Question about means test

[dman]

Main question: On the online means test calculator, it automatically figures $556 for line 20B, "Housing and utilities; mortgage/rent expenses". If things go well, I plan on not having to pay rent or a mortgage at the time of filing (We do have a mortgage payment of about $905/mo, but we're letting the house go). Basically, am I allowed to claim the standard amount on the means test, even if we don't have that expense?

Common sense says yes, since this is supposed to be an average of what you're expected to pay each month. Just because we weren't paying rent at the time of filing, doesn't mean we wouldn't be a year from then.

Additional info: Wife makes decent money while on a contract, but may only work 6-9 months out of the year (last year was 9, this year looks like it may just be 6). If we stop paying on the cards and mortgage, we might be able to save up some money to buy a plot of land, and would just park our RV (converted bus) there. That would be our homestead exemption. No mortgage, no rent. If we wait three months, then we'd be able to file with a more accurate view of our income (i.e. the six month look-back would include three months of employment, which would accurately depict the real-world scenario of working six months out of the year). We'd be well under the median income (even if we include possible unemployment income). We should pass the means test with flying colors, IF we can use the standard figures (would need to keep our old rusted car in addition to the main one...as I doubt they'd let us count our RV as a vehicle AND a homestead).

Heck, I just thought of a hypothetical situation, one I probably won't run into. Let's say that I buy some solar panels for the RV. Land has a creek running through it, so we just get a fancy water filtration system for that. Entirely off the grid. Would one be able to claim line 20A "Housing and utilities, non-mortgage expenses" even if they had no water or electric bill? Just curious, I doubt we'd go to that extreme.

Oh, and can we really use the standard health care costs on line 19B, AND our actual costs for health insurance on line 34A?

Sorry for the long post. Just want to make sure I have our bases covered. Yes, I know I need to talk to a lawyer. Right now, we are WAY out of state, and would like to wait until we're back home to meet with a lawyer face to face.

[SMinGA]

I can't answer about how to handle your wife's income situation - but keep in mind the means test is not what most districts use to calculate disposable income. It is theoretical, looking at your situation to see if there is a presumption of abuse (were you living beyond your means, in a manner that indicates you should have known you could never pay it back?) in the event you were trying to file ch. 7.

Schedule J is an important part of the bankruptcy petition - 7 or 13 - and uses your actual expenses.

[dman]

Really? So even if you are under the median income, they can deny you? Even if you're under the median income and pass the means test, they can still deny you?

For the schedules, you're saying we'd need receipts of every single thing we spend money on? Or would you simply plug in the numbers from the means test (unless your expenses were higher)?

Am I just worrying about nothing? Would they really come after us if we cut every expense to the bone and were really trying to start over? I mean, just an example, we wouldn't be living in the RV permanently. We'd just want to save up the rent/mortgage payment for a bit until we could actually afford something better.

Assuming the absolute worst for a moment (we have no rent/mortgage, trustee assumes we could stay in the RV for five years and thus we have money left over for a Chapter 13). Might it help if we showed proof that we might be leaving the country for a while, and thus a Chapter 13 would either be a huge burden (would have to constantly change payment terms, due to changing employment status and constant currency fluctuations; or even the non-ability to pay due to being in a different country)?

[SMinGA]

If you're under median income, you don't have to complete the budget portion of the means test. The means test has no 'you go straight to discharge' function. If you are over median, there are simply more steps involved/more hurdles to overcome.

Ch. 7 has always been - and will always be - about disposable monthly income. If you have DMI (net income less expenses/bills not counting unsecured debt and such) sufficient to repay some of your debts, you could end up in a ch. 13. Under median means you have the option of 36 months though. Over median filers MUST do 60 if they file ch. 13.

I don't think one needs itemized receipts for every expense. But for any areas where your expenses are abnormally high - would be wise if you could back it up.

Leaving the country would be an inconvenience for the ch. 13 trustee? Doubt that you'll draw enough attention for this inconvenience to be noticed. Doubt any ch. 7 has been granted simply because the trustees didn't want to be bothered. If there is money for a plan payment, you may find it hard to do a 7. But then, that is where working with a competent lawyer & assessing your true living expenses becomes important.

The trustee is not worried about what might happen. You file based on what is happening - amend in the future if needed.

[dman]

If you're under median income, you don't have to complete the budget portion of the means test.

This is where I keep getting conflicting information. I have read both on this forum; that if you're under median then you're fine, and that even if you're under median you still have to pass the means test. We'd have no problem with the median income. No problem with the means test. If they look at actual expenses at that snapshot in time, then we may not have enough, even though it would only be a temporary situation. Now, if they averaged expenses over the past year, and took into account the mortgage payment for eight months, then it shouldn't be a problem (example of past expenses predicting future expenses?).

