Legal Question in Bankruptcy in Minnesota

How does a foreclosure affect monthly budget for chapter 7

I am going to have to file bankruptcy in the near future. I found information on the means test online and I definately qualify for a chapter 7 based on median income, as well as my average income over the last 6 months compared to the federal standards for housing, utilities, etc.

My home will soon be in foreclosure and we cannot afford to keep it due to a significantly reduced income. I was told that even though I pass the means test I could be forced into a chapter 13 because I cant list any housing expense on the schedule J because I am not currently making payments on the house.

When we are forced to move in a few months we will of course have a housing expense at that time and should not have any problem qualifying for a chapter 7. We have creditors after us constantly and I think we need to file soon, but I don't know what to do because of the house.

Does the court/trustee ever consider what your housing payment will be rather than simply excluding it?


Asked on 11/24/07, 1:16 am

1 Answer from Attorneys
David Kelly-952-544-6356 Kelly Law Office

Re: How does a foreclosure affect monthly budget for chapter 7

Your question is a timing question. It's not a question of if you should file but when. I have in the past sat on cases for months until I felt the time was right.

What you describe is theoretically possible - but in most cases very unlikely. There is a tolality of the circumstances test as to whether there is abuse, and the circumstances would include the lack of a housing payment - but I don't think that alone would kill a Chapter 7 for you.

It is not unusual for me to spend a couple of months putting together a case before filing. By then you might be close to being ready to move anyway, or you might at least have a lease signed for where you will be moving next. I would recommend that you get to a lawyer and get started on the process.

This is for general information only and does not create an attorney-client relationship. You can find more info on my site at mn-bankruptcy.com

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Answered on 11/26/07, 11:41 am


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