New Chapter 13 Question - Means Test

[BluesCrew]

Since we are filing Chapter 13, what is the importance of the Means Test? Also, we have expenses over the allowance, how does this impact our payments? I am probably over-thinking this but I am trying to calculate what our payments will be before we meet with the lawyer.

[justbroke]

The Means Test is used to determine what your disposable monthly income, or DMI, would be in the Chapter 13. The DMI is how much money you have left over after "allowed" expenses and debt payment. Whether you are allowed to go over any specific expense category is fact specific. By "fact specific" I mean that you would need documentation that there is something extraordinary that requires you to pay more in a particular category.

For the most part, whatever you are currently paying for your mortgage (and rent) will be used as-is (without regard for the USTP allowances). However, if you claim that your non-rent/non-mortgage expenses (such as heat, electricity) exceed the allowances, you'll need a really good reason and documentation. Most Trustees will fight tooth and nail to prevent you from going over most of the expense categories. You'll hear the word "belt-tightening" often or that your creditors are suffering while you're living in luxury. Don't be afraid of those words, but they set the tone for the potential adversarial relationship between you and the Chapter 13 Trustee.

Yes. You are probably over-thinking this. Without a lot of context on how this actually works, you may either be delightfully surprised or mortified by the number the attorney gives you. There are many other factors that go into how to come up with the DMI which also includes Schedule I and Schedule J (two other forms that are completed for a Chapter 13).

You can try the online means test at Legal Consumer to get an "idea" of what your plan payment "may" be. But realize that there are other factors (are you cramming down vehicles, stripping liens, getting rid of secure property).

Welcome to the forum and Chapter 13!

[BluesCrew]

Thank you, justbroke. We have two vehicles and income tax. We are not behind on our home, so will continue to pay outside of our plan and have only $8,000 in credit card debt. We are filing only to save the vehicles and get caught up. We don't live extravagantly, but we live and Texas and electric bill can easily run over $350 per month during the summer.
To answer your question, our vehicles are too new to cram down and or getting rid of secured assets. We have $85,000 of vehicle debt, furniture debt of $12,000 and income taxes of $12,000.
So, if I understand you correctly, our payment will be roughly our secured debt, income taxes and the balance of our income less the allowances, not our real living expense?

[justbroke]

So, if I understand you correctly, our payment will be roughly our secured debt, income taxes and the balance of our income less the allowances, not our real living expense?

Your payment is your disposable monthly income (DMI) plus your secured debt, priority tax debt, 10% commission to the Chapter 13 Standing Trustee, and any residual attorney filing fees and monitoring fees.

The real key is to have an attorney that will fight for you and make sure you have a livable (and confirm-able) plan. Some Trustees, and even attorneys, like to throw around the word "belt tightening". I just say, it's already tight, and that's why I filed! Best of luck to you.

[BluesCrew]

Thank you! That's what I thought. We went today and filed an emergency shell filing, basically to just get a number and will sign the plan with a lawyer this coming Thursday. I pressed the paralegal for an estimate of our payment and she said as much, but the unsecured percentage amount would factor into it. She also stated that she would not know until all our creditors confirmed. Does this make sense?

[justbroke]

Well, the amount going to unsecured creditors (also known as the percent to unsecured creditors) really doesn't matter (unless you are in a 100% plan). The only thing that really matters to you is how much you have to take out of your pocket and pay into the plan.

(If you're in a 100% plan then it would matter how many creditors file. If you're not in a 100% plan it makes no difference.)

[BluesCrew]

How do you determine if you are in a 100% plan?

[LadyInTheRed]

If your DMI is high enough to pay off all arrears on secured debt and all priority (taxes) and non priority unsecured claims, plus trustee fees, you will be in a 100% plan. Your attorney will calculate your DMI. The percentage to non-priority unsecured claims (credit cards) is determined by what is left after paying everything else.