means test versus schedules i and j

[jec]

ok we passed the means test but we make more than the median income and we are going to surrender our vehicles. My question is that they have never litigated the issue of whether you can include secured debt which you are not reaffirming (in my state or court) If they say abuse and there is no disposable income according to our real budget how can we do a 13

[lrprn]

My question is that they have never litigated the issue of whether you can include secured debt which you are not reaffirming (in my state or court)

If you talking about including the secured asset's value and any loans related to it that you aren't reaffirming on your bk forms, then no, there is no specific case law I'm aware of related to this at the current time. Everyone is just doing it and over time lenders are showing no interest in repossessing these assets unless the asset's market value is much higher than what is owed to the lender.

However, if you are talking about surrendering an asset in your bankruptcy but still getting to keep some of the IRS-mandated expenses on your forms, then some states do have recent case law related to this. For example, one of the bk district judges (I can't remember offhand which one) ruled that even though the debtor's car was being surrendered, he still got to include the IRS-mandated car expenses on his forms. Judge said in his opinion that if Congress didn't want that to happen, they should have included that in the current bk law before they passed it!

If they say abuse and there is no disposable income according to our real budget how can we do a 13

Thank the 2005 Congress for this mess. A sizeable majority of our senators and representatives passed the current bk law that makes this "imaginary income" insanity a reality. And we get to deal with the consequences.

[dumbdumb]

ok we passed the means test but we make more than the median income and we are going to surrender our vehicles. My question is that they have never litigated the issue of whether you can include secured debt which you are not reaffirming (in my state or court) If they say abuse and there is no disposable income according to our real budget how can we do a 13

I passed too but over the median just like you... they calculated the IRS standards for the state i live in. so the mortgage on my house which is being surrendered does not count. because i will not be paying it anymore. i am sure it will be the same on any cars or other things you surrender.

[jec]

real budget

Ok


so if they try to throw you in a 13 and your real budget does not alllow any pay back i dont understand how they can do that

[uofaguy]

Hi all,

I discovered this board recently and it has been extremely helpful. In fact, I've learned things from those on this board that even the attorneys I have consulted with did not know (scary in my mind).

LPRN - If you can recall the case you referenced above (judge ruled that even though the debtor's car was being surrendered, he still got to include the IRS-mandated car expenses on his forms) will you please post the case name?

Our situation is that we have no consumer debt, but a few investment properties (business debt) in which the builder filed BK & left us with unfinished homes that have negative equity. We will likely have to file BK. Given the business debt, we may avoid the means test, however, in completing schedule I & J (and assuming the investment debt is gone) our income is much higher than our monthly expenses & we then fail the means test. The attorney we discussed the business debt angle with was concerned that the trustee may still try to push us to Ch. 13 once the investment debt is removed from the equation.

Any case law to back up the business debt angle or ability to include surrundered assets in the means test/schedule I & J would be helpful.

Thanks,
Jon in AZ

[Yankeegirl]

I'm not sure of the case LRPN is thinking of but here's one in Illinois that deals with including the mortgage on the means test for a home that is being surrendered.

http://www.ilnb.uscourts.gov/JudgeDoyle/Opinions/Randle.pdf

We are currently pursuing a legal ruling on this very topic in our district.

[jec]

i have read of several cases where the secured expenses were allowed. This is what we were told in our 341 meeting

it has not been tried in our state or district and they actually got a gleam in there eyes when they said they were waiting for just the right case to come along and litigate it and we just might be the ones they are going to test it on. I feel like a guinie pig (not sure if that is even spelled right. On the adive of our lawyer we stopped making payments and they are already requesting relief of stay and they are telling us that they might file a motion to dismisss for a buse.

[jec]

yankeegirl

what state and district are you in? is this your personal case or are you just following it? Who pays for this added litigation, us the debtor? Boy it sure seems stupid to be litigating this all over the country instead of just making a ruling on precedence. But I am not a lawyer so i guess that makes me the idiot

[uofaguy]

Yankeegirl - thanks very much for linking the case. Very helpful, as I don't think my state or region has had this issue litigated (at least according to the attorney I recently spoke with).

