Below the median, so why the means test?

[confusedguy]

Hello, I have been seeing an attorney regarding filing bankruptcy. I am in upstate New York. I have $22,000 in credit card debt and about $8500 in car debt that I'm going to reaffirm. I make $34,800 a year.

I've been trying for nearly a decade now to dig out of debt, getting half way out two or three times, then being hit by some calamity (seized engine, lost transmission, lost job) that once again put me into the spiral.

MY QUESTION: I make below the median income, but my attorney is telling me that I need to find about another $230.00 in monthly expenses to file Chapter 7. I'm confused, because everthing I read states that the means test isn't applicable if you're under the median. Is he right? I tried to ask my attorney for details, but he got impatient with me and insisted that it was the case.

I'm single, not divorced. No children. I have no property to take into consideration in this bankruptcy. I rent and own nothing that anyone would be interested in going after.

When I take the payment on my debts into account when detailing my monthly spending, I have a negative income, but of course, you're not allowed to do that.

Worst of all, my credit was good, with no late payments until about two or three months ago when I stopped paying because my attorney told me then that it would be no problem for me to file chapter 7. When I asked why he did this, he said "I thought you weren't including your debts into your situation (as if anyone new to the process would ever think that).

Should I continue pursuing a bankruptcy or should I just go for consolidation/credit counseling?

I don't know what to do. Any help would be appreciated. Thank you.

[EndInSight]

Wow, that's insane. I'd be tempted to look into a free session w/another attorney.....just for laughs and giggles.

"Worst of all, my credit was good, with no late payments until about two or three months ago when I stopped paying because my attorney told me then that it would be no problem for me to file chapter 7. When I asked why he did this, he said "I thought you weren't including your debts into your situation (as if anyone new to the process would ever think that)."

What would be the point of a C7 if those debts weren't included?

Maybe I'm confused......but then so are you.

Let us know what you find out OR maybe someone here will be of help?
I feel your pain..........

[lrprn]

I am in upstate New York. I have $22,000 in credit card debt and about $8500 in car debt that I'm going to reaffirm. I make $34,800 a year.

The median income for a one-person 'family' in NY is now $43,352 - http://www.usdoj.gov/ust/eo/bapcpa/2...come_table.htm . You are well under that so should be able to file Ch 7.

MY QUESTION: I make below the median income, but my attorney is telling me that I need to find about another $230.00 in monthly expenses to file Chapter 7. I'm confused, because everthing I read states that the means test isn't applicable if you're under the median. Is he right? ... I'm single, not divorced. No children. I have no property to take into consideration in this bankruptcy. I rent and own nothing that anyone would be interested in going after.

Given the information you've provided so far, I don't understand what the problem is. You appear to have a pretty straightforward Ch 7.

I tried to ask my attorney for details, but he got impatient with me and insisted that it was the case.

This could be a warning flag. Your lawyer should take time to answer your questions - that's why you are retaining him. If you haven't paid his entire retainer fee yet, I would set up several more free initial or low-cost consultations with other experienced bk lawyers in your area.

Worst of all, my credit was good, with no late payments until about two or three months ago when I stopped paying because my attorney told me then that it would be no problem for me to file chapter 7. When I asked why he did this, he said "I thought you weren't including your debts into your situation (as if anyone new to the process would ever think that).

It's not unheard of for unethical lawyers to push qualified Ch 7 filers into Ch 13 because, frankly, the lawyer makes more money that way. Also not every lawyer is experienced in bankruptcy. If they don't file many cases, then they may not understand the Means Test and Schedules like a very experienced bk attorney does. Honestly, this sounds a little odd to me. I'm not saying this lawyer is incorrect - he has all the financial information about your case and we only have what you've been able to share so far.

However, no matter what, you need to ask him again why you have to find more expenses to avoid Ch 13 if your income is already well below the state median for one person. If you don't get a satisfactory answer or you get brushed off impatiently again, consider asking for whatever you've paid this lawyer to be returned to you and go hunting for other representation.

Should I continue pursuing a bankruptcy or should I just go for consolidation/credit counseling?

Don't take the word of one lawyer. Frankly consolidation and credit counseling work very, very rarely. Typically if things are bad enough that you are considering bankruptcy, then you are likely just delaying the inevitable trying consolidation/credit counseling first and wasting a lot of your hard-earned money besides. (We ended up trying credit counseling and threw away almost $8,000, then ended up filing anyway.) Don't waste your time and money. We haven't had a single member who has succeeded getting control of their debt using either of these.

[confusedguy]

When I asked why he did this, he said "I thought you weren't including your debts into your situation (as if anyone new to the process would ever think that).":

He meant "I thought you were excluding the monthly payments you make on your debt when you told me how much it costs you to live each month". To which I think "Who would exclude payments that they're making on credit cards from there monthly budget, unless they were thinking like a bankruptcy attorney?"

