Chapter 13 question

[Wunsche]

Hello,

My attorney just told me that it doesn't matter if my rent is $1000/month or $3000/month. Either way, I have to pay back to the trustees the amount that the means test determines that I have available every month.

If the means test determines that I have $300 available every month, and my rent increases from $1000 to $1500, I would still be required to make the same Chapter 13 payment every month.

Any thoughts on that?

Thank you!

[LadyInTheRed]

It is true that your payment would not be automatically decreased if your rent increased. But, if you have a permanent and verifiable decrease in your disposable income, you should be able to petition to modify the plan. I have no personal experience with this, but that is my understanding from reading other people's experiences.

Talk to another attorney.

[Wunsche]

Yeah, it sounds weird to me.

If I moved in with a friend or my parents and paid $100 in rent, I'm sure I'd be required to pay the other $900 towards the Chapter 13 plan (assuming the rent is $1k).

Now if I need to move and my rent goes up, why would I still be required to make the same payment as before?

It doesn't make sense to me....

[tunskit]

If you're below the median in your state, you don't have to worry about filling out parts 4, 5, and 6 of the means test. The presumption is your payment is whatever your budget shows, and there isn't a set amount that you should have to pay back (if I understand the rules correctly). If you look at the top right corner of your means test form (B22C), you'll see four boxes:

According to the calculations required by this statement:
The applicable commitment period is 3 years.
The applicable commitment period is 5 years.
Disposable income is determined under § 1325(b)(3).
Disposable income is not determined under § 1325(b)(3).
(Check the boxes as directed in Lines 17 and 23 of this statement.)

If you are below the median, your commitment period is three years, and your disposable income is what your budget supports, not what the means test says you should have to pay. If that's the case for you, then you don't have to worry about what your attorney is telling you (that you have to pay whatever B22C presumes you can afford). Instead, you pay based on your expenses and actual DMI left over each month. If you're above the median, then § 1325(b)(3) applies to you, and you'll have to make whatever payments parts 4, 5, and 6 calculate you can afford.

[LadyInTheRed]

Wunsche's income is above median.

Whether you are above median or not, your plan should be based on your projected disposable income. If there are changes since the 6 months before filing or there are future changes that are reasonably certain at the time of confirmation, the court can take your expected income into account even if it is different than shown on the means test. This is pursuant to the Supreme Court Ruling in Hamilton v. Lanning which I believe actually ruled against a debtor whose dmi increased. By the same logic Wunsche used above, the case can be used to support a lower plan payment when there is a reasonably certain decrease in income.

Wunsche, I really think you should move before you file. Then, there will be no question as to whether your decrease in dmi is reasonably certain and you won't have to bother with modifying your plan later. If you are going to claim your dmi is lower than shown on the means test, then you need to prove that. But, my impression from your other thread is that with your current rent, your means test dmi will end up lower than your schedule I/J dmi because you have very low rent.

[justbroke]

In most Districts, Schedule I and J are controlling. The Means Test (Form B22-C) is only a "starting" place when it comes to disposable monthly income (DMI). If your rent exceeds the local standards, the Trustee will complain about it. Additionally, many districts have their own "maximum" rent for the area and it is likely lower than the IRS standards! (e.g. if US Trustee/IRS gives $1,200 month for rent, the local District's Trustees may only allow $1,100.)

If your are renting and it is exceeding the UST/IRS limits, you will be forced to find new accommodations as the court and Trustee will now allow you to supplant a "lavish" lifestyle to the detriment of the unsecured creditors.

I believe when an attorney syas that a rent increase from $1,000 to $1,500 would not change the DMI, he is probably referring to the $1,000 as being the UST/IRS limit for rent for the debtor's family size. The debtor would need to move or squeeze the budget.

[LadyInTheRed]

jb, from another thread, the OP's current rent is about half of the local standards because s/he lives in a lousy neighborhood. S/he is considering moving. So, the concern is that the payment will be to high if based on current rent instead of rent that will be closer to what is allowed on the means test.

[Wunsche]

Thank you, Everyone!

LadyInTheRed - You are correct. My current rent is half of IRS standards for the area. I've been looking for a new place to live, and don't plan on filing until after I move. I'm also looking for a new attorney. I'll be meeting with a new one in 2 weeks. I don't believe that the one who I've been working with has my best intersest in mind.

I've completed the schedules I and J forms, and my monthly new income on schedule J is -$87. If my rent goes up, it will probably be -$587 or less.

[keepsmiling]

Again, if you post all of your income and expenses here, we can help you tweak.
At your salary, it is difficult to imagine how you wind up in the negatives. What are you spending all of that money on? I mean this in the most helpful way. Something is not right here. I believe you said you make 7k a month and live alone. You are NOT counting in your cc payments correct? and your school loan repayments? and you don't have extraordinary car or health costs. Are you repaying a 401K loan?
The more info you share, the better we can help you. Remember that you are anonymous here.

[LadyInTheRed]

I agree with keepsmiling. That seems a low dmi for a 1 person household making $84K. When I filed, the gross income for my 2 person household was $76,500. My dmi, without reduction for my car payment because that is being paid in the plan, was $500. And that was before the 9th Circuit Court of Appeal ruled that payments on 401k loans were not allowable deductions. Without that deduction, my dmi would have been $800. I'm in one of the most expensive counties in California to live in.