I guess a better question about working in another country would be: "COULD they force us into a Chapter 13 payment plan if we were planning on being out of the country (and would have documentation to prove it)?" I'm not asking if they could enforce it, we'd comply even if we didn't have to.

If they did, then it'd probably make us give up this opportunity. I can just imagine us needing to buy a car, sending over the required paperwork to get the approval, it taking forever because they have no idea what car I'm talking about or how to look up the value, finally get it all straightened out, give me the ok, and the car is long gone. We'd just end up staying here, making less than before, trying to get an apartment or a small house, being told we can't as it'd reduce the disposable income we'd have available to give creditors, stuck in the RV for five years with 2+ kids, etc.

I want to plan this out the best I possibly can. Don't want to make the mistake of planning TOO well, and end up stuck for five years.

[starr4law]

You would want to file prior to losing your home because you are allowed to count the house payment(s) even if you are not currently making them. Also, it is to your advantage to try to file when you are at your "lowest point" in your 6 month look back for the means test (remember that the month that we are currently in does not count for the means test).

If you are simply below the means test, your heathcare question is moot since you only need to do the first part of the determination. However, if you initially "fail" the means test and have to compute the remaining 11 pages, for the first health care expense, you simply use the "standard" number (here it is $60/per person if under 65 yrs) and basically is factoring in co-pays, OTC meds, etc., and the other health expense number is what you are actually paying for healthcare and dental insurance, whether it is out of your paycheck or you are actually writing a separate check.

Good luck

[dman]

You would want to file prior to losing your home because you are allowed to count the house payment(s) even if you are not currently making them. Also, it is to your advantage to try to file when you are at your "lowest point" in your 6 month look back for the means test (remember that the month that we are currently in does not count for the means test).

Another thing I see conflicting information on. I thought that if we were using the homestead exemption on one piece of property, we could not use the mortgage payment on another property. If we could (even without having made a payment in a few months), then that'd greatly reduce our disposable income.

I was hoping to file first part of December. Are you saying that the six-month look back would start at the first of May and go through the first of November? Or do you mean that regardless of when you file in December (be it the 1st or 31st), they would look at June 1st - November 30th? The first scenario would include four months of income with two months of unemployment, while the second would include three months of income with three months of unemployment.

We could just wait an extra three months and file after being unemployed for six months, but we're anxious to get this behind us...and we're at least five months away from even filing!

[scorpion35]

Main question: On the online means test calculator, it automatically figures $556 for line 20B, "Housing and utilities; mortgage/rent expenses". If things go well, I plan on not having to pay rent or a mortgage at the time of filing (We do have a mortgage payment of about $905/mo, but we're letting the house go). Basically, am I allowed to claim the standard amount on the means test, even if we don't have that expense?

Common sense says yes, since this is supposed to be an average of what you're expected to pay each month. Just because we weren't paying rent at the time of filing, doesn't mean we wouldn't be a year from then.

Additional info: Wife makes decent money while on a contract, but may only work 6-9 months out of the year (last year was 9, this year looks like it may just be 6). If we stop paying on the cards and mortgage, we might be able to save up some money to buy a plot of land, and would just park our RV (converted bus) there. That would be our homestead exemption. No mortgage, no rent. If we wait three months, then we'd be able to file with a more accurate view of our income (i.e. the six month look-back would include three months of employment, which would accurately depict the real-world scenario of working six months out of the year). We'd be well under the median income (even if we include possible unemployment income). We should pass the means test with flying colors, IF we can use the standard figures (would need to keep our old rusted car in addition to the main one...as I doubt they'd let us count our RV as a vehicle AND a homestead).

Heck, I just thought of a hypothetical situation, one I probably won't run into. Let's say that I buy some solar panels for the RV. Land has a creek running through it, so we just get a fancy water filtration system for that. Entirely off the grid. Would one be able to claim line 20A "Housing and utilities, non-mortgage expenses" even if they had no water or electric bill? Just curious, I doubt we'd go to that extreme.

Oh, and can we really use the standard health care costs on line 19B, AND our actual costs for health insurance on line 34A?

Sorry for the long post. Just want to make sure I have our bases covered. Yes, I know I need to talk to a lawyer. Right now, we are WAY out of state, and would like to wait until we're back home to meet with a lawyer face to face.

if u don't have a mortgage or rent payment u can't claim that expense

[SMinGA]

You're still not getting it. When I say you don't have to do the budget on the means test, I did not say that you don't submit your actual budget at all. That is schedule J. The means test does not use actual expenses except for where you can document higher than usual figures. Actual expenses go on J whether you have to do the means test or not.

