Chapter 7 & over median income (poll)

[lalap123]

Just curious...

1) How many of you were over the median income but were still able to SUCCESSFULLY file ch. 7?

2) How much additional scrutiny (if any) did you receive?

3) How much over median were you?

4) Why didn't you wait until your income was lower?

I'm curious b/c all of the "income" that is putting me over the median is one-time, non-recurring money (cash gifts, pension fund cash-out, Ebay sales) but my atty seemed pretty adamant about me needing to be under median, even if my expenses would show that I had no available income and since I am hardly working at all...

[okiebk09]

1. over and filed ch 7
2. None that I know of
3. About $5500.00
4. It was lower but I was not willing to wait and figure outhow to lower it evern more. Was not worth it to me.

[DebtStinks]

If your numbers are true and your not "trying to get away with something" then if you pass the extended means test you are good. Hell here in CA a couple was allowed to use their 6k+ mortgage for their means test... which without they would not have been able to pass.

Some lawyers might not want to do the extra work of an above means case but that seems lame. I would talk to some more lawyers about your case and get some additional feedback. We are 15k over the mean and our 60 month disposable is -55k so it is an easy pass.

Take our crappy mortgage away and it's close as hell... +8k but we pass the seconday means test due to our 80k unsecured debt. We are waiting to file as June is the lowest month of income for us. You need to plan ahead for this stuff if you can.

Go play our with the means test wizard I wrote and see where you fall. Some times you might need to replace that old junker of a car that you own with a new low cost car that you are making payments on to get the addional $489 ownership deduction.

[jgordo52]

I was over the median and filed Ch 7, not discharged yet but everything has gone extremely smooth. No extra scrutiny, 12k over. I didn't want to make less because I needed to make more in order to keep my home.

[Scooter10]

I was over median by 20K, but had no disposable income. i was actually negative. Standard irs deductions, my mortgage, and childcare took care of my extra 20k of income. I had no issues with my 7, discarged 4/08

[jennordhavn]

1) I filed Ch. 7 over median. I filed pro se in N. Dist. CA.

2) No additional scrutiny.

3) I was about $1800 over median.

4) I didn't wait because my income was not going down, but remaining the same, so it wouldn't have made a difference.

[NeedNewStart]

When you take the means test do you automatically use all the expenses for your county or do you use what you actually spend if what you spend is less?

[DebtStinks]

Most of the deductions on the means test are pretty straight forward, like the national and local standards that let you take deductions based on your area and family size. If you are trying to claim any of the adjustments or additional expenses above means then you better be able to backup these costs with documentation and receipts.

In most areas (some rulings in the 7th Circuit have allowed it) you probably shouldn’t try to take the vehicle ownership expense if you own the vehicle free and clear. You can however take a $200 deduction here in most areas if the vehicle you own is at least 6 years old or has 75,000 or more miles on it.

You should also watch out for the “Other Necessary Expenses: taxes” deduction as it means your actual income tax expense NOT your withholding amount. If at the end of each year you owe the IRS nothing then your withholding amount is equal to your actual tax and it would be the correct number to use. If you are under-withholding and owe taxes at the end of the year then you are shooting yourself in the foot by using your withholding amount as it would be lower than your actual tax. If you get large refunds every year and you use the withholding amount for this line they you could very well have this contested since you would be trying to take a deduction that is larger than your actual expense.

Other Necessary Expenses: involuntary deductions for employment. Be sure that if you are trying to take a retirement amount in this section that it is strictly mandatory otherwise it will be rejected.

Other Necessary Expenses: childcare. If you have a stay at home parent then any amount here could be contested as well.

Any of the deductions in Subpart B will need to be documented and reasonable. Well the “Continued charitable contributions” seems like it might be the exception. We typically give $300 a month to our church but have missed a month or 2 in the past so I was worried about taking a full $300 for this section. But apparently from the rulings I’ve read on this they cannot consider amounts in this section as abuse so long as it is less than 15% of your gross income.

