Looking into BK. Question about income

[txgirl2012]

My husband and I's income is $4590 and we each do 1099 work roughly 1000 extra a month total. We figured up our permanent expenses of around 3400 but that doesn't account for any entertainment, hair, toiletries. This lawyer did a mock means test and our payment would be like 600 a month. My question is, our 1099 income varies so much, especially mine since I'm a Realtor. I had 3 closings in April so that's distorted my income, years past it's been very low.

I sent him a budget with every expense I could thing of. Dogs, hair, family trips, entertainment, glasses, medical deductible.

I'm wondering if the IRS standard is just what they say sorry with about food, because I'm thinking those food standards aren't really true. There's no way we could eat on 500 a month unless we ate ramen. We can't afford 600 a month, we might as well pay off our debt. He said our disposable income is 2,000 a month, and that's what kinda payment they would want.

Does anyone have any advice?

[justbroke]

The IRS food standards are quite accurate. The "national" standard for two people is $583. Combined with out general items, and a $231 misc category, the total for food, clothing, and other items is $1,083 per month for two.

If you're eating $500/month in food, that's not Ramen noodles... I've been there while in college and it's certainly no fun. When I filed Chapter 13, I was earning over $175K a year. Yes, my $7,000+/month payment was mind boggling, but I learned to budget like anyone else is required to do in a Chapter 13. There was no more eating out whenever I felt like it, but I could eat out by sensibly budgeting. Some additional budget money can come from other categories with a smart reorganization plan. For example, I had two cars, but based on the National Allowance of $489/car, I realized an additional $200/month per car in my "budget". While my food budget was $800 a month (IRS standards), 2 teenagers can eat $200/week just by themselves (been there done that). You just have to get smart.

If your money fluctuates so much, you probably won't like a Chapter 13. A Chapter 13 is really for someone with "regular" income, so that there isn't a guess as to just what you have to pay bills and pay the creditors (via the Trustee).

Do you have cars (plural)? Do they have loans? Your budget seems really low. Do you have a home? Are you renting? What's the rental allowance. Your $3,400 in expense seems REAL LOW unless you listed your NET income and not your GROSS income.

[txgirl2012]

Thank you! The lawyer took all of our expenses in and our real world budget based on IRS and other number is $0 but the means test says something different. How does that work?

[justbroke]

There can be a difference between the so-called IRS Financial Collection Standards and what you show as your "actual" budget. The IRS is very minimalist and there could be some cost differences. For example, heating in the northeast could exceed the IRS standard. Electricity in Florida may also exceed the standards. The Means Test is what they call a completely arbitrary "mechanical" test to determine whether a presumption of abuse arises in the case. Then they look at your Schedule I/J which would almost always have a different number.

Schedule I and Schedule J are actual and since the Means Test does a six-month lookback and uses these IRS numbers for expenses, it could skew what your actual "disposable" income should be.

A major case known as the Lanning decision was issued from the Supreme court which relaxed, somewhat, the way the Means Test works within a case. However, most jurisdictions still look to the Means Test first, then to the actual schedules... especially when they differ significantly (please don't ask me what defines significantly as it could be $1 or $1,000... I just don't know).

[txgirl2012]

Okay, it's very frustrating because these lawyers want a down payment before they really crunch you real numbers, and I'm just having anxiety because on paper we look like we have 2,000 in disposable income to one lawyer, the next 400, the next 600, and I don't know who to believe.

[justbroke]

Keep looking until you are comfortable. The attorneys, on a free consult, are not going to give away the candy store to someone window shopping. The free consult is simply to quickly look and it really does require a deeper dive.

[dmc-2008]

Laughing! I just bought some cup of noodles to stretch my budget and I am actually loving them! :-)