Above Ave Income vs. Means Test

[OhioFiler]

[QUOTE=mhman;318922]Thanks for your comments - aljohnson007

How can I claim the mortgages payment in the means test as a expense which I will surrender through Ch7?

I checked the NOLO means test. But it shows that

"If you are claiming deductions for payments on property that you plan to surrender to the trustee during bankrupcty, note that many courts will not allow that deduction."


I am confused now. Did you claim both 1st and HELOC as deductions for "secured debt payments"?

If I can claim 1st and HELOC as debt payments, I can file ch7 today without waiting 6-month!

FYI, I am in California.
/QUOTE]


Simple. Don't indicate on your petition you plan to surrender the property.

[klandsb]

mhman.... Here's how mine worked. First the Sheriff came to my door and I had to sign for a letter from the collection agency...On that letter it said I had 20 days to dispute the allegations on the form...SO I took a response to the court house prothonotary's office disputed some items and not others. Also, had to send a copy to the collection agency... Then the collection sent me another letter by us mail responding to my dispute... Now I have another 30 days before that in which time I will be filing bankruptcy so I have managed to buy myself some time... Yes, eventually it would happan because you can only stall so much....Hope that helps....

[Frshstart09]

Mhman,

I had a home in Florida with a HELOC (I rent in Washington now) and it was in the foreclosure process as I had not made payments in 8 months. Although I intended to surrender the home, I was still able to use it for means testing as it is a contractual obligation. Good luck to you!

[mhman]

Thanks for all your answers. You are truly good neighbors!

It is a good news that I can use mortgages payments in the means test to be qaulified for ch7.

If I include the 1st mortgage and HELOC payments in the means test, I don't have to wait six months.

Thanks all for your help.

[justbroke]

Let me answer as far as using your mortgage payments on the means test evern though you are surrendering the home.

You may absolutely use the mortgage payments on the Means Test. This is well litigated throughout the Districts. Congress made the Means Test a mechanical test which allows you to include all payments "contractually due over the next 60 months'. Many Trustees have fought this and lost. Plain and simple, the amount is actually contractually due.

However, the Trustee can go after you on what they call a "totality of circumstances" objection under 11 USC 707(b)(3)(B). This is where the Trustee may object to your discharge and ask for a dismissal because surrendering does give you enough disposable income to fund a Chapter 13.

I hope that helps.

[leena]

Median Income

First, it's not your income (over or under the median income) that qualifies you to receive a Chapter 7 discharge. It's how much money you have left over from your income, after allowed expenses -- also known as your disposable income!

I don't know why you'd continue to pay your credit cards at all. When are you filing? Usually -- and there are some caveats and assumptions -- paying credit cards are just throwing money away. The only time to pay them is when you've made a recent large purchase and are trying to at least attempt to pay the debt (so they can't accuse you of never intending to pay it).

What are you really trying to do? and when?

From what my attorney tells me here in MN, what you are saying regarding median income is only partially true. A person who is over median but qualifies on the means test is likely to have their schedule J (actual expenses) held up to closer examination then a below median filer. In face, he felt that Trustees were in general much more friendly to below median filings and tended to just scan the schedule J for anything that looked to out of line. In addition, a below median filer, at least according to the attorney might show some disposable income (like $200.00, not $600.00) and likely still be put into a chapter 7, though the trustee could ask for a 13. An above median filer is going to automatically be disqualified if they show as little as $100.00 of disposable income.

I see this idea popping up on the Forum that it does not matter much if you are an above or below median income filer, what "counts" are your legit expenses in determining if you can file a 7, but what I hear for MN anyway is that the trustees are pretty forgiving with most below median filers and fairly harsh with above median cases. The good news for 13 filers here though apparently is that the trustees are good with very reasonable chapter 13 plans.

It is amazing how much latitude these guys get in what is suppose to be federal laws.

[sjcmCA]

My attorney said that we intend to keep the property first and surrender it later. Even 15 days after repossesion or foreclosure, those mortgage payments still can be included in the Means Test. (Surprise! It means that no matter what default or current on the mortgages, we can include everything in the means test)

I was wondering how it works but it's true that nobody knows we intend to surrender or keep the property to the end.

[justbroke]

From what my attorney tells me here in MN, what you are saying regarding median income is only partially true. A person who is over median but qualifies on the means test is likely to have their schedule J (actual expenses) held up to closer examination then a below median filer. In face, he felt that Trustees were in general much more friendly to below median filings and tended to just scan the schedule J for anything that looked to out of line.

It is 100% true... and I'll explain it to you.

It does not matter for Minnesota or Maryland, Alaska or Arizona... again, being over/under the median has absolutely nothing to do with being qualified to receive a discharge under Chapter 7.

