Chapter 13 Disposable Income

[dwright]

Met with an attorney today, she informed me that my payment in a Chapter 13 would be based off of the means test.

I was under the impression through various items I have read that this is incorrect, and that we would put together a budget on what is available to me..
i.e.
my monthly expenses for a pet, etc...
who is correct?

[optimistic1]

If you are above median, the DMI disposable monthly income is a good predictor for your payment amount, although, if you need to pay X amount into your plan, you may need to show to the court, that you can live off of X amount of income per month towards expenses that cost X amount per month. Expenses that may be below or above the IRS standards that are utilized in the means test.

It all just depends.

[justbroke]

I am not familiar with what you have read, but here's the skinny on Chapter 13 payments.

First, part of your payment is based on your attorney fees included in the Plan, priority unsecured debt (IRS taxes, other priority debt), your secured payments included in the plan, and then any Trustee fees for dealing with those items. Whether secured debt is included in the plan and paid through the Trustee is District specific.

Now, the second part comes from the calculation from Form B22C. This is sometimes referred to as the Means Test, but is the Calculation of Current Monthly Income and Disposable Monthly Income. The means test is really a misnomer when referring to a Chapter 13.

The disposable monthly income (DMI) is calculated using Form B22C is used for above-median-income filers, and comes from Schedule J for below-median-income filers. In any event, the starting point for the unsecured payments comes from the DMI.

If your monthly payments for your home, car, attorney fees, back taxes are $1,200/month, and your DMI is $300/month, your payment to the Trustee will probably be $1,500/month. (If your secured payments are not paid through the Trustee, then your payment to the Trustee would be less.)

[falken]

[QUOTE=justbroke;296050]
The disposable monthly income (DMI) is calculated using Form B22C is used for above-median-income filers, and comes from Schedule J for below-median-income filers. In any event, the starting point for the unsecured payments comes from the DMI./QUOTE]

Not always. My district uses Schedule J for above median also, I can link you to the courts official opinion on why if you are interested. Not sure how many other districts follow the same.

[justbroke]

Not always. My district uses Schedule J for above median also, I can link you to the courts official opinion on why if you are interested. Not sure how many other districts follow the same.

I do understand that a very few Districts perform it this way. However, Schedule J is not at all indicative of your Disposable Monthly Income in a Chapter 13.

Schedule J does not take into account, priority unsecured debt, payments on non-housing secured debt, and arrearages on secured debt. While those Districts use it as a "guide", it certainly does not calculate DMI.

As such, I didn't want to confuse the poster that Schedule J is definitive, for a Chapter 13, at all. Just look to line 8 (Transportation) which says not to include car payments. Then look to Line 13 (Installment Payments) which says not to include payments for secured debt (In Chapter 11 and Chapter 13 cases) included in the Plan. Too contradictory for me as an indicator of DMI, regardless of what a small number of Districts use it for.

I will add, though, that Form B22C Line 59 Disposable Monthly Income, may also not be true. Since it is based on your Current Monthly Income (CMI) which is a lookback, the DMI may on that form may be wrong was well. Any serious practitioner will use it as a starting point.

I totally understand why those minority Districts want to use Schedule J. It's because Schedule J is supposedly an actual "current" view, but it does not take everything into consideration. I side with Congress on this issue and the BAPCPA amendments. They made it a very mechanical calculation for the DMI for the right reasons. Schedule J is too interpretive and subject to too much debate. It gives the Trustee too much power, in my book, and Congress sought to take most, if not all, of the subjectivity out of the process.

[keezeed]

If your monthly payments for your home, car, attorney fees, back taxes are $1,200/month, and your DMI is $300/month, your payment to the Trustee will probably be $1,500/month. (If your secured payments are not paid through the Trustee, then your payment to the Trustee would be less.)

If you had all that money per month why would you need to file CH 13 to begin with?

Not sure if I'm missing something here or not

[justbroke]

If you had all that money per month why would you need to file CH 13 to begin with?

I don't know what you mean by "all that money". You could quite easily become insolvent these days. Just imagine that you took a couple of 0% credit cards with a 9.99% interest for life. Then the Banks (not to get any one particular bank, we'll call Skank of America)... jack up your interest rate to 30% or more. This could make your payment go up $100 or more a month (depending on balance). Now consider the same thing, but on a Mortgage that has an Adjustable Rate.

All of a sudden, you don't have any "money" for any emergencies, and they will come.

Now imagine your home insurance tripled in 3 years (yes,k in Florida since the hurricanes). Then imagine property taxes increasing steadily.

It's easy to see that you'll be insolvent in no time.