I'm struggling to understand the means test with a "roommate" situation

[derp]

I met with my second lawyer today, and I'm still baffled by this. I live with my girlfriend. The mortgage is in her name. We split all utilities, the mortgage payment, food, cable, ect in half. I'm responsible for my own debt, and she's responsible for her own debt. What part of her income exactly is counted towards household income? The lawyer wanted an average paystub of hers to get an estimate of her income.

In other words, I live in PA. I make less than $30,000 a year. The median for a 1 person household is $44,396, so I'd be ok there. She makes a little less than me. Let's say $27,000, which brings us both up to $57,000. The median on a 2 person household in PA is $53,572, so I fail that part of the means test if her entire income is counted towards the household income.

I took the means test on legalconsumer.com, and the only option I had was to file "unmarried", so I couldn't include her expenses, even though I had to choose "2 person household". So I have to deal with a 2 person median, without being able to deduct a second person's expenses, because we're not married.

What am I missing here? The lawyer explained it, and what I got out of it was that it's either her contribution towards the household expenses that count as household income, or whatever money she has left after her own expenses that count as household income. But, even after telling him how much she made, he still mentioned things like having me buy a car to bring up my monthly expenses or reducing my OT to temporarily bring down my yearly income (which would mean waiting until the end of November to file, since I have to help cover peoples vacations over the summer).

Other than this whole median headache I actually did like this lawyer. My parents used him in '03 or '04, and he got them out of the convoluted mess they were in.

[BKDefender]

derp -
First things first - if the attorney actually told you that you could buy a car with the express purpose of increasing your monthly expenses as to reduce your resulting means test results, he has just violated bankruptcy law, specifically 11 U.S.C. 526(a)(4) which was just upheld by the Supreme Court in In Re Milavetz back in March 2010. I don't know if I would go around advertising that fact because him advising you to do so is illegal and unethical.

Now on to your actual question - if someone came to me in your situation I would use the roommate's/girlfriend's contribution towards your combined household expenses as your additional income. Your roommate/girlfriend is not required to give you any money whatsoever so the real monetary benefit you're getting is that you only pay 50% utilities, 50% gas bill, 50% water bill, 50% trash bill, 50% food bill, etc. Well, other than the other non-monetary benefits of a live-in girlfriend of course......

As for the mortgage - you're actually contributing to her expenses not the other way around, so I'd be more comfortable listing your monthly contribution as a rental expense to you and not her paying 50% of your mortgage (since it is HER mortgage that is being paid, not yours.)

Other than the 'buy a car to reduce your means test results' part that can get him in trouble with the UST's office, the other advice seems on-point.

--William

[Majakat]

not to hijack, but didnt want to pm..

hey bkdefender, i am in northern nv- would it be wrong to increase my insurance coverage (Bodily Injury, Property Damage, Uninsured Motorist, Medical Payments) before filing? It would resultingly decrease my free cash, but also being me up to recommended levels, i have been 'underinsured' for a long time because i could not afford to pay it all

[BKDefender]

The problems with the above case was not that the DERP might have bought the car with the intent to decrease his means test results, it was that his attorney is not allowed to advise him to do that.

Majakat - if you are above median income in Nevada, and by increasing your insurance it drops you to below median, as long as the amount of insurance you get isn't excessive for a person in your situation and you do it a few months before you file, then you should be fine. The trustee does not request proof of payments to car insurance unless it looks excessive.

--William

[derp]

BKDefender,

No, no no! It wasn't like that. He didn't literally tell me to go buy a new car to raise my monthly expenses. He asked me about the condition of my car. Only after I told him I was driving a 15 year old beater, with quarter of a million miles on it, an oil leak, a brake line leak, a power steering leak, electrical problems, in need of new struts, new tires, and a new side window, with a perpetually illuminated Check Engine light, did he say anything about buying a new car. And that if I did buy a new car, I could count that as a monthly expense.

I probably should get another car anyway, before my credit rating nosedives.