Another area to watch out for is your payments on secured loans that you intend and then actually surrender during bankruptcy. The means test only looks at a snapshot of your financial history for the 6 months prior to filing. Any payments made on secured loans will apply to the means test in determining your “presumption of abuse”. However even if you pass the means test if you surrender a great deal of secured property you might find yourself in a situation where the trustee is taking a 6 month forward looking picture of your ability to pay on a Chapter 13 plan that would NOT include the surrendered property. If it shows that you have the ability to fund in this hypothetical forwarding looking picture then your case could be dismissed or forced to a Chapter 13 based on the “totality of the circumstances”. I’ve read numerous cases where the debtors were well over the mean income but passed the means test with no problem due to the secured debts on a large house, multiple cars, boats, motorcycles, etc. which they choose to surrender in bankruptcy. These cases were dismissed because the forward looking situation shows that without these secured debts they have the disposable income to fund a Chapter 13.

This is just my take on the topic from the research I’ve done. It just goes to show how important it is to have an experienced lawyer that is familiar with the rulings of your local bankruptcy court. Seems to me that the bankruptcy code is just poorly written and open to far too much local “interpretation” for what is supposed to be a federal guideline.

[SuzieBK]

Re. the childcare expenses and stay at home parents, what if you work for yourself in a home-based business? I'm a graphic designer and work out of my home and have my four year old in preschool/daycare 5 mornings & 2 afternoons a week. The biggest reason for declaring is that my business has tanked over the last six months, but if I take her out, I won't have any time to generate business. Is that likely to fly?

[DebtStinks]

Re. the childcare expenses and stay at home parents, what if you work for yourself in a home-based business? I'm a graphic designer and work out of my home and have my four year old in preschool/daycare 5 mornings & 2 afternoons a week. The biggest reason for declaring is that my business has ranked over the last six months, but if I take her out, I won't have any time to generate business. Is that likely to fly?

I'm in the same boat... work from home. But if your job is also at home then I would assume that it's going to be a "reasonable" expense.

[NeedNewStart]

So if the IRS Standard for clothing, food, misc. is $507 and I only spend $300 on these items do I still get to claim the full $507?

Also if you do have a car payment but it's only $200 and the Vehicle Ownership Allowance is $489... do you use the $489 or just the $200?

[DebtStinks]

So if the IRS Standard for clothing, food, misc. is $507 and I only spend $300 on these items do I still get to claim the full $507?

Also if you do have a car payment but it's only $200 and the Vehicle Ownership Allowance is $489... do you use the $489 or just the $200?

I believe you take the full $507.

As for the car the amount is determined by subtracting your payment on the vehicle by the deduction amount of $489 and the result can't be less than zero. So with a $200 car payment you would show the $200 under your secured debt and then you can take another $289 for ownership expense.

[laurannm]

1) Over the median by about $4k. Discharged and closed in 10/08

2) No scrutiny at all. Didn't need to provide any documentation other than the standard pay stubs and tax returns

3) Waiting would would have actually caused my income to increase as I was due raise (albeit small) 3 months down the road. We did have to wait though in order for a $5k cash gift to fall off

[yuckhatethis]

We were about 20K over and we were fine. No UST involvement at all and discharged right on time. We didn't wait because both of our incomes were only going to increase. We passed the means because our unsecured debt was so high. We also both have mandatory payroll deductions for retirement of 11.5%, so that makes our take home much lower.

Just curious...

1) How many of you were over the median income but were still able to SUCCESSFULLY file ch. 7?

2) How much additional scrutiny (if any) did you receive?

3) How much over median were you?

4) Why didn't you wait until your income was lower?

I'm curious b/c all of the "income" that is putting me over the median is one-time, non-recurring money (cash gifts, pension fund cash-out, Ebay sales) but my atty seemed pretty adamant about me needing to be under median, even if my expenses would show that I had no available income and since I am hardly working at all...

[Kingxray]

1) Over the median and have not been successfully discharged in Chapter 7 yet.

2) Tons of scrutiny but only after 341. Awaiting a hearing to adjust our numbers. UST trying to convert us to 13.

3) Over by 55K

4) Income was not likely to change and my father was attempting to garnish our wages for a debt we owed him so we needed to move quickly.