Oh, no. Please help. Means test or not?

[frmrdwn]

I thought I was just fine filing Chapter 7 April 1 of 2010. My income is close, $84/month under the mark for my state.

My 2008 income is under the median income.

I plan to file April 1, 2010 and that six months income (October - March) will just make the cut.

Here's the surprise. I am/was receiving income from January- September 2009 for what I was told was "reimbursed expenditures" and that I did not have to report it on taxes. The co. realized that was an error and that the reimbursement needs to be reported and taxed. The feds call that income. Oh, crap. That additional reimbursement that magically turned into income puts me over the median for the year. However, if we are only looking at the last six months prior to filing, I am under. I am not working that co. anymore.


Do I still qualify for ch. 7?

[keepmine]

The lookback period is the 6 months priro to filing.

[frmrdwn]

I am still trying to wrap my head around the year long increase in income. As of March 2009, people filing in Oregon must be under 56,300. The gross is around 4600/per month. But, in BK we only average the last six months of income to get those amounts?

Sorry. I think I am hyperventilating.

[fooked]

yes, you average your income from the prior 6 months... so if you file August 31st, you add your actual gross income from February through July and divide by 6

[justbroke]

First, stop trying to qualify for a Chapter 7 by being under the median. Being over/under the median has nothing to do with being qualified to receive a discharge under Chapter 7. Having the correct expenses is what allows you to file Chapter 7.

I will never, to this day, understand the fascination with being under-the-median and filing Chapter 7. Sure, the more your are over-the-median, the less likely you are going to qualify, but qualification is based on something called your disposable income calculation.

I don't see anything at all wrong with your expenses being reimbursed in your check and the company doing a gross-up on your salary to cover the taxation. Those are legitimate expenses (taxes). I would wait for the travel expenses to average off (based on the 6 month lookback). Tt they are legitimate business expenses that are reimbursed in your payroll check so that they are taxed, then you should be able to list those expenses on your Schedule J.

[frmrdwn]

First, stop trying to qualify for a Chapter 7 by being under the median. Being over/under the median has nothing to do with being qualified to receive a discharge under Chapter 7. Having the correct expenses is what allows you to file Chapter 7.

I will never, to this day, understand the fascination with being under-the-median and filing Chapter 7. Sure, the more your are over-the-median, the less likely you are going to qualify, but qualification is based on something called your disposable income calculation.

I don't see anything at all wrong with your expenses being reimbursed in your check and the company doing a gross-up on your salary to cover the taxation. Those are legitimate expenses (taxes). I would wait for the travel expenses to average off (based on the 6 month lookback). Tt they are legitimate business expenses that are reimbursed in your payroll check so that they are taxed, then you should be able to list those expenses on your Schedule J.

I think my fascination, as you put it , is that I don't really understand the purpose of the means test. After all of this reading, I think I have it in my head that people can disqualify themselves from bk altogether if they are over the median income (maybe me) and yet their disposable income is negative (definitely me). Otherwise, why have the means test in the first place? Even when when if I don't include cable, internet and entertainment in my Schedule J, I still have negative flow. Hence the outrageous cc debt.

So, maybe I am asking the wrong question. Does the trustee/ law view people who in over the heads in debt and over the median income as commiting fraud and therefore will not provide bk protection? Is there a sticky or link that answers this question that I missed?

FYI: I never intended for this to happen. I honestly thought things would turn around.

[justbroke]

Otherwise, why have the means test in the first place?

The means test really has to do with whether you have the "means" to fund a Chapter 13. It's counter-intuitive! Before the Means Test was created, these decisions were very subjective and varied amongst the Bankruptcy Districts.

The means test is a quick "mechanical" test based on a well established formula that basically puts everyone on equal footing. (At least, that was the intention of it.)

The means tests gauges your expenses versus your income. If the net result -- also known as your disposable income -- is less than $108, and in come cases, less than about $180, you qualify for a Chapter 7 discharge. Otherwise, you can afford to pay $10,000 (theoretically) in a Chapter 13 over 60 months.

So, maybe I am asking the wrong question. Does the trustee/ law view people who in over the heads in debt and over the median income as commiting fraud and therefore will not provide bk protection? Is there a sticky or link that answers this question that I missed?

No, but people over-the-median do get a "closer" look. What really peaks the Trustee's curiosity are those significantly over the median and/or those with significant unsecured debt (around $100K and over).

FYI: I never intended for this to happen. I honestly thought things would turn around.

That is what this is for.

[frmrdwn]

I appreciate the info, just broke. Thanks!