Bankruptcy

Move In With My Parents Or File Bankruptcy?

By Mark Buckley, Rhode Island Bankruptcy Lawyer

There’s No Place Like Home

Many adults would love to return to childhood.  A comfortable bed and three meals a day in exchange for a few chores.  Financial stress was never part of the deal.

Move out of the nest, however, and the pressures of life make their grand entrance.  Less than perfect jobs, expensive rents, and a myriad of new expenses start to take their toll.  This is why so many young people become part of the boomerang generation. 

A few wrong financial moves and a little misfortune can cause anyone to ask:

1. Should I move in with my parents to save money and repay excessive debt?
2. If I do move back, will it be more difficult for me to qualify for bankruptcy relief?

A Case Study

I recently spoke with a young married couple that moved in with parents in order to save money.  Substantial credit card debt had accumulated while both were working.  It later became unpayable when their income dropped to $45,000.

As we explored various debt relief options, we considered the possibility of filing Chapter 7 bankruptcy.  In Rhode Island, the median income for a household of two people is presently $ 62,806.  This couple could easily pass the means’s test, but would their case be so simple?

Moving back home created a big problem:  their new living expenses were now only a fraction of what they once were.  As long as they continued living with their parents, filing a Chapter 7 bankruptcy became impossible.  There was now enough income to finance a five year Chapter 13 repayment plan.  And they had no intentions of living there that long.

In contrast, their old living expenses included substantial rent, utilities and groceries.  It was easy to see  they had no ability to repay their debt.   That would have been the perfect time to file for a Chapter 7 bankruptcy.  It could have been a very simple case.

Move home or File Bankruptcy?

Don’t try to reclaim your old bedroom, unless you are prepared to do the following:

1. save enough money while living there
2. stay there long enough to completely eliminate your debt
3. possess the discipline to not waste your positive cash flow

On the other hand, if you fail in any of these three requirements, stay right where you are and consider calling a Chapter 7 bankruptcy lawyer to understand your options.

Mark Buckley is a Rhode Island bankruptcy lawyer and CERTIFIED FINANCIAL PLANNER professional.  If you live in Rhode Island and have debt problems, call (401) 467-6800.

Full post as published by Bankruptcy Law Network on January 30, 2010 (boomark / email).