Chapter 13 Disposable Income lower than 7 means test

[peteisbroke]

I am pretty new to this but have been reading many, many posts. My wife and I are in the process of finding an attorney.

My question is: If my wife and I fail the means test for chapter 7 by something like $500.00, could the chapter 13 payment actually be close to $0. I am thinking this could be possible as my understanding is that you are allowed more expenses in 13 then in 7, or at least the amount of an expense seems to allow a more liberal $ amount than the IRS guideline in 7.

Is this correct or am I confused?

[lillymarlene]

I'm not certain, but I think if you were that close, just $500 over the means, I would think you could still file chap 7. Others with more experience probably have some more ideas.

I myself am a below the means chap 13 filer. I wanted to be able to keep my paid for car, and a few other non-exempt assets. My payments are around $200 per month, but I've seen a few people around here that have payments for a lot less, around $100 per month. Along with disposable income, I think it also goes by how much debt you have, too.

[justbroke]

This is the area of bankruptcy law practice that separates the experienced attorneys from the inexperienced (and incapable) attorneys. It also depends heavily on your District and how a "hypothetical" Chapter 13 would work. In some Districts, they do not like or allow "$0" Chapter 13s since they consider them back-door Chapter 7s. In that case, your Chapter 7 Means Test may show a DMI of $500 while the Chapter 13 DMI shows $0.

[peteisbroke]

So if if the district doesn't like a 0$ Chapter 13, I would assume they would just disallow some of our expenses so that you end up at some point they feel is appropriate?

This is the area of bankruptcy law practice that separates the experienced attorneys from the inexperienced (and incapable) attorneys. It also depends heavily on your District and how a "hypothetical" Chapter 13 would work. In some Districts, they do not like or allow "$0" Chapter 13s since they consider them back-door Chapter 7s. In that case, your Chapter 7 Means Test may show a DMI of $500 while the Chapter 13 DMI shows $0.

[justbroke]

So if if the district doesn't like a 0$ Chapter 13, I would assume they would just disallow some of our expenses so that you end up at some point they feel is appropriate?

In those Districts, they may require you to actually contribute "something" to the unsecured creditors. The specific practice varies across Districts. In Florida, $0 Chapter 13 plans are okay. I think Ohio is one where they are not allowed -- they don't like the so-called back-door Chapter 7.

This is where a really good attorney, practicing in your area, could help navigate the District-specific peculiarities. Additionally, you may be missing some expenses! You could potentially add some term-life insurance. You may have forgot about other expenses that you don't really thing about. Do you have excess home-energy costs? Do you have telecommunication expenses necessary for the production of income or for the health and safety of your family?

[peteisbroke]

I makes sense that a good attorney can make this work out well. The first one we went to went through our expenses very quickly, looked into the air and said how would $450.00 a month sound for a Chapter 13 payment. Five minutes later he said "we could try a 7, it will run you $3300.00 dollars and I will give it a try, if it doesn't work then we will go for 13". I am still looking for an attorney.