Is the new means test too easy?

[FoolAndHisMoney]

OK now you just made me feel really uncertain and depressed about this whole thing.

How's that? I meant that according to the IRS expenses the housing expenses are the same for 1 person or 2. This means that 1 person with 1 income is in better qualified for chapter 7 then 2 people with 2 incomes. I thought that would cheer you up. 1 person also pays much more in taxes if that person has no deductions such as home mortgage or "little ones". You'll be fine. Cheer up!

[FoolAndHisMoney]

My educated guess is that besides high income debtors, 2 income married couples with no kids will probably be the biggest targets for a chapter 13. It's kind of the worst of all worlds(at least in bankruptcy). 2 incomes, but only allowed the same housing expenses as a single debtor and no kids to pad up the other living expenses. I sure hope the new law doesn't increase the divorce rate.

[Rona123]

Thanks all for the information and the discussion. I understand the process MUCH better now.

Here's a follow up question that no one may know the answer to yet with the changed laws:

If your income is below the state median, will they look at your expeses every bit as closely as if you are high-income filer? My expenses aren't in any more disarray than anyone else's, but I'm curious about what practical difference it makes if one is below or above the state median. Since being below the state median means that "the presumption does not arise," what impact does that fact have on the process, if any?

Ron

[cpw111]

Who knows? In time we shalll find out.

Exactly, I go in less than two weeks and to be honest I am tired of worrying about it. I will keep everyone posted on what happens.

[FoolAndHisMoney]

Thanks all for the information and the discussion. I understand the process MUCH better now.

Here's a follow up question that no one may know the answer to yet with the changed laws:

If your income is below the state median, will they look at your expeses every bit as closely as if you are high-income filer? My expenses aren't in any more disarray than anyone else's, but I'm curious about what practical difference it makes if one is below or above the state median. Since being below the state median means that "the presumption does not arise," what impact does that fact have on the process, if any?

Ron

It's hard to answer what they will look for so early. My guess (and only a guess) is they probably won't look at every detail since the "means test thing" is what they have been pushing for, for years. The US Trustee always supported a system based on IRS collection standards.

If you are below the median then only the US Trustee and judge can dispute your chapter 7 filing. Over the median the creditors also can dispute your chapter 7 filing if they feel that allowable expenses are unrealistic. If they lose that dispute they will pay your legal bills just as if they dispute a discharge of certain debts they feel were fraudulent.

If you for whatever reason go into a chapter 13 and you are below the median then it will only be for 3 years unless you need more time to keep an asset. For everyone else it's 5 years.

[StaciMM]

My thought is the means test is to steer more high income filers to ch. 13. It will have some (minor) impact on lower income filers, but I think that is a side effect.

[cpw111]

Learning as we go

I was going over all of my papers and comparing my means test with the schedule J.

Means test monthly disposable income = $47.xx

Schedule J Monthly net income = -$155.xx

I dont know if this is to my advantage or disadvantage. But thought you guys might want to know.

I do make roughly 6K over the median income but I also pay out the ass in taxes and have a student loan. If you want to know any othe specifics let me know.

[FoolAndHisMoney]

I was going over all of my papers and comparing my means test with the schedule J.

Means test monthly disposable income = $47.xx

Schedule J Monthly net income = -$155.xx

I dont know if this is to my advantage or disadvantage. But thought you guys might want to know.

I do make roughly 6K over the median income but I also pay out the ass in taxes and have a student loan. If you want to know any othe specifics let me know.

The $155 may put you in a chapter 13 unless you have a large amount of unsecured debt. It's crazy but if you have 37000 or less in debt then you will be in a chapter 13. If you have way more then 37000 in unsecured debt then you should qualify for a chapter 7. Between $100 & $166 you will qualify for a 13 if you can pay at least 25%. I guess they feel anything less then 25% the unsecured creditors won't get a meaningful distribution. Are you sure you listed all of your "reasonable expenses"?

[cpw111]

It is a negative $155.00 if that matters but I probably didnt list all my debts. Anyway I have over $37000 in unsecured debt. Maybe I will qualify for a 7 but if I dont it wont be the end of the world.

[Rona123]

I assume student loans are considered unsecured debt? If so, then there are worries on my end. Just for comparison, at $6k below my state's median, I'm a whopping $1500 on the negative side on the means test. And while I haven't done a formal Schedule J yet, my rough draft has me about $400 a month in the red, and that doesn't even include another $500 in student loans.

Here's another question: In the past, how closely would the court or trustee examine the expenses on your schedule J? Do you have to produce proof in the form of receipts and statements, or do they just take them at face value as long as they are resonable and below the IRS standards, as mine are.

Thanks for all the great information,
Ron

[question4you]

pass means test?

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