Ch 13 or potential Ch 7??

[scuguy77]

So we completed Means Test (w/ attorney) and it is now negative ($-66) and this is whiteout addtl expenses (just standard + daycare + secured (car and taxes).

Our I/J reflect same (we can make a plan that pays all the secured + taxes in 5yrs) but leaves little for unsecured.

We are above median (by about double), what are chances we could do a Ch 7? (because of the negative means test)

or if we did ch 13 that trustee would raise payment (since according to means test its negative to begin with) …and there isn't a lot of room with our expenses (to make the plan work) ??

thank you

[ld2366eh]

What does your attorney say? If you file c7 you probably will be scrutinized because of your high income, but it can be done. I hope I am living proof. We are over median - about the same as you- and we filed chapter 7 in October. No presumption of abuse YET (have until jan 28).

[scuguy77]

I have not asked yet…as until recently my wife and I were pretty set on Ch 13 because of taxes …if we have to file April-July it will have to be Ch 13 but if we can hold-off until Nov or later then there is potential a Ch 7 would work better.

But of course thats assuming we could even file a 7 …

I wouldn't mind a 13 assuming they don't try to jack our pymt up (its pretty clear with negative on means test and very conservative expenses were not hiding or padding anywhere)

[LadyInTheRed]

If you pass the means test and your attorney thinks you have a good chance of getting past any totality of circumstances objection, I'm not sure why you want to be in a Chap 13 for 5 years when you can be done with a 7 in a few months. I know you have both IRS and student loan issues. But, you should be able to work out payment plans for both. Are the student loans federal loans?

[scuguy77]

Thank you!

I will certainly go over this with her (have a meeting next week), she has been super responsive and supportive.

We are current on all the student loans, and it would work since 1 of them is paid off this Nov (thus freeing up that money that could fund a IRS/State tax repayment plan)…but we'd have to hold off until then (thus far we haven't been accessed any taxes so not sure how fast they move)

We have a mix of federal/private though the one to be paid off is private.

Do you think if we did opt for the 13 that the negative means would work for us? (I think you might be in the same district as us (N. CA) sounds like you had a good ch 13 trustee exp (its a woman right?)

[LadyInTheRed]

If you have a negative means test and file Chap 13 anyway, the means test is irrelevant to your plan payment. It is your Schedule I and J that is important. You will need to show on those schedules that you can fund a feasible plan.

Didn't you say in another thread that you are still current on your credit cards? If you keep paying the student loans, stop paying credit cards and send at least something to the IRS each month, I bet you can put the IRS off until you pay off the one loan.

If you file a Chap 13 in the Oakland court, you will have the same trustee because she is the only Chap 13 trustee in that court. My plan was easily confirmed as originally filed. There was one expense my attorney told me I should be prepared to document, but it never came up. When I asked my attorney about the trustee, he said she is tough but reasonable. That reminds me, I need to go get a money order to send to her! Good thing I have this board to remind me! I need it sometimes.

[scuguy77]

Thank you! LdyInRed

Yes, we would be filing in Oak so same trustee…

According to I/J we can fund a plan to pay taxes and secured in full, but really not much left to pay unsecured. (0.5% I believe)…our expenses are in-line.

What is the process like? You file, then in about 30 days is 341 (where I assume you meet her) and then confirmed around that time or months later?

So your saying the Means Test only becomes relevant if we file Ch 7? Otherwise its all I/J? I will ask about the Ch 7…

I just don't want to go Ch 7 only to find out we'd be in 13, nor do 13 and find out she is unreasonable with payment amount.

Our original thoughts was to just get everything out there and dealt with. (Technically we don't owe any taxes, they still have to enter the ones from the audit), and we have to file amendments which will create the other taxes owed and file for this year … but just trying to look out ahead and get in front of things.

[LadyInTheRed]

I think my 341 was about 45 days afer I filed. Either the trustee or a representative will be there. It went very quickly. Just standard questions. Nothing specific about my petition. My attorney had not submitted the order approving my lien strip which is required for confirmation, so Ms. B recommeneded confirmation of my plan contingent on the entry of the order. My attorney submitted the order later that day and it was signed by the judge and filed within a couople of days. My plan is shown as being confirmed on the same day as the 341. My plan is very liveable. I have to be careful with my spending, but it is helping me form good habits in place of the bad habits that got me where I am. I save some months and have dip into savings other months.

In a Chap 13, there technically is no such thing as a means test. You use form b22C which is called "Statement of Current Monthly Income and Calculation of Commitment Period and Disposable Income" and is only slightly different from form b22a, the Chap 7 "Statement of Current Monthly Income and Means Test Calculation". If you show positive disposible income on form b22c, then the trustee would insist that your plan payment be no less than that amount unless there is some change in your disposible income that you can prove. But, because your disposible income on form b22c is negative, the only thing form b22c does is determine your committment period. Schedules I/J will determine your plan payment.

I really think you are looking at this backwards. Unless your attorney advises otherwise or thinks your chance of success is small, try for a Chap 7 first. You should only prefer a Chap 13 if you are trying to keep non-exempt assets, want to strip a second mortgate, need to catch up on arrears on debt secured by assets you want to keep or have the IRS or Student Loan Creditors ready to put liens on your property and garnish your wages, leaving you with less each month than a Chap 13 would.

I'm curious - What is it that makes you pass the means test but able to show disposible income on Schedules I/J? Where are your expenses lower than local/national standards?

[scuguy77]

Thank you!

I think our case would be pretty straight-forward (no lien strips, no mortgage/house actually just taxes, 2 cars (one in plan one out and CC's, student loans and 2 lines of credit)

Though little worried about the whole confirmation pending creditors, can they hold it up because they want to be paid more (there's only so much we could pay)?