I will re-state, again, that being over the median or having unsecured debt near or over $100K will cause the United States Trustee (UST) to be more "interested" in your case and subject you to more scrutiny.

I see this idea popping up on the Forum that it does not matter much if you are an above or below median income filer, what "counts" are your legit expenses in determining if you can file a 7,

Absolutely, in caselaw as well, does not matter. The reason why USTs devote more time to over-the-income filers, is because that's where they'll find more abuse of the Bankruptcy Code. The UST's office just doesn't have the time to scrutinize every case. Every single UST Region has a set of "triggers" that they use as a guide to look deeper into a case. Those are generally, over the median or attempting to discharge at, near or exceeding $100K in unsecured debt.

It's not so much latitude on the law... it's just that the UST can't look that deep into every case, given how much time is given for them. For example, to determine abuse, the UST has to file a presumption of abuse within 10 days of the 341 Meeting... or s/he can't file it. For the totality of circumstances and "bad faith" objections, s/he has to file within 60 days after the first scheduled 341 Meeting. That doesn't give them time to "scrutinize" all case. So they take the cases that are more likely to cause issues.

In the end... it does not matter if you're over or under the median income in order to receive a discharge under Chapter 7. What matters is your expenses in relation to your income.

In addition, a below median filer, at least according to the attorney might show some disposable income (like $200.00, not $600.00) and likely still be put into a chapter 7, though the trustee could ask for a 13.

Doesn't matter what the Trustee thinks. No judge would see disposable income over $182.50/month and allow a Chapter 7. If it's below that jurisdictional threshold and sixty times that disposable income is more than 25% or the scheduled unsecured debt, then they could ignore the "abuse" as dictated by the code, because the code reads "may" dismiss. However, show up at any 341 Meeting with $200 as disposable income, and either you'll need to re-work your Schedule J/B22A, or you will be in a Chapter 13. This is not a decision for the Trustee, as it's jurisdictional. Remember, the threshold is around $182... not $200. With $200/month disposable, that's $12,000 over 5 years, and that is just not going to allow a Chapter 7.

An above median filer is going to automatically be disqualified if they show as little as $100.00 of disposable income.

This is not correct. The Bankruptcy Code is what determines jurisdiction, not made up numbers. The threshold for the presumption of abuse is about $109.00/month. If the debtor, over OR under the median, shows a disposable income of more than $109/month to $182/month, then there is a presumption of abuse. That presumption is only overcome (jurisdictionally speaking) if (a) that disposable income multiplied by 60 (months) is less than 25% of the total scheduled unsecured debt, or (b) there are exceptional circumstances.

[leena]

I am going simply on what my attorney explained to me. Oh, and yes I do know that these trustees get scary latitude. Latitude in the way they deal with student loans, in the way they deal with property that is going to be given up, you name it. It is amazing to me that the "new" laws give trustees this much whim and whimsy.

[justbroke]

I am going simply on what my attorney explained to me.

I think your attorney used "round" numbers and did not get into specifics as I just mentioned. I do not want other readers of the forum to think that being over-the-median doesn't allow a Chapter 7. Nor do I want them to believe that having as little as $100/month in disposable income will not allow them into a Chapter 7.

I want them to know that only a "presumption" arises at about $109/month. I also don't want Chapter 7 debtors thinking the threshold for a Chapter 13 is at $200/month when it is clearly lower.

I do this because sometimes, $1 makes all the difference.

The exact numbers are (For March 1, 2007 to February 28, 2010):

1. Presumption of Abuse: $6,575 over 60 months or $109.58/month
2. Abuse: $10,950 over 60 months or $182.50/month
3. NOTE: Under 11 USC 104, these amount will adjust again in March 2010.

[leena]

I think your attorney used "round" numbers and did not get into specifics as I just mentioned. I do not want other readers of the forum to think that being over-the-median doesn't allow a Chapter 7. Nor do I want them to believe that having as little as $100/month in disposable income will not allow them into a Chapter 7.

I want them to know that only a "presumption" arises at about $109/month. I also don't want Chapter 7 debtors thinking the threshold for a Chapter 13 is at $200/month when it is clearly lower.

I do this because sometimes, $1 makes all the difference.

The exact numbers are (For March 1, 2007 to February 28, 2010):

1. Presumption of Abuse: $6,575 over 60 months or $109.58/month
2. Abuse: $10,950 over 60 months or $182.50/month
3. NOTE: Under 11 USC 104, these amount will adjust again in March 2010.

