Means Test & General Questions

[DebtStinks]

[Help!]

One thing to consider in your calculations is that if you're surrendering the house, you won't be able to use those mortgage payments as your housing expense. I can also speak from experience that it is tough to find someone to rent to you with BK on your credit report, and even private parties (not just management companies) all seem to be checking credit histories. You may want to consider securing a rental and getting a lease agreement signed now so you'll have that documentation for your housing expense.

Being above median with significant assets with a large amount of debt to discharge also makes it (in my opinion) more likely that you'll be scrutinized, and I would encourage anyone going into Ch. 7 in that position to read as much as you can and ask a lot of questions (especially of your lawyer).

[DebtStinks]

It was my understanding that if we are current on our mortgage (not even sure this is a requirement) that it should count on the means test deductions. There is no equity in the home so as an asset is it worthless. Once the BK process has started we would have the option to reaffirm the mortgage which we wouldn’t do. Either during or after the discharge we would stop making mortgage payments (lender won’t talk modification if we are current) and explore what load modification options are available to use. If a modification doesn’t make sense then we would allow them to foreclose on the property.

We don’t plan to voluntarily surrender the home. I do want to explore whatever options there are in modifications. If none of those options work then they can take the home back via foreclosure and eviction.

If I’m not correct on this I’d really be interested in reading the law/ruling on this as it would change our bankruptcy strategy a bit.

Also, thanks for the heads up on the renting. We’ve done some looking around it’s truly a renters market around here and we do have options even with a BK.

Thanks!

[DebtStinks]

Being above median with significant assets with a large amount of debt to discharge also makes it (in my opinion) more likely that you'll be scrutinized.

Do you believe that we would be scrutinized due to my wife earning potential? Because asset wise we have nothing that won't fit into the CA system 2 exemptions. Should easily be a no-asset case.

[DebtStinks]

Debtors Pass Means Test But Case Dismissed Based on the Totality of Circumstances of the Debtors' Financial Situation

This is an interesting read on the topic of using your current secured loan payments on the means test when your intention is to surrender said property. I assume that if we don’t leave the house and make a good faith effort to get a loan modification that this would not be an issue for us.

Even if we wanted to play it super safe and drop the mortgage from our means test it would only mean a reduction in our deductions of $864 a month. We were already negative $444 + the buffer $165 (we pass the secondary means test for our ability to fund a chapter 13). So that would put us over by around $255 a month. This is when the 2 transportation ownership deductions would come into play I guess since we would need at least one of them to pass the test.

The court agreed with the decision in In re Henebury, 361 B.R. 595 (Bankr.S.D.Fla.2007)(Hyman, C.J.), and held that the court should consider post-petition events in making its determination under section 707(b)(3)(B). The court further held that the cut-off date for the relevancy of post-petition circumstances is the date of the hearing on the motion to dismiss.

So reading this more closely it looks like if you file an intent to surrender the secured property and then DO surrender the said property before your dismissal hearing you open the door for a potential negative ruling on the totality of the circumstances of the debtors' financial situation. You will pass the means test since the secured debt will be part of your financial snapshot. But if the US Trustee petitions on this they will calculate hypothetical forward looking chapter 13 payment plan that won’t include the surrendered property.

This is something that you would want to look at closely if filing under these circumstances. I would gather that if you don't file to surrender the property and keep it at least though your dismissal hearing that this would be a non-issue.

[jennordhavn]

As to your concern about the vehicles, I filed pro se in N. Dist. CA and this is how I handled the car matter:

Both our cars are titled in my DHs name and I filed by myself. He owns one outright (that fell under the exemption) and the other one is financed and upside down.

I only used the operating expense for one car on line 22A. I used the car that he owns outright and I also included it as his asset and used the car exemption to cover it. Even though it is not my car, I drive it, so I included it. I did not attempt to claim the ownership expense on line 23. I believe I read somewhere that CA does not allow this for vehicles that are owned outright.

Even though I make the payments on the other car (my DH is unemployed), I didn't include it since I was filing by myself and I didn't want to complicate matters.

I did also include the public transportation amount since I commute to work using both my car and public transporation. This wasn't questioned.

Good luck.

[DebtStinks]

Thanks for the feedback!

I came across this PDF that seems to have some very good info in it (it's for a chapter 13 but much of the info also applies to chapter 7):

Statement of the U.S. Trustee Program's Position on Legal Issues Arising Under the Chapter 13 Disposable Income Test