Met with attorney about Chapter 7 eligibility - eye opener!

[browneyes]

We met with a very experienced attorney yesterday about filing. He was looking at our numbers and was looking hard at projected/probable future income vs. our actual expenses.

We are over the median right now, but if we waited a few months we would be under. I asked him if we should wait and not have to deal with the means test at that time, he said it wouldn't matter.

He told us that even if our income was under the median, if there was any disposable income left over after your regular expenses, that you could end up in a chapter 13.

I thought if you were under the median you were safe?

[WorkingItOut]

I am just barely under the median. I have plenty of disposable income leftover now that I'm not paying credit cards, and no one has batted an eye. I suppose if you have a real hard-nosed Trustee, they might pursue it. But they aren't supposed to.

[mindy0795]

I believe it is up to the trustee also... I'm from PA and attorney told me nothing over $100.00 or we could be put into a chapter 13. We filed and are waiting our 341.....

[keepmine]

If you have sufficent dispsoable income to fund a Chapter 13, you can be forced into one. It's pretty specific in the code. I believe the current number is $187/month.

http://doney.net/bkcode/11usc0707.htm

(A)

(i) In considering under paragraph (1) whether the granting of relief would be an abuse of the provisions of this chapter, the court shall presume abuse exists if the debtor's current monthly income reduced by the amounts determined under clauses (ii), (iii), and (iv), and multiplied by 60 is not less than the lesser of--

(I) 25 percent of the debtor's nonpriority unsecured claims in the case, or $6,000 [$6,575], whichever is greater; or

(II) $10,000 [$10,950].

[Help!]

I strongly disagree with your attorney. If you can file with your income below median there is no presumption of abuse. Having the means test in your petition opens the door for scrutiny that may change the course of your BK. Even if your attorney goes through your paperwork and tells you the presumption of abuse does not arise, there is always the chance the UST will disagree.

[HHM]

I strongly disagree with your attorney. If you can file with your income below median there is no presumption of abuse. Having the means test in your petition opens the door for scrutiny that may change the course of your BK. Even if your attorney goes through your paperwork and tells you the presumption of abuse does not arise, there is always the chance the UST will disagree.

"Help"

The attorney is correct. Even if you are below median, a debtor can still be pushed into a 13 if their schedules I & J show an ability to make payments. Granted, it is uncommon, but it can happen.

[keepmine]

I'd add to HHM's thoughts-if you're below median and supporting yourself it's hard to see how you have the income to fund a 13.

[optimistic1]

From legalconsumer.com, the means test calculator section.

"Some judges look to your ability to pay as part of the "totality of the circumstances" test (Section 707(b)(3)), and will bar you from Chapter 7 Bankruptcy, regardless of whether your income is above or below the median."

Another thing to worry about: Some judges may rely on different required forms as guides in looking at the "totality of the circumstances" under 707(b)(3): Specifically Form 6, Schedules I and J. These forms also deal with income and expenses but can yield a different "disposable income" result than the means test form (Form 22A) because different things are allowed and excluded on each form.


So depending on your district, this may or may not come up, hiring an experienced bankruptcy attorney whom would have insight into this topic would be your best bet.

[browneyes]

We pass either way with our expenses at the current income or via the means test and the allowed expenses on there. I only thought about waiting to avoid the means test step because I read how so many people wait until their income is below the median so they don't have to do it.

It really sounds like no one is safe for sure even if you are below median, but rather based on your individual circumstances of residual income, the quality of your bankruptcy attorney, and the discretion of the trustee.

Great resources and discussion! Thanks.

[Help!]

"Help"

The attorney is correct. Even if you are below median, a debtor can still be pushed into a 13 if their schedules I & J show an ability to make payments. Granted, it is uncommon, but it can happen.

Oops - I wasn't very clear and I can't edit my post. I meant that I disagree with the attorney on the above/below median point, not the disposable income point.