Means Test and my dependents expenses

[SJ0228]

My dependent children ages 18 and 19 are in school. I pay their rent, utilities, groceries, phone and transportation expenses. Can I use these expenses to qualify for the Means Test? I don't make enough money to pay back my creditors for a chapter 13, and my income is too high to qualify for the Means Test if I can't include my kids expenses. Thanks in advance for your assistance.

[keepinitreal]

I think it depends if you a co-signer on their apartment leases and utility bills.

[SJ0228]

Keepinitreal, I am the guarantor on their lease and all their utilities are in my name.

[HHM]

I will be honest, that is a difficult situation. First question, why are you paying the expenses?

If the judge were to ask you; "why should your creditors get nothing so you can pay for your adult children to do...." What is your response? I can practically guarantee your chapter 7 will get an objection from the U.S. Trustee unless there is some necessity behind why you are paying your kids expenses (i.e. they are medically disabled, etc).

[SJ0228]

My kids are attending school fulltime, they are unemployed and unable to pay their own expenses.

[HHM]

My kids are attending school fulltime, they are unemployed and unable to pay their own expenses.

Hate to say it, the bankruptcy court is probably not going to allow the expense. The only thing you have going for you is that you are the one legally obligated on the expenses so you have an argument that you should be allowed to maintain those expenses.

The only way this works is if you have enough expenses, not including your support for your kids such that you would qualify for bankruptcy anyway, or if you were a non-consumer chapter 7.

I don't have all your facts (assets, income, debt,etc), but your choices are these:
1. Cut off the kids, file bankruptcy (even if a chapter 13) to get back in control of your finances and debt.
2. Wait it out. Wait until you kids finish school (this course of action depends on your risk factors, wage garnishments, equity in assets, etc), then file bankruptcy.

[SJ0228]

Thanks HMM, I appreciate your feedback. Here's more info to give you a better picture of my situation:

Monthly expenses (without kids expenses) $4932 (I used the expense spreadsheet I found on this site)
Kids expenses $2160
Monthly takehome pay $4554
IRS lien $28,292
Student loans $227,245
Other debts (repo, unpaid medical) $18,265

The attorney I spoke to said I don't have enough take home pay (even without the kids expenses) to file a chapter 13. I would need to pay $65K of my expenses at $1200 per month for five years which I dont have.

The attorney wasn't sure if I could use my kids expenses. He was going to research this topic. His advise was that there were no options for me except for garnishments and liens from the IRS and student loans since it seems bankruptcy is not an option. Do you agree? Thanks again.

[BnkrptcyLwyr]

Thanks HMM, I appreciate your feedback. Here's more info to give you a better picture of my situation:

Monthly expenses (without kids expenses) $4932 (I used the expense spreadsheet I found on this site)
Kids expenses $2160
Monthly takehome pay $4554
IRS lien $28,292
Student loans $227,245
Other debts (repo, unpaid medical) $18,265

The attorney I spoke to said I don't have enough take home pay (even without the kids expenses) to file a chapter 13. I would need to pay $65K of my expenses at $1200 per month for five years which I dont have.

The attorney wasn't sure if I could use my kids expenses. He was going to research this topic. His advise was that there were no options for me except for garnishments and liens from the IRS and student loans since it seems bankruptcy is not an option. Do you agree? Thanks again.

The IRS liens are secured, and you can divide the amount by 60 and include it as secured debt on the means test right there.

Just looking at it ... not sure how you don't make the means test?

The kids are dependents - the fact that they are adults shouldn't matter. It would be one thing if they were earning their own income, but they're not. If they weren't in school, they'd be with you. I have written an extensive brief on this in my practice. It is very much a fact-based issue. And frankly, it will depend on the judge too.

Even then, I would claim them as a "special circumstance" to deduct a reasonable expense for them - that portion which you would pay if they were home.

I see plenty of avenues for a 7 on the facts you stated.

[SJ0228]

Thanks, now I have to find an attorney who agrees with you. Thanks so much for your help.

[HHM]

That info is helpful.

First question, are any of those taxes dischargeable? Your attorney is correct, you don't seem to have enough disposable income to fund a chapter 13.

Second, your numbers beg the question, how exactly are you funding your kids expenses, you have $4554 in take home pay, but $7,092 in expenses (with the kids).

Third, where did the attorney come up with the need to pay $65,000 over 5 years. Do you have non-exempt assets? (i.e. home equity)?

Short of knowing your asset picture, I am not really sure bankruptcy is even the right option for you even if you could qualify. Granted, I don't really have a better option off the top of my head, but I am not sure what you really gain from the bankruptcy. Bulk of your debt are debts that can't really be addressed in bankruptcy, student loans and to some degree the taxes.

Talk to some other attorney. I agree with BKLwyr, there are arguments for keeping support of the kids, but it is very hit or miss. As he pointed out, the middle ground is that you claim the expense you would have if they were living with you.

[SJ0228]

HMM, answers to your questions:

1. First question, are any of those taxes dischargeable?
Yes, they are underpaid taxes from 1999 and 2004. All of my taxes have been filed.

2. Second, your numbers beg the question, how exactly are you funding your kids expenses, you have $4554 in take home pay, but $7,092 in expenses (with the kids).
I am struggling to pay everything, sometimes I have to double-up on some expenses or cut-back on groceries etc.

3. Third, where did the attorney come up with the need to pay $65,000 over 5 years. Do you have non-exempt assets? (i.e. home equity)?
The attorney said I have apprx $250K in debt of which I would pay a percentage of that over five years, resulting in $1200 per month to be paid to a trustee to settle my debts.


I don't own a home, I make payments on my car and have no assets. I thought the benefit of filing bk would remove my taxes and other debt, maybe leaving me enough money to pay my student loans which are $1100 per month. Even paying the student loans after bk would be a struggle since my expenses already exceed my take home. I'm just desperately trying to find a solution that might, some day, get me in better financial health than I am now. It's hard to hear and realize that I don't have any options. Thanks for your time and response.

[HHM]

Ok, this situation becomes a little more straightforward.

Go see another attorney, this attorney telling you that you must pay back a certain percentage of debt is just plain wrong.

You should push for a chapter 7. If you have very little assets, the tax liens are only worth the value of your assets. (note, exemption do not apply to tax liens, so you want to be very careful how you value your household items, etc). A chapter 7 will discharge the tax debt, 8 times out of 10, the IRS will simply release the lien after the bankruptcy if all you have are household items, clothing, etc as assets. And you will discharge your taxes and misc unsecured credit card debt.

Thus, the real issue is do you qualify for chapter 7 (means test).

[BnkrptcyLwyr]

Ok, if there's a lien for taxes, you're in a pickle ... this will simply have to be paid at some point. Once there's a lien ... that's a problem because they will always be able to enforce the lien (unless they let the ball slip on the refiling of the lien). No lien ... well, then we can talk about whether the taxes can be discharged.

As for the student loans ... now that's the REAL problem. Look into paying based on your income. I think the program works where you pay like 10% of your income over 25 years and everything else after that is discharged. That may be your only option.

You could still file Ch 7 and rid yourself of everything else ... then, deal with the taxes and student loans.

[SJ0228]

Thanks. That sounds like a plan. Any advice on finding a good lawyer? My current lawyer won't work with me on a 7 because of my kids expenses, he didnt even bring up the option of "special circumstance" that was mentioned here. It's important that I hire a fully knowledgeable attorney that knows the law and can provide me with all the options available to me. How do I sift through all the listings online and in the yellow pages to find the lawyer that's right for me?