Can't use average expenses if you no longer have them. Can use average on irregular items. Like I buy glasses for my daughter + eye exam once per year (add $18 for frame insurance, and we actually make it thru the year). That is added to occasional prescriptions and OTC stuff for an average monthly medical expense. I don't spend the same amount on clothes every month. Generally 2 big spends: spring & fall. And odds & ends here & there. Add up annual, average monthly.

This is where I keep getting conflicting information. I have read both on this forum; that if you're under median then you're fine, and that even if you're under median you still have to pass the means test. We'd have no problem with the median income. No problem with the means test. If they look at actual expenses at that snapshot in time, then we may not have enough, even though it would only be a temporary situation. .

[SMinGA]

6 mo look back is 6 calendar months before the month you file.

If you file in Dec, its all income paid to you June-July-Aug-Sep-Oct-Nov. Would not matter if you filed Dec 1 or Dec 31. Actual average income at time of filing goes on schedule I though. If you were unemployed for 3 months and netted $2500/mo for the most recent 3 mos AND net $2500 at time of filing, $2500 goes on sched. I. Not average.

If you file a ch. 7 with disposable income and the trustee tries to push you into a 13: you should have the option of dismissing. But saying "I might need to move out of the country" won't persuade the 7 to go thru.

Work with a good attorney - discuss your income/expense scenario. If its an experienced, reputable atty - he/she should advise you whether or not you're likely to have trouble with a 7. (After reviewing the details of your case-no way to say without discussing income & expenses in context of what is standard in your district.)

[dman]

Can't use average expenses if you no longer have them. Can use average on irregular items. Like I buy glasses for my daughter + eye exam once per year (add $18 for frame insurance, and we actually make it thru the year). That is added to occasional prescriptions and OTC stuff for an average monthly medical expense. I don't spend the same amount on clothes every month. Generally 2 big spends: spring & fall. And odds & ends here & there. Add up annual, average monthly.

I think I'm getting what everyone's saying, I just want to be absolutely sure.

Average expenses for the year...does that mean I could average the mortgage payments I did make, with the months that I didn't make one? I realize that may be a stretch, but it just seems that if we're only temporarily not going to have some kind of rent payment (rather it's actual rent, or us saving up for a down payment on a house, or whatever), they shouldn't assume we won't ever have one.

We have some pretty big grocery bills now that we wouldn't have once we're back in TN. I don't think I could average that out (don't think we'd come back here for a while, cost of living is quite a bit higher so it'd skew the numbers), but who knows.

I'd rather speak to a lawyer face to face, but we might need to do some phone consults instead. Waiting until September (to speak to a lawyer) might be too long.

[dman]

If you file in Dec, its all income paid to you June-July-Aug-Sep-Oct-Nov. Would not matter if you filed Dec 1 or Dec 31. Actual average income at time of filing goes on schedule I though. If you were unemployed for 3 months and netted $2500/mo for the most recent 3 mos AND net $2500 at time of filing, $2500 goes on sched. I. Not average.

I get the first part of what you're saying. Won't matter when in December, they'd look at income from July to November. Good to know...if we were going to file toward the end of December, might help us to file the first of January instead (two months employed and four months unemployed).

The second part...you're saying that they only look at the current income for Schedule I, and not the average of the past six months? If so, then the only income coming in would be unemployment (assuming she gets it), which may or may not even count toward income. Regardless, that would mean I have nothing to worry about. Unemployment income from one person would definitely not leave a family of four with disposable income at the end of the month. Am I understanding that right?

[SMinGA]

I don't know how your district views UE income. I also don't know your expenses, or if any remains fromt UE income minus expenses. You should be able to do that math.

Unemployment income from one person would definitely not leave a family of four with disposable income at the end of the month. Am I understanding that right?

[dman]

I don't know how your district views UE income. I also don't know your expenses, or if any remains fromt UE income minus expenses. You should be able to do that math.

I was about to edit my post...I completely forgot that unemployment may or may not count toward your median income...but I'm pretty sure it counts toward disposable income. I'll just assume it does for now.

Once we pay for utilities, groceries (I'll make sure we eat REALLY well just to be on the safe side), upkeep on two vehicles, medical insurance, other misc. costs...I'm pretty sure that'd be more than the $1,600 or so unemployment that she'd get.

So did I read that right? If she is on unemployment, only her unemployment income goes on Schedule I? Not the average of the past six months? Or if she wasn't on unemployment, she'd simply put $0?

Edit: Ok, I found the answer, and it seems to be...it depends. Argh! This thread was a good read about it: http://www.bkforum.com/showthread.php?t=44791