Sched I/J vs means test

[tcreegan]

To some of the great posters on this forum....

DMI on the means test puts you into Chap 7 or Chap 13 (or no chap. I suppose)

But what use is the DMI calculated from Sched J & I? Who looks at this?

What if Sched I/J DMI is higher or lower than means test DMI?

What if Sched I/J DMI is over state median but means test DMI is not?

Not sure how Sched I and J are used in a chapter 7......

Any help?

Tom in Colo

[gmk]

The means test/median income test serves to examine your eligibility for whatever chapter you're filing. If you pass the means test for Ch7, that is step one. It is quite possible to pass the means, be over the median income-or not, show a negative income, etc. and still have positive DMI on your schedules I&J. That is where the trouble is. The means test uses some pre-established numbers that are based on IRS statistics and may very well be higher than your actual expenses.

Schedules I & J use your actual (and forward looking) income & expenses and may show a positive monthly DMI. If your actual net DMI is high enough, in other words, you have sufficient monies left over each month to fund a Ch13, then you could very well be ineligible for Ch7. The choices then would be to have your case dismissed or to convert to a Ch13.

Look at it this way - The means test is just that, an eligibility test. Schedules I & J are really the numbers used for determinations of DMI. We all sweat the means test (I was over median), but the nuts and bolts of BK are found in the schedules.

[drowningNIL]

question.....sorry to jump in but I read the answer and now I am even more confused.

I passed the legal consumer means test using the IRS numbers. I am over median. on the expenses J, the problem is my numbers are over in some areas (groceries and personal) but probably a little lower on others. Can't you just use the IRS allowable if you aren't claiming to be over? (like for out of pocket medical, clothing, etc) Or will they want proof anyway?

I know I am over in the grocery area & probably personal too. The kids have their activities monthly. The first lawyer said those wouldn't be "allowable" but the 2nd one had me put them down - but again - will it be allowed? Also, nowhere for pet care. Not sure how much is allowable for that, either. Why do they ask these things if they aren't even going to allow them?

Sick in IL

[gmk]

There are many threads and posts in here on coming up with expenses for the schedules. It would be my take that the IRS #s that may be used in the means test have little or no relevance to the schedule but having said that, they are useful as a guide as to what may be scrutinized more closely by the trustee(s). Things like pet care certainly could be allowable expenses, I've read in these forums, some pretty extravagant pet care claims. They could fly, I dunno.

You really have to spend a good deal of thought on all your expenses, you may surprise yourself on small things you've overlooked. I'd list everything you can and at what amounts you feel represent your situation going forward. Most of us on the hamster wheel have been sacrificing quality of life and even sustenance because we have been struggling to pay debt. The schedules should reflect what you are and will be spending. We literally hadn't spent a dime on clothing for a year or so but we know that's unrealistic so we put in a reasonable number (I forget - $100/mo) or so for that category.

List everything and if there is no category that seems to fit your expense, put it in a separate list and give it to your attorney. Realize that for every expense category that looks out of line you need to be able to satisfactorily explain it or better yet provide supporting evidence. Your attorney should know stone cold what works and what won't.

Being over the median income you should expect closer scrutiny by the panel trustee and the US Trustee.

[tcreegan]

actual expenses vs IRS standards

When do you use the IRS standards.....

These look OK: Use whatever is lower

Actual expenses exceed the IRS standard = use IRS Standard
Actual expenses below IRS standard = use actual expenses

but what about these: Use whatever is higher

Actual expenses below IRS Standards = use IRS standards
Actual expenses above IRS Standards = use actual expenses

Any guru's out there with some help?

Tom in Colo

[SMinGA]

IRS standards are for the Means Test only, and to use as a guideline to compare to your numbers. As in, if you're spending $1000/mo on food and the IRS guidelines say $500 for your family size - then you probably should look for ways to cut back unless you have documentation on reasons why you need to be over.

Use actual figures on schedule J. You never know what documentation the trustee will ask for. If you are a family of 5 and claim $300 medical per month because its the IRS standard - but have only $100-150 per month in out of pocket medical, you'll have trouble if questioned on it. Being questioned in one area, if you can't answer, can cause all of your expenses to be questioned.

Also, look at the big picture. If you are trying to hide questionable expenses in groceries, etc. - keep in mind now is the perfect time to start cutting back when you can. If you continue spending more than you make after filing - BK will not help you. You'll still be in trouble after discharge.

When do you use the IRS standards.....

These look OK: Use whatever is lower

Actual expenses exceed the IRS standard = use IRS Standard
Actual expenses below IRS standard = use actual expenses

but what about these: Use whatever is higher

Actual expenses below IRS Standards = use IRS standards
Actual expenses above IRS Standards = use actual expenses

Any guru's out there with some help?

Tom in Colo