a bit confused, read some info in another thread

[sepiid]

so i am filing first of august for BK7. already have a lawyer retained etc...

i was reading this thread

http://www.bkforum.com/showthread.php?t=58868

people mentioned that passing the means test wasn't the only part to qualifying for chp7. this person was mentioning that they had 700 "extra" each month now but hasn't paid for a year or so.
my assumption is that extra is the money that would be going to his CC

so like my situation i owe about 44k in cc and 20k in a car loan.

when i dont pay them i have an "extra" amount of about 1300-1500

does this mean i wouldn't qualify for a chapter 7? i am in CA and pass the means test. but not by much.
Bottom Line

Based on the information you have entered so far, your monthly income of $6,867 is above the median for for 3-person households in California ($5,887), but you pass the means test because, its formula says that your expenses will leave you with no disposable income over the next five years.

Summary of your data:

Your average monthly income is $6,867 and, so far, you have expense deductions totaling $ 7,482 per month. That would leave you with $ -615 at the end of each month to pay into a hypothetical, five-year Chapter 13 bankruptcy plan, which would pay your unsecured creditors $ -36,912 over the next five years, or -84 cents for each dollar of the $44,000 you owe them.

[sepiid]

as an added hunk of info, the big gap is from housing.
Housing expenses

California Bankruptcy Informationfor 3 persons in Santa Clara County, CA.

$697 allowance for housing and utilities, non-mortgage expenses

and

$2,145 allowance for mortgage/rent expenses
(This is a minimum amount. if your mortgage payment is higher, you get the full amount of the mortgage.Not so for rent, unfortunately.)

my rent right now is 855$ with utilities included for a 373sqft studio for me,wife, and almost 9 month old son.

if this bk7 were to complete we would be able to afford moving into a 1-2 bedroom apt. that would be about 400-600 more per month.

[SMinGA]

The means test has a couple of functions... To determine for a ch. 13 if you're over or under median, and therefore whether or not you have an option of a 36 month plan. Also to determine if there is a 'presumption of abuse' which I would translate to 'were you living beyond your means'. If the answer to that is yes, you'll have a hard time filing ch. 7. If the answer is no, it does not mean an automatic ch. 7. Being under median means no presumption of abuse (you are not assumed automatically to have been living beyond your means) but ch. 7 is still about having no or very little disposable monthly income.

The means test uses theoretical expenses, based on where you live, family size, etc. It does not consider your actual expenses except for some things that cannot really be determined by demographics. Like child support/alimony payments, expenses from ongoing medical conditions, etc.

When you say you have $1300-1500 left each month - are you considering your actual living expenses? Reasonable costs for transportation (gas, insurance, an average monthly amount for routine maintenance), groceries & household needs (cleaning supplies, paper products, etc.), personal care (toiletries, haircuts, etc.), medical (copays, prescriptions, OTC items), clothing, etc.?

If after all of those things (and any other routine expenses you may have, like daycare/school supplies for kids/home maintenance/etc.) you really have $1300-1500 left each month then it does not matter if you pass the means test. You are NOT a chapter 7 candidate. Ch. 7 is for those who truly cannot afford to pay their debts. Not even in part. If you have $1300-1500 left each month, you can afford to repay at least some of what you owe.

See an attorney - or 3. Discuss your situation, your actual expenses.

[keepmine]

Nobody can tell you if you qualify for a Chapter 7 until you fill out schedules I and J and determine your monthly disposable income.
I'd agree with SMinGA-you need to get talk with your lawyer and be certain you understand the process.

[SMinGA]

On schedule J, you use actual expenses. You can't claim $2,145+$697 when you only spend $855. If you have decided that filing is 100% in your future, one way or another, you probably should stop paying the cards & start setting aside $ for a deposit on a bigger place & prepare to move. You will most likely need to rent a 2 bedroom. (I'm in a different state, but GA has an occupancy guideline that says no more than 2 people per room - and an infant over 6 months counts.) And it sounds like without the cards, you can afford it.

California Bankruptcy Informationfor 3 persons in Santa Clara County, CA.

$697 allowance for housing and utilities, non-mortgage expenses

and

$2,145 allowance for mortgage/rent expenses
(This is a minimum amount. if your mortgage payment is higher, you get the full amount of the mortgage.Not so for rent, unfortunately.)

my rent right now is 855$ with utilities included for a 373sqft studio for me,wife, and almost 9 month old son.

[ja181]

yeah, 300 square feet?

I'd say move to a bigger place..that will get your rental expenses higher and make your means test look better. I did that right before filing..

otherwise you could get stuck in that small place for 3 years paying dough to creditors in a ch 13, when you could just be living in a nicer place and not have to mess with it.

[SMinGA]

Won't change the means test - but will change your actual expenses... That is part of the confusion so I just wanted to clarify.

