Another Means test issue

[blockhead]

I searched other threads and didn't find it. The older 22a forms (older meaning about a year ago) had wording to add in to the mortgage payment RE taxes and insurance as payment of these is mandated by the mortgage. The later form just has a box to state whether payment to creditor includes RE tax or not. Some BK lawyers are saying to add those items as a separate line item or to include under the monthly payment.

My question is really whether one can only deduct for them in the means test if RE taxes and insurance are escrowed? (i.e. paid to the creditor as opposed to paid separately to city/town and insurance company?

[blessed]

Whether or not the money sits in escrow is not the deciding factor IMO. You still have to pay that bill, bi-annually or monthly or whatever, it needs to be included in your expenses. How you break it down doesn't matter.

[blockhead]

Seems reasonable to me too

but, the wording of the law says "payments contractually due to secured creditors" and of course a city/town/ins co is not a secured creditor.

And I wonder why they changed the 22A form to just include a checkbox for "does/does not include taxes and insurance" when the previous form spelled it out to include those things

[blessed]

I see what you're saying now. I was looking at the schedule J which includes them as expenses on a line lower on the page if they are not included in the mortgage payment.

I'm sure they are included though, just not sure where to record the amounts on the means test.

[justbroke]

My question is really whether one can only deduct for them in the means test if RE taxes and insurance are escrowed? (i.e. paid to the creditor as opposed to paid separately to city/town and insurance company?

For a Chapter 7, all secured debt payments (including taxes and insurance) are included on the Means Test (B22A).

Many Trustee have fought this, but the law is clear. All "contractually due" payments, including property that you are surrendering, are included on the Means Test. However, you can't include those payments for property that you are surrendering on Schedule J.

justbroke's study guide: Also realize that Trustees only use the Means Test as an "initial" test of your eligibility. The Means Test (B22A was created specifically to create a so-called "bright-line" test to see if you're initially eligible. The first test is whether your income is under the median. If you are under the median, you stop the Means Test and just fill out your Schedule J to indicate expenses. If you're over the median, you get to fill out more of the Means Test which limits and controls which deductions you can take for expenses, and it produces a disposable monthly income (DMI) number. If this is number is over $109.58, then a presumption of abuse arises. You can rebut the presumption if the total DMI is less than $182.50 and multiplying your DMI by 60 (months) yields a value that is less than 25% of all your unsecured debt. Otherwise, you don't qualify for a Chapter 7 unless you have "special" circumstances.

In any event, the Trustee's will still take your Schedule J expenses and subtract them from your Schedule I income to determine your true disposable income. This is mainly because Form B22A (Means Test) is "backwards" looking -- looks 6 months back and doesn't take into account property that you're surrendering. Schedule J is more "current" and "forward" looking, so is the true reality of your financial condition.

(As a side note, the opposite is true for a Chapter 13. In a Chapter 13, you can only list those expenses that you'll actually carry forward on your Means Test -- form B22C.)

I hope this helps.

[blockhead]

Helps a lot

Thanks