform has a lot of tricks and traps.  This is one of them.

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Jan 2011

Bankruptcy Means Test: "I spent $95 at CVS."

Posted by / in The 2005 Bankruptcy Law / 3 comments

Cough medicine: medical care in the bankruptcy means test

Cough medicine, pain relievers and all over-the- counter meds count for you in the bankruptcy means test.  Make sure you count them.

Yesterday I spent $95 at CVS.  So?  I’m a Virginia bankruptcy lawyer.  Every day I talk about family budgets to three or four people who need to to file bankruptcy.

Most of those people estimate their health care expenses way too low. That hurts the chance of getting their bankruptcy approved.


The bankruptcy means test is the formula Congress set up for you to prove why you can’t afford to pay your debts.  Under that bankruptcy means test, you get $60.00 per person for health care ($144.00 if you are over 65) or your actual health care spending.  Whichever is more.

Most people’s first budget comes in way under the $60.00.  Most people actually are spending a lot more.

That’s where my $95.00 comes in.

I’m in my early 60’s in good health and with good insurance.  My wife is much younger, also in good health. Yesterday, I spent $95.00  at CVS.  Of that $20.00 was on the one prescription I take–for my cholesterol.  But all the rest also counts as as health care. (Here’s an article by the Bureau of Labor Statistics, that explains their definitions.  The Bureau of Labor Statistics  studies what people spend.  Those studies are used by IRS collections–and the bankruptcy means test also uses the IRS figures.)

What else did I buy?  Benadryl.  I have allergy problems since I was little–and it seems to be getting worse.  Cortisone cream.  I got some kind of rash when I got my flue shot.  Yuck!

Tylenol PM.  Helps my wife sleep.

Calcium.  WebMD says the average American diet gets only half the calcium needed to maintain strong bones.

Omega 3.  Most Americans are “dangerously short” of Omega 3.  We need to eat less eggs and more fish.  Or take an omega pill.   I try to do both.

Health care includes all non-prescription drugs and vitamins. I spend that $95.00 twice a month–around $200 total–on prescriptions, vitamins and over the counter meds every month.  That already has me over the $120.00 bankruptcy means test allowance for a family of two.

That’s not all.  My doctor wants to check my cholesterol every 4 months.  With a $20.00 deductible and another $20.00 for the lab work.  That’s $10.00 per month average.

Seeing the dentist every six months–or more often.  For me that’s $120.00 per year after insurance–another $10.00 per month.

The pressure in my eyes is borderline for glaucoma.  That’s another $8.00 a month average over the year to get that checked.

Health care includes first aid.  People with children are spending a lot on cuts and scrapes.  (Not to mention sprains and broken bones.)

Health care includes topical creams, like acne medication for teens.

Health care for the bankruptcy means test includes medical equipment–for a lot of people that’s glasses and contacts.

Then there’s the big stuff.  I’ve been seeing the same dentist for 35 years.  He’s warned me for 35 years that he’ll need to put crowns on my back teeth if I’m not more careful about grinding them.  I guess I didn’t listen.  That’s going to cost me $1200 next week!  For just one!   Ouch!

So, I’m spending $328 per month average on health care for a family of two–way over the $120 allowance.  And that’s if nothing else goes wrong this year.

(Will another tooth start to split–maybe.  Will I need new glasses–maybe.  My wife travels a lot for business–will she catch something on those long airplane flights–almost for sure.)

But the point is you, not me.  You and your family are probably spending a lot more that you first think, too.  Accurately budgeting your health care cost is an important step to getting your bankruptcy approved.

(When I got home from yesterday’s CVS trip, I noticed that I didn’t buy any toothpaste.  That was good for my point here.  Toothpaste, shaving cream and deodorant are “personal care,” not health care.   For your bankruptcy means test,  they are part of your food budget. )

Where’s the line between “personal care” and health care?  I think the line is mouthwash.  Mouthwash is personal care.  Anything that’s more like medicine than mouth wash is should go on the bankruptcy means test in the health care budget.

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