Means Testing and Car Lease

[Cin929]

New to this forum as we are filing for Chapter 13 in the coming weeks. Just heard from our attorney about our Trustee Payment (rough draft). We are at 100% payback and there is a big difference between our I&J and our DMI. Part of this is because they took our car lease (3 year lease with 2 more years remaining) and divided the remaining lease payment of 2 years into 60 months. So that payment is about $400 less on the means test. That's a big difference. I questioned my attorney, he confirmed that this was the correct way of calculating it....REALLY? We would try to get rid of it, but we recently bought a car to replace an older car before filing for bankruptcy, getting that was tough enough with our tough credit scores. That extra $400 makes our payment plan unmanageable. The attorney is trying to bridge the gap by taking a closer look at our expenses to make sure we have everything that is allowable documented but I know there is not $400 worth. Now what?

[enginegirl]

they did the exact same thing with my car.... and it really does not make sense..... anyone have any ideas??

[momofthree]

Not sure about with a lease, but with the loan, I *believe* if you pay it thru the plan (rather than directly), then it shouldn't affect you. Of course, then you'd have to pay the trustee fee on the amount, but at least you wouldn't be so far in the hole each month....

[Cin929]

momofthree -- you are right if it's added through the plan it would be okay. But our attorney doesn't want to go that route because in essence I'd be paying 3 extra years on a lease that I would no longer have. On top of which I would have to then purchase a car (not an easy feat during Chapter 13 I know) to replace the leased car. UGH! Had no idea that would work out this way.

[ValleYum]

Part of this is because they took our car lease (3 year lease with 2 more years remaining) and divided the remaining lease payment of 2 years into 60 months. So that payment is about $400 less on the means test. That's a big difference. I questioned my attorney, he confirmed that this was the correct way of calculating it....REALLY? We would try to get rid of it, but we recently bought a car to replace an older car before filing for bankruptcy, getting that was tough enough with our tough credit scores. That extra $400 makes our payment plan unmanageable. The attorney is trying to bridge the gap by taking a closer look at our expenses to make sure we have everything that is allowable documented but I know there is not $400 worth. Now what?

Instructions for Line 47 on 22c read: The Average Monthly Payment is the total of all amounts scheduled as contractually due to each Secured Creditor in the 60 months following the filing of the bankruptcy case, divided by 60.

We had the same experience. It was horrifying to see a $400/mo car payment be reduced to under $200/mo on 2 cars! But the offset in the ownership expense (at least in a Chapter 7) on the Means Test made up for the difference.

But I looked on the form 22c and I see this expense entry on Line 28 and 29 there as well.

$496 IRS Standard Ownership Expense
-$400 Monthly payment
$ 96 Ownership Expense for Line 28 if incorrectly figured based on entire monthly payment amount

$496 IRS Standard Ownership Expense
-$200 Monthly payment average over 60 months from Line 47
$296 Ownership Expense for Line 28

Does that help any??

[Cin929]

Instructions for Line 47 on 22c read: The Average Monthly Payment is the total of all amounts scheduled as contractually due to each Secured Creditor in the 60 months following the filing of the bankruptcy case, divided by 60.

We had the same experience. It was horrifying to see a $400/mo car payment be reduced to under $200/mo on 2 cars! But the offset in the ownership expense (at least in a Chapter 7) on the Means Test made up for the difference.

But I looked on the form 22c and I see this expense entry on Line 28 and 29 there as well.

$496 IRS Standard Ownership Expense
-$400 Monthly payment
$ 96 Ownership Expense for Line 28 if incorrectly figured based on entire monthly payment amount

$496 IRS Standard Ownership Expense
-$200 Monthly payment average over 60 months from Line 47
$296 Ownership Expense for Line 28

Does that help any??

Yes, it does make up some of the difference. I did realize it after my original post. We got into a higher end lease with some hesitation and now we are stuck, should have listened to that gut instinct a year ago. It does end up being about $200 less in the long run, not as bad as $400. Just a hard pill to swallow. Thanks for the input guys!