JEC - I asked an attorney I spoke with a few nights ago in Phoenix about next steps and costs if I file chapter 7 based on my investment/business debt and the trustee tries to force me to Ch 11 or 13. I intend to fight for Ch. 7. The attorney told me that we would have to take it to BK court where the judge would rule and that not to worry because the cost wouldn't be more than $10,000. I agree with you about standardizing these decisions - - insane that people facing bankruptcy may have to pay thousands of additional dollars because a trustee is overzealous & won't follow law from another jurisdiction.

[Boscoe]

My take on it is that it was congress's intent with BAPCPA (the new BK law) was to force debtor's with primarily consumer debt to pay back amounts over 5 years if they have the means to do so. The theory being that consumer debt was incurred so that goods and services were "consumed" personally by the debtor and/or his family.

To determine this, the debtor's income is compared to the median of the state and if over, the presumption would be that a chapter 7 filing would be abusive.

However, for cases where the debts are primarily business/ investment, the debts are not primarily for "consumption". The law does not specifically require a means test for these items. In my case, we did not even file the B22A "Means Test" form for this reason.

I do not consider this a "loophole" by any stretch, and believe that congress did not intend for business/investment bk's to be considered abusive or to force these debtors into a chapter 13.

Since there is not enough case law on it, each bk district interprets it a little differently. In my case, we were able to get down close to $0 disposable income and make the case that we do not live an "affluent" lifestyle, so calling ours "abusive" would not be accurate. As you see from my signature, the jury is still out.

UofAGuy - From what I understand of your case, you really don't have much of a choice but to file the ch 7 and make your case with the trustee. You will ultimately not be able to make those loan payments (maybe you are there already), they will foreclose and probably chase you for deficiency balances. Never mind having bad bad credit for 7 years until they fall off.

Keep the faith that the trustee (and judge if need be) will do the right thing.

[uofaguy]

Boscoe -

You are exactly right. We were advised a few months ago to stop making the mortgage payments on the investment properties as we could not keep this up indefinitely and were basically throwing good money after bad. Given the slowdown in the real estate market and fact that the investment homes are not even finished (as the builder just filed BK), there could be huge deficiency judgments against us and we were advised to file BK before foreclosure begins.

I feel that I've learned so much the past few weeks - thanks again to all.

Jon in AZ

[Yankeegirl]

jec and uofaguy -

The case I listed is one that I found when I was doing research for my own case.

I live in the Southern Texas district. We filed Chapter 7 in March 2007. The UST is pursuing a dismissal for abuse. We are currently fighting this. We have become a test case in our district on two issues:

1. Can we include our mortgage payment on our means test if we have filed an intent to surrender.

2. Can we include the IRS standard deduction on the means test for a vechicle that has no lean.

For issue #1 above there is no case law in our jurisdiction. While there have been rulings in other districts (such as the one I listed) I'm told that it's essentially meaningless unless it's from our district or a higher court.

For issue #2, there are numerous cases supporting both sides of the issue.


We are paying for this above and beyond our intial attorney's fees. It has become quite expensive! However, we felt it was still cheaper than having to payback over 60k in CC debt!

The issues go before the jude on 9/25/07. Our attorney believes that if the judge rules in our favor on issue #1 then the UST will probably drop the motion to dismiss. Otherwise, we will either have to go to court or convert to a Chapter 13.

[jec]

Yankee Girl

This is my own personal case. Same thing it has not been decided in this district (eastern tn, Knoxville)

the mortgage is not so much the issue because the rent alllowance is about the same

The issue it the vehicles. We could not afford both and the lower payment vehicle was a 2 seater truck with jump seats (hardly would work for a family of 5)

Well we tried to do a 722 redemption on our van and found it was upside down by about 11,000 so we asked our lawyer and he said it would be ok to go ahead and purchase another family car that was more affordable (we participated in a program called freshstart in kentucky. They let you buy even while in bankruptcy.)

The thing that is so stupid is that we have to have cars to drive and my parents gave my husband an old truck to drive but they are saying that they might file for abuse and not allow us to claim ownership costs even though we have to vehicles. And get this because our budget on schedule j is so upside down no judge would have allowed us to reaffirm our vehicles.

[jec]

Cases I have found

i will try to attach the cases i have found in my research. Lawyers think we are so stupid

wont let me