Under the Median

[ApresMoi]

I was just told that I don't need to worry too much about income and expenses or having too much disposable income since I am way below the median income for my household size in this state (CA). Is this true?

[Meatstick]

I would run far away from whoever gave you that bit of mis-information.

[aces67]

I would run far away from whoever gave you that bit of mis-information.

I agree! Just b/c your below the median doesn't mean anything. If you have disposable income that can still push you into a 13.

[ApresMoi]

I went to Nolo, to look up info about the 'median/means' issue:

"Under the rules enacted in 2005, the first step in figuring out whether you can file for Chapter 7 bankruptcy is to measure your "current monthly income" against the median income for a household of your size in your state. If your income is less than or equal to the median, you can file for Chapter 7 bankruptcy. If it is more than the median, however, you must pass "the means test" -- another requirement of the new law -- in order to file for Chapter 7."

http://www.nolo.com/legal-encyclopedia/article-30040.html

The person I spoke to is an attorney who said that he's seen hundreds of petitons and that if someone is under the median, the trustee doesn't pay much attention to income and expenses. That you still need to list that info in the Schedules, but that it doesn't have much of an impact. This is for Ch. 7 in CA. Can a few more people weigh in, please?

[ApresMoi]

And here's what it says on legalconsumer.com:

"Do you need to complete the means test?

If you are filing for Chapter 13 bankruptcy, you do not need to complete the means test. However, you do need to complete a form almost identical to it — and that will determine how much you must pay in a Chapter 13 plan.

If you want to file for Chapter 7 bankruptcy, you must at least complete the first part of the form to figure your "current monthly income" (CMI), which is based on your average income over the past six calendar months. That number will determine whether you must complete the rest of the form.

If your CMI is below the median income for California for a household your size, then you do not need to complete the means test.

If your CMI is higher than the median for California for a household your size, you must complete the means test to compute your monthly "disposable" income (that is, income minus expenses). The result of that computation will determine whether you are eligible for Chapter 7 bankruptcy."

So, no, I would not have to complete a means test, but the question is whether a trustee would still be interested in disposable income.

[aces67]

We were below the median but showed disposable income and the UST was all over us! Until he realized that our attorney gave him the wrong info and we didn't actually have disposable income.

If a lawyer is telling you not to worry about disposable income then you need to run fast and get a second opinion.

[sawdust14]

We are in that situation. Semi-retired...Well below the median because social security is not counted for the median, but show $450 disposible income on the schedule where it is counted. What a creazy deal!!! All our debt is unsecured...house paid, clunker cars paid, no kids at home, etc., so don't have many monthly payments like many of you folks. We are 7 days past our 341 and have not heard anything. Our attorney said it would be no problem because we are below the medium. Time will tell.

[ApresMoi]

So your attorney said the same thing -- that you don't need to worry too much about Schedules I and J? $450 is a lot of disposable income to have. Please post back and let us know how it goes. What state? I am in Southern California. Thanks.

[albacore44]

If you find a good attorney, he will know what will fly under the radar for your district. yes, your expenses should show negative DMI, yes, they dont pay as much attention to someone filing who is under the median. but do you want to risk it ??. Not me. It is important to plan your BK, and make sure your planets lined up.

I found a good attorney. i originally thought I was over the median, but i ws still ok, since my ligitamate expenses were more than my income. But the attorney determined i could file with the 3 additional dependants that live with me, my son, his wife, and my mother-in-law. Now that brought me under the median. and my expenses are more than my income.

I cant stress enough the importance of finding a good BK only attorney who knows the minds of the trustees for you district

[sawdust14]

We live in Iowa and our attorney is very experienced in ch7, but I still have my fingers crossed. I have read enough posts on this forum to know that anything can happen and all districts and tustees are different. All it takes is a trustee having a bad day, and suddenly you are the exception rather than the rule.

He said that in practice, below median incomes are rarely looked at for disposable income. They don't have time. Low income ch13 always fail. "Unlikely to be a problem", his words.