Rental Property (Means Test)

[gfreeman]

Hi all,
I am new to the BK Forum and have never been more confused after reading everything I can about Bankruptcy, especially Chp. 7. So many different opinions, even amongst attorneys. Nevertheless, I am going to ask the question here in hopes that I get a good answer; thanks for your input in advance.

Question: Can we include our rental property on the means test if we have not had it rented out in the last 6 months and it is upside down in equity. We plan to "not" reaffirm" / "surrender" the property. With it on the means test as mortgage payments, we pass, without it, we are too high income. With it on the means test we have -$1340 and without it we are positive above $275. Can the trustee disallow / deny this secured debt claim it if we are "Contractually Due"? The amount owed on the home is upside down by about $150K. We live in Maryland.

[HHM]

You can include it under the section for secured debt payments, BUT YOU WILL get an objection from the U.S. Trustee on "allowing" that expense since you are surrendering the property.

Time to hire an attorney. If you are only off by $275 dollars, there is probably a way to eat into that so as to show no DMI. Or, at the very least show no DMI on schedule I & J.

Incidentally, are you over or under your states median income?

[gfreeman]

HHM.,
Thanks for resonding! We are Over the Median for our state (MD). We are scheduled to see an attorney this coming Friday. Do you know where I can find any particular rulings / opinions regarding this matter in our district? I have spent hours surching in the maryland district and cant find any. Just wanted to be mentally prepared and knowledgeable to know what questions to ask the attorney(s) and or ensure they are filing for us correctly. Once again thanks.

[justbroke]

Do you know where I can find any particular rulings / opinions regarding this matter in our district?

Since you are over the median, I would not rest my laurels on rulings. This will not even be (panel) Trustee specific. The United States Trustee (UST) will intervene because you are over the median. They will be looking for ways to force you to dismiss or convert to a Chapter 13.

As HHM suggested, the best thing is to go back through your expenses and make sure you covered everything. Likewise, and more importantly, make sure that the expenses are not likely to draw attention or objection. Even if they do draw objection, you should still be able to be below $182.50/month in disposable income, without that particular expense objected to. I ran multiple scenarios for mine to test if the UST objected to expense A, then the rest would still keep me solid.

So, yes, you can include it on the Means Test (Form B22A), but you will get objection if you put it on Schedule J (Expenses). Your questions to your attorney should be that you want to maximize your allowable expenses in order to easily pass the means test.

[gfreeman]

Just Broke. Thanks for you input!
One last thing, have you ever heard of anyone receiving a modification on their mortgage after not reaffirming the debt in a chapter 7 ?

[justbroke]

Yes. I am such a person!

[2manybills]

Also, you may want to check with your attorney about your rental property. If the mortgage that you owe is more than half of your debt, and your rental property can be considered as a business, then you do not have to take the means test as more than 50% of your debt is considered "business debt".

[angles]

Also, you may want to check with your attorney about your rental property. If the mortgage that you owe is more than half of your debt, and your rental property can be considered as a business, then you do not have to take the means test as more than 50% of your debt is considered "business debt".

[2manybills]

That's great, so you should be fine.