Trustee is not looking at 6 months of prior income as stated in the law

[louie123]

Hi All,

I have a unique situation here.

1. I filed on March 13 of 2021.
2. My new job which is higher paying started on December 1st of 2020.
3. 6 months prior to my filing date, includes 2 months of a lower paying job, 1 of which I was out-of-work for a month, and 3-1/2 months of my higher paying job.

My proposed 60-month Chapter 13 plan is falling apart. The payment myself and my lawyer concluded on, factoring in my last 6 months of income which was in line with the means test was $765/monthly.

According to my attorney, the trustee filed an objection stating they are not going to look at the previous 6 months, they are going to look at my current income after filing and use that amount to come up with a payment that is literally close to 4x the amount - now $2,650.

I honestly cannot afford that payment and it makes no sense to me how the trustee can avoid the bankruptcy laws and look "ahead" at my income rather than the last 6 months.

I just don't understand how this works, I know the courts follow the means test, however I have expenses that are unavoidable like my mortgage, my real estate taxes, car, medical bills not covered by insurance, etc. etc.

If they follow the means test so strictly, then what is the purpose for the Schedule I and Schedule J?

I would appreciate any help at the moment because I can honestly say for the first time in my life I an contemplating either leaving the country or committing suicide. My life is over in my opinion, my debts are over $400K of unsecured, I will never be able to pay them off and I simply cannot afford the trustees recommendation at $2,600/month - it's just not possible.

Please help.

[shipo]

Others with more experience will chime in here I'm sure, but I do have two comments:

• Chapter 13s are often as much (or more) "forward looking" as they are based upon the 6-month lookback period.
• Just because a Trustee is filing a challenge and is asking for $2,650 per month doesn't mean he or she will prevail. This is where your attorney gets to earn his or her money.

[justbroke]

First, please be aware that your payment to the Trustee could include your mortgage payments, arrears (if any) as well as your car payments all bundled together.

Second, Chapter 13s are not based on the Means Test. The Means Test, as one judge quoted, is only the begining of the inquiry. Since the Lanning decision, all Chapter 13 payments (calculation of DMI) is based on a combination of the Means Test (as the minimum amount to pay) and Schedule I/Schedule J.

Finally, your attorney can and will object to the Chapter 13's assertion, but it reads as though you do have disposable monthly income (DMI). That DMI is more than what's on the Means Test (MT) because the MT looks backwards -- which is almost never a real view of today. Schedule I/J looks forwards.

It's not the end of the world. Work with your attorney and try to find why the Trustee's number is so high. You may need to adjust your Schedule I/J if you were depending heavily on the value on the means test. A Chapter 13 plan is more a contract negotiation than the simple means test. I can't answer any questions related to why you concentrated on the number of the Means Test and not the bottom line number on Schedule J.

If your attorney told you that the DMI number on the Means Test is what you pay, that's simply incorrect (even for the Means Test). Unless you are current on mortgage or cars, all bankruptcy districts require the debtor to pay all secured debt through the Trustee. (In some districts, even those that are current must pay through the Trustee.) Your first goal is to find out what's included in the Trustee's number.

So, you need to sit with your attorney and ask these questions:

• does the Chapter 13 Trustee's amount include my home?
• does the Chapter 13 Trustee's amount include my car?
• Did we miss expenses on Schedule I/J that I should include?
• did the Trustee correctly calculate based on Schedule I/J

[flashoflight]

I won't repeat what JB said, but read it over and over again. It's all the truth.

If you can post how the trustee came up with the $2650 number, that would help us figure out what is going on. Need to know if your car lease, mortgage, and secured debt arrearages are included or not. Does your mortgage have escrows?

We also need to know if you have any non-exempt equity, especially in your home. Pennsylvania does not have a homestead exemption so you would need to use federal exemptions to protect your home, which isn't a whole lot better. This is related to the "best interest of the creditors in a ch7" test. So I'm not confident of your earlier post that you were able to exempt your house. Non-exempt equity can raise your plan payment well beyond the DMI number in J.

[louie123]

First, please be aware that your payment to the Trustee could include your mortgage payments, arrears (if any) as well as your car payments all bundled together.

