Chapter 7 Means Test

[Paramom]

My husband and I would like to file a Chapter 7. Due to an extended business trip March-June, 2009, our Means Test income is inflated and we are over the allowable for our state and family size. However, upon itemization, we can get it down on only a few hundred over. We still fail; however, Schedules I & J reflect a large negative at the end of every month. Can we file a 7 and explain the overage of a few hundred dollars (about 400) as a fluke business trip?

[lovebirds]

If you are negative after the means test, you qualify for a Chapter 7. If you do not, wait 6 months and then redo the means test.

[teacher]

Explain your business trip. Reimbursements (i.e. paying you back for hotel or per diem) is not considered income, if I recall correctly. Maybe someone with experience in this can chime in.

Also, if I and J are negative, that is a good thing.....

[keepmine]

If you are negative after the means test, you qualify for a Chapter 7. If you do not, wait 6 months and then redo the means test.

You still must fill out schedules I and J to determine if their is MDI to fund a Chapter 13.

[OhioFiler]

My husband and I would like to file a Chapter 7. Due to an extended business trip March-June, 2009, our Means Test income is inflated and we are over the allowable for our state and family size. However, upon itemization, we can get it down on only a few hundred over. We still fail; however, Schedules I & J reflect a large negative at the end of every month. Can we file a 7 and explain the overage of a few hundred dollars (about 400) as a fluke business trip?

Does this mean you also fail the 2nd portion of the means test?

The means test is a 6 month average. Schedules I and J are your CURRENT income and expenses. If your current expenses are allowable and you have a negative DMI you're a pretty good candidate for a C7. You may get more scrutiny from the UST.

[keezeed]

You still must fill out schedules I and J to determine if their is MDI to fund a Chapter 13.

This confuses me so much.

Does the means test qualify you for CH13 or do Schedules I and J?

Would I be right or wrong in saying that the means test determins your eligibility/requirement for CH13 but your Schedules I and J determine how much DMI/MDI you would actually have to fund the CH13?

That being said, what if you pass the means test meaning you are headed for a CH13 and then your I/J Schedules show you in the red due to job loss, pay cut, hour cuts, etc?

Thanks.

[OhioFiler]

This confuses me so much.

Does the means test qualify you for CH13 or do Schedules I and J?

Would I be right or wrong in saying that the means test determins your eligibility/requirement for CH13 but your Schedules I and J determine how much DMI/MDI you would actually have to fund the CH13?

That being said, what if you pass the means test meaning you are headed for a CH13 and then your I/J Schedules show you in the red due to job loss, pay cut, hour cuts, etc?

Thanks.

The means test is used only to determine if the presumption of abuse arises. It simply means it may be more difficult to qualify for a C7. If your current income and expenses on Schedules I & J are accurate and legitimate and you have a negative DMI (or slight positive) you may well still be able to receive a C7 discharge. It's just more difficult, not impossible.

[keezeed]

The means test is used only to determine if the presumption of abuse arises. It simply means it may be more difficult to qualify for a C7. If your current income and expenses on Schedules I & J are accurate and legitimate and you have a negative DMI (or slight positive) you may well still be able to receive a C7 discharge. It's just more difficult, not impossible.

Thanks for the info!

So...

The long drawn out means test is really only used if abuse is suspected?

What is the proper way to fill out expenses on I/J? I have been looking back 6 months and averaging my electric bill, phone bill, etc. Will I need to explain how I arrived at my expenses and if so am I doing it right?

When you do your I and J forms are you supposed to be explaining your current expenses or expenses over the past 6 months?

And with income do you list your current income or the income for the past 6 months?

(My wife was laid off last week and our current income is radically different from our income over the past six months so am I supposed to report zero income for her or what she made over the past six months like the means test?)

Thanks again!

[optimistic1]

No, you will be required to fill out the means test form (B22A) for a Chapter 7 or a (B22C) for a chapter 13.

Depending on what amounts you are coming up with for your schedule I and J will be looked at, however, most trustee's probably have a guide that they use to determine if that type of amount is considered normal.

Sometimes current income can be averaged by taking into account the last two paychecks and then multiplying it accordingly, some may take the average income.

It wants your current income, although to get that amount, you cant take into account other circumstances you had in the 6 month look back period, like job loss, decrease in pay, so its a conundrum.

I plan using the last 2 pay checks average and then multiply by how many times you get paid in a year, usually 24 to 26. Then divide by 12, which will give you a monthly income figure.

[Paramom]

Yes, we fail on the 2nd prong as well. Due to the inflated income from the business trip, it looks like we have disposable monthly income; however, if you look at our current income and expenses, we are clearly negative. The presumption of abuse arises, but can we still proceed with a 7 and explain the circumstances to Trustee?

[keezeed]

I have a similar situation... I'm meeting with a lawyer tomorrow so I'll be back with his verdict.

I'm thinking considerations would be made based on what I've read but I'm not sure.

[teacher]

Previously being HR personnel, a reimbursement for travel expenses for work is NOT income. It is not reported on your W2 and is not taxed. It is a direct reimbursement for monies paid for a business.

I don't know how the BK courts see this, but that is how the IRS sees it.