Chapter 7 Qualification

[bf2bf]

Is the primary qualification for Ch 7 the gross income or the disposable income?

Say the 3-member family median state income is 70K.
If the filers income is say 80K with only $50 disposable income, is this filer automatically disqualified from Ch 7 because his/her income is over 70K?

[hamburgervol]

$50 wouldn't fund a Ch13.

[aces67]

The most important factor is how much money is left over. If you only have $50 a month leftover than you qualify for a Ch 7.

[HHM]

Part I of the means test is based on Gross Income...I refer to it as the over/under, you are either over or under the state median income for X family size. Keep in mind, your income is calculated off of the last 6 months. If you are over, then you go to Part II where you calculate Disposible monthly income based on IRS allowed expenses and your actual secured expenses.

[bf2bf]

Thanks for clearing up this important point.

Now that I'm reading about IRS "allowable" expenses versus actual "secured" expenses it brings another question to mind.

Does the second mortgage (a cash-out equity loan taken out a month after the home was purchased with 20% down) qualify as either of these expenses or is it looked upon in the same light as the unsecured credit card debt and cannot be used in the expenses calculations? (The current equity in the house may cover only about half of this equity loan)

[justbroke]

Does the second mortgage (a cash-out equity loan taken out a month after the home was purchased with 20% down) qualify as either of these expenses or is it looked upon in the same light as the unsecured credit card debt and cannot be used in the expenses calculations? (The current equity in the house may cover only about half of this equity loan)

The second mortgage is secured against your residence. It counts, in the Means Test, as secured debt.

[bf2bf]

The second mortgage is secured against your residence. It counts, in the Means Test, as secured debt.

Thanks jb!