[Beeheery]

Hi BK,
Do you happen to know if I need to include my roommates income when I file Ch. 7? He makes ALOT of $ and he is letting me stay with him till after my BK is discharged. I pay for my own food, cell phone etc but other than that, I have no other living expenses as he lets me stay on the couch. My only source of income is selling odds and ends on ebay. But even if I had no income at all, his salary is just over 100K. He isn't responsible for my credit card debt so I can't see how anyone's BK depends on someone else's income. Any help would be appreciated. Thank you!

[lrprn]

When a roommate is involved, the roommate's gross income from all sources for the six months prior to filing is added on in the first part of the Means Test. Then later in the Means Test, all of the roommate's income that doesn't go directly towards supporting the household is subtracted back out.

[Beeheery]

Hi LRN, sorry to still be confused but if my roommate supports me almost 100%, is that going to hurt me because they want to see his income for the previous 6 months? He doesn't pay any bills of mine or anything, just doesn't charge me to live there-but I do not contribute to the utilities, his bills, his food etc. And do you know if the fact that I will be (kindly) kicked out after I am discharged play a role? Thanks.

[stratos]

If your roommate is paying his regular bills and letting you live there rent free for now, he is not necessarily "paying your bills." He's certainly not paying your rent, because you don't owe any! If you plan to get your own place after bk, you could arguably include the rent expenses that you expect to pay after bk on your schedule J. To the extent your roommate regularly pays for other expenses you owe, you should include his contributions to your expenses as your income. But first I would evaluate which expenses of yours he is actually paying.

I think the real problem comes in with the "2 person HH." I hope this roommate issue gets addressed by the courts soon. It would make much more since to evaluate your status based on a 1 person HH, since you don't have dependents.

[stratos]

No, you would only include money he paid toward expenses you owe. You don't owe rent; he's just paying his own bills and letting you live there. I think the best position is to compare your income to a 1 person hh to see if you have to complete means test. If you're below the 1 earner median, you're ok for ch. 7.

[BKDefender]

If a person filing BK is under the median income, then the trustees do not normally review the expenses in extreme detail to determine if you are spending too much or not, unless the bottom line of Schedule J has you showing a large excess disposable income. Schedule J is for 'current monthly expenses' so I would caution you about putting expected expenses. In Nevada, we have to provide the trustee's with the past three months of bank statements. If the trustee does not see rent payments coming out of your bank account, and your income is not enough to support the rent payments you say you're paying, your case may be reviewed with a much closer scrutiny - which you don't want.

--William

[nokia123]

My son stays with me, lawyer just took into account how much he contributed to the household, he would put his money into my account each week towards the household. They did not want see his pays stubs

[JackBondLove]

It would seem to me that if person A were the owner or lessee, and rented out space in his home to person B - and A & B were not married or in a situation such that one were the legal guardian of the other - then B's household would not include A. Now, if both A & B are both part owners of a home, or on a lease, then the argument could be made that they are a household.

And it should not even matter than you are "conjugal" with your landlord (although if the courts were to rule that you have a common-law marriage, then she would be part of your household.)

[tcreegan]

Hi all,

I was going to say "don't take it personally if the original posters don't answer, the thread was from last May"

...but BKDefender proved me wrong! Good Job BKD, that is dedication!

On the roommate question....

A) Household = 1 Expenses = half In other words, ignore the roommate.

B) Household = 1 Expenses = full Actual amt roommate pays toward expenses is additional income. No other roommate financials included.

C) Household = 2 Expenses = full Roommate income included with yours, seems logical .....BUT...case in MN and another in AZ court ruled:

C(alt) Household = 2 Expenses = full Actual amt roommate pays toward expenses is additional income. No other roommate financials included.

Options (A) and (B) are straightforward, no questions asked

Just thought I would throw (C) into the fray to stir the pot a little...

Tom in Colo

[oregonpilot]

Hi...my attorney used option A for me......NO questions asked. Not even a hint of a question