I will certainly ask, set-forth the case for Ch 7, just wondered if Trustee would oppose because while were negative on Means we are nearly 2x the median income (though you live in this area and how much it costs so were not really making that much money)

We are negative on means test because taking the standard allowances on everything plus the taxes we pay (ongoing tax liability not the ones we'd pay back) which are pretty high because other than our kids we have no write-offs (no mortgage, prop taxes etc.) so in this case it helps us, and the kids daycare expenses (which are reasonable given our area) but still a significant expense. So other than that 1 expense everything else is 'as-is' on MT and we come out -300.

Where we are under from the national std is housing and utilities (housing is 2800 and we spend 2000, and utilities is 520 and we spend about 250) we are over on transportation (gas costs) and a little on food/clothing etc (by 50) so all told the MT actually gives us $800 more in expenses then we use (so on I/J our actual expenses shrink that down to $400 to allow for 401k loan and to make plan pymt work)

There are Pros/Cons to both chapters …

Ch 7 would be quicker and has the possibility (if we wait long enough) of getting rid of some of the tax debt, though have to pay on student loans and taxes would accrue interest (so pymt might be a little more)

Ch 13 would be longer but would allow for lower car pymt on the one in plan (cram-down) though this 'savings' gets partially eaten up by trustee amount, has more structure (there actually would be more money for expenses assuming our plan is confirmed as-is because the student loans would be on-hold) and the taxes would be paid back interest free

[LadyInTheRed]

"I am no getting paid as much as I want" is not a valid reason for a creditor to object to your plan. The lender on your car loan could object to a cram down if they disagree with your valuation.

If you pass the Chap 7 means test, the fact that you are far above median is not a basis for objection. But, the trustee will look closely at your case for errors on your means test or reasons to object based on a totality of circumstances. It sounds like you may be vulnerable to a totality of circumstances objection because of your low housing and utilities expenses and the fact that the child care expenses and 401K apparently don't completely offset the difference between local standards and your actual expenses.

It sounds like you have a good perspective on your options and have probably gone over a lot of this with your attorney already. When calculating the costs and savings of Chap 13 vs. Chap 7, don't forget the fact that your student loans will continue to accrue interest if they go into forebearance.

[scuguy77]

Ah, ok that makes sense (otherwise they'd all object if it was less than 100%).

Looking at a few cases on PACER I noticed there is a Margaret that is the standing trustee but then Ms B is the US Trustee, what is the difference? Or who does what?

In terms offset, we certainly could raise our expenses on J to close that gap but then we wouldn't be funding the plan, but I think even raising them reasonably there would still be $100-200 positive (not to pay unsecured but to fund a plan) so then it becomes if we have to do Ch 13 might as well make it really work (which is how we've been positioning all the numbers)

I will present all this to our attorney (which again, she didn't bring up Ch 7 because we've been pretty adamant about Ch 13 thinking that was our best route).

Your right…that was the one thing I hated about the 13 was the student loans being on forbearance (though one we do have to pay indirectly because my wife's mom is co-signed on it).

So I guess the two plans negate many of the things out (one savings vs. a different savings but another cost etc.)

BTW, what did you have to bring to the 341 meeting? Tax returns or pay-stubs or is that all sent before? Have you had to send in tax returns every year?

[LadyInTheRed]

Margaret is one of the attorney's in the US Trustee's Oakland office. She is not a trustee. http://www.justice.gov/ust/r17/oakland/staff.htm. You are seeing her name because she is filing pleadings on behalf of the trustee. Ms. B is the standing Chap 13 trustee in the Oakland Division. She is responsible for the primary administration of Chapter 13 cases. The US Trustee overseas all of the standing trustees. My understanding is that it is the US Trustee that objects to a Chap 7 discharge when a debtor may not qualify for a Chap 7. Here's an article on what the duties of the US Trustee: http://www.nolo.com/legal-encycloped...ankruptcy.html

I gave my tax returns and pay stubs to my attorney who submitted them to the trustee before my 341. Because of stories I read here, I brought copies with me just in case the trustee didn't receive them, but I didn't need them. The only thing that I needed at the meeting was my driver's license and social security card. I don't have to send her copies of my tax returns. I get a statement from the trustee each year showing what I've paid and what she's disbursed to creditors. Other than that, I just make my plan payment every month and go about my life.

Definitely see what your attorney says about a Chap 7. The Chap 13 filers that post here who seem to have the most trouble during their plan are the ones who passed the means test but chose to file a Chap 13 anyway. But, usually those people also have below median income and are trying to keep assets they probably can't afford. It is good that you don't have an overblown fear of Chap 13 as many people do. But, don't be too quick to dismiss a Chap 7.

Be careful on PACER. There have been some BKforum members who were surprised by huge bills from exploring other cases in their district.

[scuguy77]

Ah! Thank you now I understand the difference between the trustees now.

Yes, I ended up racking up $24 yesterday though learned quite a bit! But def need to be careful!

[scuguy77]

Hello,

Just wanted to give an update after our meeting w/ our attorney this week. Our Means Test is now -1k but because of our income (being nearly double the median amount) she thinks if we were to file Ch 7 we'd have to fight pretty hard whereas if we elect a Ch 13 the Trustee will be more 'hands-off' because we chose to do a Ch 13.

[ld2366eh]

Maybe it's the district, but our attorney did our means test and I/j and we passed both. We were more than 2 times over median income. He said he would fight for us to stay a 7. I'd get a few more consults. We are set to be discharged on the 29th of this month. Not a PEEP from the US trustee. A 13 would have crippled us.