I'm confused!

[MrsB2021]

We haven't filed yet. I have the paperwork filled out but have a couple of questions.
1. Our income falls well below the median & have almost $40,000 in CC & medical debt, do we need to file the means test paperwork?
2. We have 3 bank accounts, my husband's, mine & one we use strictly for paying bills. I transfer from the other two accounts into the bill account & pay the bills for the week.
We also have a separate "mortgage account" (my sister & I are on that account) My sister gives us $1200 a month that I use to pay the mortgage. The money goes into that account and we pay the mortgage from that account. I'm afraid if I put that she contributes & $1200 a month it will look like we have a lot of extra money after everything is paid but we really don't. Is there any way around reporting this income? Any suggestions would be greatly appreciated.

[JellyBeany]

Hi there! You must be forthcoming about all your income. Does your sister live with you? Why is she helping to pay your mortgage? Omitting $1200/month in income in a BK case could get your case thrown out and could even come with criminal penalties.

Do you have a lawyer to handle your case? If not, I encourage you to hire one so you can have advice around this and other matters.

[justbroke]

1. Our income falls well below the median & have almost $40,000 in CC & medical debt, do we need to file the means test paperwork?

Technically everyone completes the first portion of the means test to determine whether or not they need to complete the entire means test. The first part of the means test uses your current monthly income, based on your 6 months of income immediately before filing, to calculate a value for your estimate annual income. That number is then used to determine whether or not you are considered over or under-the-median.

2. We have 3 bank accounts, my husband's, mine & one we use strictly for paying bills. I transfer from the other two accounts into the bill account & pay the bills for the week.

This shouldn't be an issue, but the Trustee would want statement copies from all 3 accounts.

We also have a separate "mortgage account" (my sister & I are on that account) My sister gives us $1200 a month that I use to pay the mortgage. The money goes into that account and we pay the mortgage from that account. I'm afraid if I put that she contributes & $1200 a month it will look like we have a lot of extra money after everything is paid but we really don't. Is there any way around reporting this income? Any suggestions would be greatly appreciated.

As JellyBeany wrote, this could become problematic. You must report this, but it's not reported as 'per se' income. It's reported as an offset of your expenses.

For example, you will receive an expense allowance based on your household size. There is a specific expense for a mortgage (or rent). Let's say that the mortgage expense is $2,400/month. You would have used that $2,400 value, but since your sister is paying half of it, you would need to list $1,200/month as your actual expense.

The problem doesn't come from your Means Test if you are under the median, since you don't need to complete the entire means test form. The problem will arise on your Schedule I/J calculation. More specifically, it will matter on Schedule J when you list your "actual" mortgage expense as $1,200. This could lead you to show excessive disposable monthly income (DMI). If your DMI is generally over about $275/month (don't quote me on the specific number), then it is likely the Chapter 7 Trustee would move to dismiss your case or voluntarily convert to a Chapter 13.

You'll need to find a good attorney who, maybe, can figure out how to get you into a Chapter 7. Please find 3-5 attorneys in your area and schedule a 'free' consultation. Explain the situation and get their take. That "extra" $1,200 may be the sole reason why you would only be able to file a Chapter 13.

Just my thoughts.

[MrsB2021]

We are technically a 2family household. Do I list all 4 of us in the family size even though just my husband and I are filing bankruptcy? That would increase our budget amounts & possibly offset some of the extra income. Thoughts?

[justbroke]

This is where the attorney will come in handy. If the other people in your household are not your dependents (with some sort of proof, such as tax returns showing they were claimed as dependents), then the bankruptcy trustee will usually go by your actual legal household size. While the IRS determines household size by the number of occupants, the bankruptcy trustees generally use the number of people claimed on the tax return(s).

I tell you this because this is a very specific of the bankruptcy code which is confusing! The IRS says household size is everyone in the household. The bankruptcy trustees say that it's only those that you have a 'legal' obligation to support and that it must be ongoing. People have argued this in bankruptcy both ways... at least based on my research on the subject.