Thanks.

[confusedguy]

Boy, you folks reply fast! Thank you!

I have not paid my attorney any fees out of my pocket because I participated in a legal insurance plan though my employment, anticipating that I might face the inevitable time that I had to say "when" and declare bankruptcy.

I don't get the impression that my attorney is trying to take advantage of me financially. I get the impression that he might be inexperienced with clients who are below the median income. A week or two before, I had to correct my income with him, and I reminded him of this when I asked about being below the median. I think he might be kind of "stuck on repeat" and for some reason is confusing a bankruptcy for someone who is below the median with someone who is above it...and maybe mixing in the old bankruptcy laws to boot.

Do they even question or ask for your budget numbers if you are below median income?

Thanks,again.

[jec]

get a second opinion but i think that if you have disposible income the trustee might try for a 13. Interview several attorneys. Usually the first consultation is free any way and also make sure that you have absolutely included everything in your budget

[keepmine]

The issue likely goes to disposable income.
If you have as little as $166/month you could be forced into a 13. And no, the payments on debts you wish to discharge aren't considered as pary of your budget.
How much disposable income are you showing?

[ssdsco]

If your total income for the past six months times 2 is below the state median income a "trustee" can force you into a chapter 13 ?

I didn't think you even included your expenses in the filing in this situation.

[nc73]

If your total income for the past six months times 2 is below the state median income a "trustee" can force you into a chapter 13 ?

I didn't think you even included your expenses in the filing in this situation.

Bastards can do almost whatever they want.

[Boscoe]

You still want to show zero or slightly negative disposible income, even if you are below the median. You can't include monthly payments that you are including in the bk.

This is a monthly budget that should show that you have little if any disposible income - not including the bk items, as you are not paying them anyway.

[BKTango]

Even if you are under the median income, if you show a substantial amount of disposable income you can be placed in a ch 13. For example if you make $1500 a month and that's below the median but you only have $800 a month in expenses they see the other $700 as disposable income. Best thing to do is chew up your income, remember everything you buy every month down to stamps. Increase your clothing budget a little, your food budget, if you increase it all just a little it eats up the extra income. Also take into consideration the allowable expenses for your state and household size. Even if you qualify for a straight no-nonsense ch7 you want to show as little disposable income as possible. Get it down to at least $100 or less if possible.

[ssdsco]

Learned something new today. For a below the median income chapter 7 which form is used to list the monthly expenses ?

I shouldn't have any problem establishing no disposal able income. I have $4k/month pension income, house payment is $1700, cobra is $800, prescriptions/co pays is $300, car is $400.

Once I get through BK I'll be supplementing my pension with 5% annual withdrawals from my 401k to cover my cash and carry budget.

I hope the trustee can’t come up with some creative way to get at my 401k.

Thanks for the info.

[ameliabedilia]

In my district, they say that you really need to be at $100 disposable income or less on schedule J to have a chapter 7 go through without any problems.
Just remember to really account for everything, you are not trying to impress anyone with living like a pauper if you really end up paying more than you think. Check your local standards and really look at your bank account, you may spend more than you think each month on gas, car maintenance, etc...

[Lindsay]

We had a friend who filed a successful chapter 7 in NY, his monthly expenses were 2400 and his income was 2200. His son also filed and was forced into a Chapter 13 because he had disposable income after his debts.

We're way upside down on our income right now so I don't think they would try to force us into a Chapter 13. I figured roughly $41,000 for the past year with a family of 5. I did a forensic of our total years finances and found out that our expenses without credit card payments are $49,000 a year. This includes some "bad" expenses like satellite television and cell phones. This total doesn't include gifts and restaurants either. Apparently I'm the world's worst homemaker and our food budget is way out of control. I guess I can see why we are bankrupt. I've been listening to Dave Ramsey and its been very eye-opening. I am going crazy trying to trim expenses so we can live within our means after the BK and I'll have my degree next year so hopefully I can earn alot more.

If the lawyer says you need to find $200 more of expenses, what does that mean? Does he want you to move to a slightly more expensive apartment or have a bigger car payment? Some expenses, such as car insurance, may increase as a result of the bankruptcy afterwards. What expenses would count towards that?

[confusedguy]

Thank you all for your replies.

I don't have my numbers here in front of me at the moment, I'll provide them later.

I have schedule J, the list of eligible expenses, but I understand that there are acceptable maximum dollar amouts in relation to this list. Does anyone know where I can find the an itemized list of the maximum allowed for each expense on schedule J. This might be able to give me some guidance as to where I might be shooting to low.

Thank you.