Actual expenses are important. Otherwise everyone under median income could file a simple ch. 7, if that was the only thing that mattered. There would not be any need for schedules, etc. Just show proof of income < state's median income for family size and be done. That is not how it works.

Remember - median income/means test just started being used 5 years ago, and that is in addition to the requirements that were already in place. Those other requirements (such as having disposable income tends to open up the possibility of a ch. 13) are still around.

I'd say move to a bigger place..that will get your rental expenses higher and make your means test look better. I did that right before filing..

[ja181]

Won't change the means test - but will change your actual expenses... That is part of the confusion so I just wanted to clarify.

Actual expenses are important. Otherwise everyone under median income could file a simple ch. 7, if that was the only thing that mattered. There would not be any need for schedules, etc. Just show proof of income < state's median income for family size and be done. That is not how it works.

Remember - median income/means test just started being used 5 years ago, and that is in addition to the requirements that were already in place. Those other requirements (such as having disposable income tends to open up the possibility of a ch. 13) are still around.

Not sure I understand what you're saying...

Being under median and passing the means test are two different things...If the OP reported on his schedules that he had extra money to spend, he would be put into a chapter 13, but if his schedules don't say that (accomplished by having higher rent) he would be ok with chapter 7

I had a friend that was told by their attorney to "buy a car" before filing so that they would pass the means test...

[SMinGA]

ja181, the means test figures are set #s for housing, utilities, living expenses are set by standards based on location & family size. The means test does not use actual rent/utilities unless they are higher than the allowed amounts.

The original poster indicates his actual expenses are much lower than the means test figures - actual figures go on schedule J. Increasing actual expenses - but still being under the means test figures - won't change the means test. Will change schedule J and actual DMI.

Buying a car is different. One cannot claim ownership expense (aka car payments) on the means test if they are not paying a car payment...

This poster 'passes' the means test but seems to have alot of disposable income on schedule I - schedule J. Perhaps in large part because he has kept his housing expense unreasonably low while trying to resolve credit card debt. Your friend may have actually need help to pass the means test...

[sepiid]

SMinGA,
you are correct in your last post, we have only been able to afford the "ghetto" because of the CC debt and trying to pay it off.

so from what i understand moving would be the best option to increase the actual expenses?

or am i getting it wrong again?

[ja181]

ja181, the means test figures are set #s for housing, utilities, living expenses are set by standards based on location & family size. The means test does not use actual rent/utilities unless they are higher than the allowed amounts.

The original poster indicates his actual expenses are much lower than the means test figures - actual figures go on schedule J. Increasing actual expenses - but still being under the means test figures - won't change the means test. Will change schedule J and actual DMI.

Buying a car is different. One cannot claim ownership expense (aka car payments) on the means test if they are not paying a car payment...

This poster 'passes' the means test but seems to have alot of disposable income on schedule I - schedule J. Perhaps in large part because he has kept his housing expense unreasonably low while trying to resolve credit card debt. Your friend may have actually need help to pass the means test...

Oh, I didn't realize that, I thought the means test used your actual expenses, and not what the average is for your location. I thought the average for your location only applied if you go over it, the additional amount over wouldn't count on the means test.

w/ my friend -- his income was above the median, but barely passed the means test for ch 7, after buying a 2nd car for his family (extra car payments put him over)

[ja181]

SMinGA,
you are correct in your last post, we have only been able to afford the "ghetto" because of the CC debt and trying to pay it off.

so from what i understand moving would be the best option to increase the actual expenses?

or am i getting it wrong again?

If the only reason you're living in the ghetto is so you can make your credit card payments... if I were you, I would stop trying to pay them (stop completely) and move to a better apartment, while you can. I think it might be easier to get an apartment before the BK then immediately after..but not sure?

Just my 2 cents =)

Don't make your family suffer in a bad apartment just so a few numbers are different on a few bank's computers.

[sepiid]

Ill have to consult with our lawyer to see what she has for advice as well, but i like the idea of moving to a bigger place.

and SMinGA you are correct again in your other post mentioning how many people can live in an apartment as well for my location, we are permitted 2 persons per room. so i WILL have to move os our son now counts towards that number. it may even allow me to break my 1 year lease a month or two early penalty free. ill have to talk to the apartment managers about that though.

[sepiid]

spoke with my lawyer, she said it would be a great time to move to help with the expense picture. so now to find a place. looking at 3 bedroom apartments. so far i have found aobut 8 or 9 complexes at about 1500-1900 some even include all expenses.

[sepiid]

so that would be a change in rent by about 600 or so dollars, it will also increase our gas expenses as its about 14 miles from work instead of 7. it will also allow us a chance to get renter insurance. and if it doesnt include utilities that will help as well.