Second, Chapter 13s are not based on the Means Test. The Means Test, as one judge quoted, is only the begining of the inquiry. Since the Lanning decision, all Chapter 13 payments (calculation of DMI) is based on a combination of the Means Test (as the minimum amount to pay) and Schedule I/Schedule J.

Finally, your attorney can and will object to the Chapter 13's assertion, but it reads as though you do have disposable monthly income (DMI). That DMI is more than what's on the Means Test (MT) because the MT looks backwards -- which is almost never a real view of today. Schedule I/J looks forwards.

It's not the end of the world. Work with your attorney and try to find why the Trustee's number is so high. You may need to adjust your Schedule I/J if you were depending heavily on the value on the means test. A Chapter 13 plan is more a contract negotiation than the simple means test. I can't answer any questions related to why you concentrated on the number of the Means Test and not the bottom line number on Schedule J.

If your attorney told you that the DMI number on the Means Test is what you pay, that's simply incorrect (even for the Means Test). Unless you are current on mortgage or cars, all bankruptcy districts require the debtor to pay all secured debt through the Trustee. (In some districts, even those that are current must pay through the Trustee.) Your first goal is to find out what's included in the Trustee's number.

So, you need to sit with your attorney and ask these questions:

• does the Chapter 13 Trustee's amount include my home?
• does the Chapter 13 Trustee's amount include my car?
• Did we miss expenses on Schedule I/J that I should include?
• did the Trustee correctly calculate based on Schedule I/J

I do not believe the trustee’s number includes my home or my car. However, I’m verifying this right now with my attorney.

I was never behind on my home or car. My taxes are not escrowed.

I’m assuming (but need to get clarification) that with my new job, the I/J forms are showing a DMI of $2,650, that’s my assumption. And previously, when using the means test “ceilings” for each expense my DMI was $765/month.

Am I correct that it is not a dollar-for-dollar expense for
1.) Mortgage
2.) Car
3.) Property Taxes
4.) Etc.

My attorney told me there are ceilings to all of this as defined by the “national standards”.

However I truly thought the TRUE expenses of my house, car, taxes, etc in schedule I/J in a Chapter 13 calculate what’s left over.

Is this not true?

[justbroke]

Am I correct that it is not a dollar-for-dollar expense for
1.) Mortgage
2.) Car
3.) Property Taxes
4.) Etc.

It is dollar for dollar expense. This is allowed on both the Means Test and Schedule J. While there are "national standards" those are hardly used when it comes to your mortgage. For vehicles there is a national standard of about $533/month per car up to two cars. There's also a regional standard for car repairs and maintenance.

My attorney told me there are ceilings to all of this as defined by the “national standards”.

They are not technically ceilings when it comes to a mortgage. For example, the standard for my mortgage was about $2,400 but with my normal payment (which was > $3,300 escrowed) plus my arrears , my payment came to $5,000 a month. Not an issue.

It is really based upon what a reasonable person would be able to afford given their income and the location of the property. While there is anecdotal evidence that some Chapter 13 Trustees have demanded that the debtor get rid of the house, most courts have concluded that the home is "required" for the debtor to reorganize successfully under a Chapter 13. In other words, don't read a lot into those numbers.

However I truly thought the TRUE expenses of my house, car, taxes, etc in schedule I/J in a Chapter 13 calculate what’s left over.

Yes, the true expenses of your house, car and taxes go on Schedule J. Unless the car is over $533, or you have a significantly un-affordable home, the Chapter 13 Trustees (and most certainly the courts) don't question the amount.

Good or bad, your attorney may have confused you more than helped you.

You need to determine, first, whether the Chapter 13 Trustee's number includes the payment of your secured property (car, home). Also if you're single then you're going to pay a lot into a Chapter 13. There's no way around it unless you have a really big mortgage payment and a sizable car payment.

[flashoflight]

The max for housing is the higher of the housing standard in your area or your mortgage PITI like as if you are escrowed. So you can add home insurance and prop taxes back in.

The car is negotiable. $500/month car loan or lease yes. $1000/month car loan or lease hell no. Somewhere in between, don't know where is the line.

How much is the net equity in your house?

[flashoflight]

Yes, the true expenses of your house, car and taxes go on Schedule J. Unless the car is over $533, or you have a significantly un-affordable home, the Chapter 13 Trustees (and most certainly the courts) don't question the amount.