I think his point was that it is more difficult for an above median filer to get a 7 than a below median one, not that a person above median can not get a chapter 7. They obviously get them often. I also think his point in saying that a person who was below median and had two hundred bucks a month in "disposable" income might walk away with a 7 none the less is that presumption or no, that is something a trustee can decide to permit, and they do indeed sometimes make that decision based on their own take on the circumstances. Not frequently. but it happens. I would never bet a bankruptcy on it (for heaven's sakes if you are a below median filer with normal living expenses-as in not living in your mom's basement a good attorney should be able to help you find enough expenses to NOT have much at all if any in the way of disposable income!).

My whole point in this is: beware! The current laws give the trustees far more discretion than they probably out to have.

[justbroke]

I think his point was that it is more difficult for an above median filer to get a 7 than a below median one, not that a person above median can not get a chapter 7.

That is completely the wrong thinking. It is common to find these lawyers, like yours, who tell everyone who is over the median to "go away". The reason is, they like to charge $1,500-$2,000 on a "no look" case and do lots of them... or they are just Bankruptcy Mills.

There is absolutely nothing in the code to suggest that, and many people, every day, even here on this forum, receive discharges being over-the-median income. Some without any scrutiny. Sheesh, we have folks on here that were under-the-median and got beat up by the U.S. Trustee (UST). It is just as difficult for a below median person to file if they do not have the requisite expenses to produce a low monthly disposable income.

They obviously get them often. I also think his point in saying that a person who was below median and had two hundred bucks a month in "disposable" income might walk away with a 7 none the less is that presumption or no, that is something a trustee can decide to permit, and they do indeed sometimes make that decision based on their own take on the circumstances.

You have $200/month in disposable income... you are going to be dismissed (period). It's jurisdicational. Trustee's don't decide this. It is jurisdictional and just won't happen. Having $200 in disposable income, over or under the median, is no longer a presumption. It is abuse.

Bankruptcy is a highly technical process. Only $1 here or there can make the difference between abuse, dismissal or even a lien strip (in other Chapters). Have your attorney list 5 cases that were under-the-median and had $200 (or more) disposable income on the Schedule J and/or Form B22A that were not dismissed. Do not list any cases that were $182.50 or less. (These should be final amended forms.) I will be happy to research them and record the outcome here.

Bankruptcy is a highly technical process, and the UST always argues over expenses, not that you're almost at the presumption of abuse. It's a threshold and is clearly written within the law. If the law was so broad, as it was before, then you'd receive some absurd results. This is specifically why the BAPCPA was written, to remove a lot of the ambiguity and differences in cases across the venues. (Not that it didn't create new ambiguity... vis-a-vis the so-called hanging paragraph in 11 USC 506.)

Not frequently. but it happens. I would never bet a bankruptcy on it (for heaven's sakes if you are a below median filer with normal living expenses-as in not living in your mom's basement a good attorney should be able to help you find enough expenses to NOT have much at all if any in the way of disposable income!).

Right, "find expenses" to bring it either under $182.50, or less than $109.58. The real goal is to be under $109.58 unless the amount up to $182,50 is less than 25% of your scheduled unsecured debt or you have special circumstances.

My whole point in this is: beware! The current laws give the trustees far more discretion than they probably out to have.

Actually, with the exceptions I already noted, the law does not give the UST any discretion. This is precisely what Congress sought to take away with the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005.

Again, I do not want readers thinking that being over-the-median makes a Chapter 7 any more difficult or that much harder. Sure, you may receive more scrutiny by the UST. Scrutiny also awaits the under-the-median filer who are in the $109.58 to $182.50 range... or discharging at, near or over $100K in unsecured debt.

[PdxDavid]

I will be happy to research them and record the outcome here.

When you say research... How are you researching these? Are you using PACER, or is there another way to search and view public record cases like this?

Thank you

[justbroke]

When you say research... How are you researching these? Are you using PACER, or is there another way to search and view public record cases like this?

The actual Bankruptcy Court websites, on which they publish their opinions. I also use Lexis/Nexis for cases that I really need the decisions, that I can't get to (and good for searching). The local law library has a Westlaw and a Lexis-Nexis terminal for public use, so those come in handy. They'll print an entire case for $2.50 for me if I give them the Citation.

There's also LexisOne... which is free, but it's limited in the briefs it provides. There are also a bunch of publications from ABI (American Bankruptcy Institute) and a few others that provide commentary on various landmark cases.

It's not easy on the search engines, although you can find some things (like published opinions). The Law Library helps. Searching PACER is expensive, and not recommended. If you do find a case in your "free" searches on the Internet or on LexisOne (free), then you can actually go into PACER to find the actual case and pull any document from the case file/docket, but that can get expensive too.

If someone gives me actual cases, with case numbers and which District they are in, then I would go directly into PACER and look through the docket report.