Expert: Mark J. Markus- California Bankruptcy Attorney - 8/13/2009

Question
I am currently unemployed and receiving unemployment. My wife does still have her job. Income wise, we went from about $120K to now about $67K between her work and my unemployment. We were barely keeping up at the $120K (which is our fault). Anyway, our house is in the redemption period of foreclosure. I see no way around bankruptcy. We have an opportunity to rent a house from a friend near where my wife works. I talked to an attorney that said not to move. The expenses will be better for qualifying us for Chapter 7. She also said not to sell things which we have been doing just to get by. 1. What is the difference if I move? I still owe the money that the house sale didn't cover. 2. What is wrong with selling stuff? I need to keep the lights on. I worked out a budget and with the savings of the house, we will be able to live on unemployment and my wife's income. Of course we wouldn't be paying the credit cards, the left over money the house didn't bring in the sale, nor the left over money we owe on the car that they repoed. I don't want to pass up this house. I may not be able to get credit from a stranger to rent a house.

Answer
By moving and admitting that you will not be making any further payments on the mortgage, you risk an objection by the US Trustee to using the mortgage payments as an expense item.  I have no idea if you need them or not without going through a comprehensive consultation, but if a client is near the limit, I always advise they pretend to hold onto the property until after the bankruptcy case is filed.   You can always let it go after.  Plus, it's often much better to have the foreclosure sale occur after the bankruptcy case is filed, for tax reasons.

As far as selling stuff goes, it's not really a problem, as long as you keep track of names/addresses of the parties you sell to, and the amounts you sold for, but that is all income which needs to be reported and can affect the means test calculations.   You also need to list any such sales which occur within 2 years prior to filing your case, so it's a matter of A. increasing the amount of work which needs to be done to file your case; and B. can possibly affect your eligibility to file Chapter 7 bankruptcy.

Of course, you have to balance all the above with your practical concerns that you listed.  You need to discuss this all with your attorney because he/she is in a much better position to evaluate the consequences of whatever options you choose.

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