The car loan / lease can be well over $533. But ridiculous car payments like $1k won't fly. I know $770/month worked when the other car was $250/month with a debtor friend.

[louie123]

First, please be aware that your payment to the Trustee could include your mortgage payments, arrears (if any) as well as your car payments all bundled together.

Second, Chapter 13s are not based on the Means Test. The Means Test, as one judge quoted, is only the begining of the inquiry. Since the Lanning decision, all Chapter 13 payments (calculation of DMI) is based on a combination of the Means Test (as the minimum amount to pay) and Schedule I/Schedule J.

Finally, your attorney can and will object to the Chapter 13's assertion, but it reads as though you do have disposable monthly income (DMI). That DMI is more than what's on the Means Test (MT) because the MT looks backwards -- which is almost never a real view of today. Schedule I/J looks forwards.

It's not the end of the world. Work with your attorney and try to find why the Trustee's number is so high. You may need to adjust your Schedule I/J if you were depending heavily on the value on the means test. A Chapter 13 plan is more a contract negotiation than the simple means test. I can't answer any questions related to why you concentrated on the number of the Means Test and not the bottom line number on Schedule J.

If your attorney told you that the DMI number on the Means Test is what you pay, that's simply incorrect (even for the Means Test). Unless you are current on mortgage or cars, all bankruptcy districts require the debtor to pay all secured debt through the Trustee. (In some districts, even those that are current must pay through the Trustee.) Your first goal is to find out what's included in the Trustee's number.

So, you need to sit with your attorney and ask these questions:

• does the Chapter 13 Trustee's amount include my home?
• does the Chapter 13 Trustee's amount include my car?
• Did we miss expenses on Schedule I/J that I should include?
• did the Trustee correctly calculate based on Schedule I/J

Here’s the attorney’s response to these questions.
does the Chapter 13 Trustee's amount include my home?
Your mortgage is to be paid outside of the plan / trustee payments. You make your mortgage payments directly to the mortgage company. The allowable living expenses for a household size of one, based on the Chapter 13 Calculation of Your Disposable Income (Official Form 122C-2), for Mortgage / Rent in Lackawanna County is $828.00 (Line 9a). Non-Mortgage (i.e. utility and home maintenance) is $563.00 (Line 8).
·does the Chapter 13 Trustee's amount include my car?
Your auto loan is to be paid outside of the plan / trustee payments. You make your auto loan payments directly to the lender. The allowable operating costs for transportation in the Northeast Census Region is $242.00, based on the Chapter 13 Calculation of Your Disposable Income (Official Form 122C-2) (Line 12), for ownership / lease expenses it is $521.00 (Line 13a).
·Did we miss expenses on Schedule I/J that I should include?
I don’t believe so. However, the Trustee is base his calculation of disposable monthly income off of the Chapter 13 Calculation of Your Disposable Income (Official Form 122C-2).
·did the Trustee correctly calculate based on Schedule I/J
The Trustee bases his calculation off the Chapter 13 Calculation of Your Disposable Income (Official Form 122C-2). He does not use Schedule I/J.


Can you please send me the calculation of $2,600/month ($156K total) for 60 months?


Yes, I will forward as soon as I can. Also, I attached a link from the Department of Justice that breaks down the numbers: https://www.justice.gov/ust/means-testing

[louie123]

The car loan / lease can be well over $533. But ridiculous car payments like $1k won't fly. I know $770/month worked when the other car was $250/month with a debtor friend.

My car lease is $779/month.

[louie123]

The max for housing is the higher of the housing standard in your area or your mortgage PITI like as if you are escrowed. So you can add home insurance and prop taxes back in.

The car is negotiable. $500/month car loan or lease yes. $1000/month car loan or lease hell no. Somewhere in between, don't know where is the line.

How much is the net equity in your house?

The equity I have in my home is exempt.

[louie123]

It is dollar for dollar expense. This is allowed on both the Means Test and Schedule J. While there are "national standards" those are hardly used when it comes to your mortgage. For vehicles there is a national standard of about $533/month per car up to two cars. There's also a regional standard for car repairs and maintenance.

They are not technically ceilings when it comes to a mortgage. For example, the standard for my mortgage was about $2,400 but with my normal payment (which was > $3,300 escrowed) plus my arrears , my payment came to $5,000 a month. Not an issue.

