Forced to chapter 13?

[Geeznowwhat]

I had someone suggest to me that if I show $80 a month above my basic living necessities that the trustee could force me to go chapter 13.

Really?

I have about $42,000 in debt. How would $80 for 5 years make any difference at all?

Ok..so if this is true, how do I avoid it? Last thing I want is to have this drag out for 5 years, Also...I do not expect to have this extra for 5 years...would I have to wait 7 years to file chapter 7 if I lost this little bit of income?

Can this really be true?

[justbroke]

First I will assume that you understand how the Means Test works and how your expenses are calculated. The magic number is not $80/month. The current minimum amount, where you have to "overcome" a presumption of abuse, is $7,475 over 60 months or... drum roll... $124.58/month in disposable monthly income (DMI). The absolutely maximum that you can use to "rebut" the presumption of abuse is $12,475 over 60 months or $207.92/month in DMI.

The Means Test is a complex formula. To put this simply, if your DMI is under $124/month, there is no presumption and you are eligible for a Chapter 7 discharge (baring any other issues). If you do have a DMI over $124/month, a second calculation is made. If your actual DMI is less than $207.92/month and that amount multiplied by 60 is less than 25% of your unsecured debt (non-priority), then you also qualify for a Chapter 7. There are other special situations where you may be able to overcome this "presumption" but let's not complicate things.

So, to summarize, you generally need to have less than $207.92/month in DMI. If your DMI x 60 is more than $7,475 and is more than 25% of your unsecured debt, then you may not be able to overcome the presumption of abuse and be forced to dismiss or convert.

(FYI, $80 x 60 months is $4,800 dollars. Not that it matters, but that is 10.7% of your unsecured (non-priority) debt. Since you are below the first threshold (presumption of abuse) of $7,475, then you "pass" the means test regardless. Now say your DMI was $190/month. That's a different result! You would have the presumption but still be under the upper limit of $12,475 since 60 X $190 is only $11,400. The problem is that you can't rebut the presumption because if your debt is $45,000 in this scenario, the $11,400 is 25.3% of your unsecured debt and you would be able to provide what they call a "meaningful" distribution to the unsecured creditors.)

I hope that helps!

[Geeznowwhat]

Does this mean I have to fill out ALL of 22A-2 means test? I thought I would just have to fill out B22A1

[justbroke]

Geeznowwhat whether you need to complete more than just Part 1 of the Means Test is dependent on whether you are "over the median income" for your State. The instructions are available at the U.S. Courts website for download (http://www.uscourts.gov/file/3268/download).