With a Threshold debt payment amount < 25% Can I automatically Pass the Means Test

[debtinohio]

Hi -

In order for me to meet the 25% Threshold debt payment amount I would need a disposible income of at least $1029 (unsecured cards 215K, student loans 32K)

With 2 cars, House, Child Support, Basic IRS Limits for the rest, I'm already at like $800 disposible income before I add any of my own deductions which would bring me negative but might be challenged (kids activity, tutor, cell phone, etc).

Can I outright qualify for a 7 by not meeting the Threshold debt payment amount??

My attorney was pushing for a Ch13 only because our gross income is $132K (family of 5), I'm looking for alternatives.

Thanks in Advance!

[shabam]

You seriously want to file a ch 7 with a $132K salary.

You are going to have some serious explaining to do. You will also need to get ready for thorough examination by the UST.

[whipster1]

The worst case scenario, you would be converted. You better have good records for each expense, and none of them can be luxuries...the tutor is first to pop up as a red flag.

[shabam]

Also needs to keep in mind that Music lesson for the kids, $500 401k payments etc are all red flags and grounds for dismissal.

[dakota112]

I have negative DMI now also. My lawyer made it clear as I was also a previously high income earner, to get my income down under the median and only then would she be comfortable pursuing a CH7 for me. So I have done that and will file in 2 months. Why suffer in a ch13? 5 YEARS? That is like a prison sentence.

[debtinohio]

$132K sounds fine except take home is $6700/month after child support, taxes, insurance, standard HSA deposit. Take the 5 person IRS expenses + $2400 for house, $550 & $600 for the cars, $450 utilities, etc and it's not $1000 left.

The tutor is $120/month and is for a child below reading level. I believe the IRS deduction is $130/month for educational expenses.
Back to my original ? - - can the means test be passed being below the 25% payback level?

[debtinohio]

Also needs to keep in mind that Music lesson for the kids, $500 401k payments etc are all red flags and grounds for dismissal.

None of that, thanks though.

[dakota112]

I really feel for you, as I was in your same situation until I just decided to do the best I can to get a fresh start and escape from all this nonsense, live and learn and move on. For me that meant shedding almost everything I can to get under the median, lose my job and get whatever help I can from family and press on. I just don't want these trustees to have an excuse that they can dismiss or deny me my constitutional right based on their rules. My atty will do the rest. Having to go throught the hoops and hurdles of the means test and all of its associated nonsense just adds to the aggravation. I didn't want to have to deal with it. The totality of circumstances, job loss, age, economy etc should be working in your favor.

[debtinohio]

I understand I'd have some trouble with expenses, I'm just wondering if the 25% limit is ever used?

[LimpDisc]

The debt threshold wouldn't be there if it wasn't used. Like the other posters have already stated, be ready to explain all of your expenses with the high of income.

[shabam]

I understand I'd have some trouble with expenses, I'm just wondering if the 25% limit is ever used?

Some trouble is an understatement.

I have never heard of the 25%

[debtinohio]

Some trouble is an understatement.

I have never heard of the 25%

Not really -- how much do you think is left once you take out the $2400 for house, $1650 IRS limit for food/personal for 5 in my zip 2 car payments (IRS limit amounts) IRS limit utils ? That's $5500 alone

[shabam]

You are making a mistake assuming that you will simply cite the IRS limit if audited or in a 2004 deposition. If the UST asks to review your case, they will possibly ask for one or two years worth of bank and credit cards statements. You will also have to present actual receipts to explain everything listed. The IRS limits are just that, limits. You still need receipts and bank statements to verify these amounts.

To make matters worse, you may also need to explain where the $215,000 worth of unsecured debt went. Any debt over $100K is a red flag and almost guarantees an audit. There are two major red flags here. Which translates to audit.

How about your exemptions? Are you under those totals? Did you make any large transactions on your credit cards within the last year?

[klandsb]

debtinohio: I feel your pain. None of us really wants to be under the trustees thumbs for the next 5 yrs but it's made for people with stable income which appears to the case with you & me included. Did u look at state guidelines ?? And also the IRS guidelines ??
Bankruptcy is a BIG decision and cant be taken lightly. You have to be in it for the long haul or its just not gonna work. A quick fix for some of us just isnt in the cards but at least we are employed which alot of people cant say.. I count my lucky stars for that everyday..Just research on this site and you will find some good threads about a ton of different things and read the STICKIES...They are very informative...

[backtoschool]

Your case will probably be looked at closely by the US trustee. Expenses that most likely won't be allowed are:

The tutor
Entertainment
cable over basic
expensive cell phone plan
car payments over $489
utilities over the average for your area (450 is high)
Kids activities beyond very basic amounts
Eating out
Student loans in many states. (some allow them some absolutely do not allow them)
Music lessons
excessive 401k contributions

The US trustee only has to find around $175-190 dollars a month in these discretionary expenses to kick you into a chapter 13.