Means Test vs Actual Expenses

[sunnydazeahead]

Hi everyone,

Back again after a successful Chapter 7 discharge in 2007. My husband's been diagnosed with cancer and, in spite of living frugally and within our means since our Chapter 7 discharge, this cancer diagnosis has rendered him unable to work and burdened with medical bills. Our income is cut in half as we'll be living on my salary alone from here on out.

Which leaves us with a Chapter 13 since it's only been 6 years since our last filing. We realize we can convert to a Chapter 7 in 2 years. We've consulted with many attorneys and have chosen one. I'm just still doing some research trying to get all our ducks in a row prior to beginning all the paperwork.

Using the means test with all the allowable expenses per the guidelines for our zip code we come out upside down with no disposable income (actually, in the hole over $500 per month). Our actual expenses are less than that and show a whopping disposable income of $30 a month.

Will the means test possibly cause a trustee to dismiss the case because it looks like we have no disposable income? If so, what are our options?

Just curious what real life experience has shown....

Thanks so much,
Sunny

[justbroke]

We realize we can convert to a Chapter 7 in 2 years.

You can not convert. You would need to dismiss your Chapter 13 and file a new Chapter 7.

Will the means test possibly cause a trustee to dismiss the case because it looks like we have no disposable income? If so, what are our options?

Most Chapter 13 Standing Trustees use the Means Test (Form B22C) as a "starting" point. it is not the final say in what your payment could be. The Trustee will also look at your Schedule I/J, specifically at the disposable income listed on Schedule J.

The Trustee may also poke at some of your expenses. If you are $-500/month without paying any unsecured creditors, there is something seriously affecting your expense amounts. I hope that you're able to find a good balance and come up with a plan on which you can live.

[sunnydazeahead]

Thanks for your response. Curious why we won't be able to convert to a 7? I guess I don't understand conversion vs dismissal and re-file. That's all quite a way down the road, though.

Our expenses are all medical. We are under in the rent/utilities/living expenses/auto costs according to the standards.

Our attorney will guide us I just like to research, as well, so that we're not going in blind.

Thanks again,
Sunny

[Pjmax]

Sunny, so sorry to hear about DH's health. I know you've got a tough road ahead. I wish I could help. My thoughts will be with you.

[NoMoreCards]

With your Hubbys illness, and medical expenses...wouldn't it make sense to not file right.now? I assume medical bill will continue for a while, so maybe holding off filing for now.

[sunnydazeahead]

Thanks so much for your warm thoughts, Pjmax! We're taking all we can get right now

Yes, we worried about that, too. Luckily, though, he was able to get on my insurance which is much, much better than his (he had a high, high deductible) and there was no pre-existing condition clause (amazing!). The medical bills from when he was on his own plan are astronomical. Plus we have an RV, a truck, and an ATV which, if we sell ourselves will have a deficiency balance on so we need to file to help us manage all of that. Our medical bills from here on out will be manageable....the $500 is prescription copays, a prescription that's not covered by insurance, dr. visit copays, and research based herb/mineral/natural supplements. His medical costs should remain static for the foreseeable future.

Thanks again for sharing your thoughts....we appreciate any and all advice as well as healing thoughts

Take care,
Sunny

[ValleYum]

Sunny? Did hubby file an expedited claim for disability from the Social Security Administration? My uncle with bladder cancer was approved within a month - he went to his local SS office in FL and they helped him through it.

I wish you and hubby all the best. I hope the supplements and treatment are super successful for you.

[justbroke]

Thanks for your response. Curious why we won't be able to convert to a 7? I guess I don't understand conversion vs dismissal and re-file. That's all quite a way down the road, though.

You cannot file a Chapter 7 within 8 years of the filing of a previous chapter 7. This is why you are filing Chapter 13.

When you convert a case from Chapter 13 to Chapter 7, it's as if you filed the Chapter 7 on the same date that you filed your Chapter 13. Since that would have been a no-no, you can't just convert. You would need to dismiss and refile.

[sunnydazeahead]

Aaahhh....thanks for the clarification. That makes sense now :-)

Yes, we're working with disability (through Social Security) now.....thanks again for the well wishes. What a warm and caring place this is!

Take care,
Sunny