It is really based upon what a reasonable person would be able to afford given their income and the location of the property. While there is anecdotal evidence that some Chapter 13 Trustees have demanded that the debtor get rid of the house, most courts have concluded that the home is "required" for the debtor to reorganize successfully under a Chapter 13. In other words, don't read a lot into those numbers.

Yes, the true expenses of your house, car and taxes go on Schedule J. Unless the car is over $533, or you have a significantly un-affordable home, the Chapter 13 Trustees (and most certainly the courts) don't question the amount.

Good or bad, your attorney may have confused you more than helped you.

You need to determine, first, whether the Chapter 13 Trustee's number includes the payment of your secured property (car, home). Also if you're single then you're going to pay a lot into a Chapter 13. There's no way around it unless you have a really big mortgage payment and a sizable car payment.

My home mortgage is $1,376/month, not including taxes or insurance. Taxes are $6,900/year and insurance is $1,400/year.

[justbroke]

Here’s the attorney’s response to these questions.
does the Chapter 13 Trustee's amount include my home?
Your mortgage is to be paid outside of the plan / trustee payments. You make your mortgage payments directly to the mortgage company. The allowable living expenses for a household size of one, based on the Chapter 13 Calculation of Your Disposable Income (Official Form 122C-2), for Mortgage / Rent in Lackawanna County is $828.00 (Line 9a). Non-Mortgage (i.e. utility and home maintenance) is $563.00 (Line 8).
·does the Chapter 13 Trustee's amount include my car?

Well the way it works on the Means Test is a little more complex. What you probably have on your MT line 9c is $0.00. That's because they don't allow you to double count. Your "actual" payment is on line 33a. Make sure that line 33a includes your PITIA (Principal. Interest, property Taxes, Insurance, and Association dues).

So, yes, the county related is on line 9a and your current mortgage (total PITIA) is deducted and put on 9c. If your total PITIA is more than the county, then $0 gets entered on that line. However, to prevent double counting, the total PITIA is also on line 33a.

I don’t believe so. However, the Trustee is base his calculation of disposable monthly income off of the Chapter 13 Calculation of Your Disposable Income (Official Form 122C-2).
·did the Trustee correctly calculate based on Schedule I/J
The Trustee bases his calculation off the Chapter 13 Calculation of Your Disposable Income (Official Form 122C-2). He does not use Schedule I/J.

You wrote that your B122C (Means Test) shows an amount which is 25%. If the Trustee is taking the amount on your B122C and you say that's something that's 1/4th of what they are now asking, there's a miscommunication somewhere.

[flashoflight]

Your lease is too high, especially if the trustee insists on using the means test. Even with J, it would not be easy to convince the trustee to let you keep the car at $780/month. In other words, why should your unsecured creditors subsidize a nicer car than average at their net expense of $280/month? I would surrender the leased car and buy another car with an auto loan with a payment no higher than $500/month. There is no way you can absorb a $280 hit every month when every last extra dime is going to be devoted to your unsecured creditors. Besides that, you will have to turn in the leased car eventually anyway.

On the means test, the housing expense for your county minus your mortgage should be zero because it's negative. Because of that, you will deduct the actual monthly mortgage payment later on in the means test instead of the county housing allowance. That's how you get the higher of your mortgage or your county housing allowance.

The folks that get low trustee payments are those with big mortgages, big mortgage or tax arrears, two financed vehicles as a couple, past history of 401k contributions, big recurring medical expenses with receipts, alimony, child support and big charitable contributions with receipts. If you don't have that, your trustee payments are going to be high. If you want to succeed in a 13, you will have to learn how to budget and stick with the budget that the trustee will eventually agree to. The trustee budget is your real budget. Get all your budget items done right with a fine toothed comb so you have the best chance of getting through this. You won't be eating out much if you want to survive the 13. Like I said earlier, chapter 13 won't give you room for a $280 overage in your car lease. It's super tight.

[justbroke]

I would echo exactly what flashoflight has just written. I totally missed the high lease payment (the Trustee would, and probably did, reduce it to $533/month). Also, if the lease ends during the Chapter 13, that could be problematic too.

louie123 you need a good sit down with your attorney to review all your expenses. There is something missing here.