Default Judgment - Include on Means Test?

[gman]

Scenario:

* Likely filing Chapter 7 next month when my 6 month income average "dips"

* A $25k default judgment obtained by law firm/junk debt buyer (credit card debt) exists

* The junk debt buyer has not attempted (yet) to collect the $25k judgment (for whatever reason)

* I live in a state where wage garnishment can occur (and I experienced this recently with another default judgment of $7k as they garnished 25% of my take home pay for a few months.)

* I do not own a home / have assets

* I am recently unemployed

* I am currently still over the median income for my state even though I have not had income in 2 months - so I need to pass the Means Test to qualify for a Chapter 7

* A lawyer I met with informed me that the $25k judgment is a "good thing." he says that the $25k can be divided by 60 and the (monthly) amount included on the Means Test EVEN THOUGH IT WOULD BE WIPED AWAY IN A CHAPTER 7. I believe he wants us to put this on Line 44 of From B22A.

* I realize that this amount would NOT be part of Schedule J expenses, but I will be cutting it close on the Means Test and I could really use the "expense" of this Judgment. Once I pass the Means Test, I am 99% sure I will be OK with Schedule I & J, especially since I make no current income.

I have searched all over the Internet and cannot find any cases/opinions that have covered this scenario.

Does anyone:

A - Have an idea if this Judgment could be included on the Chapter 7 Means Test?

B - Know of any specific cases where this kind of scenario has been addressed?

Thanks for your help!

[Freddy03]

I was told my judgment didn't go on the means test. It just acts like a regular creditor.

I'm really not sure.

[nceguyfromne]

I'm pretty sure this is just another unsecured debt like any credit card. Unless you were, for some reason, to reaffirm this debt, I don't believe it would be listed as an expense. Did they creditor place a lien on any of your assets (i.e. real estate) after obtaining the judgment? If so then you might be able to put it into play somehow.

[gman]

I'm pretty sure this is just another unsecured debt like any credit card. Unless you were, for some reason, to reaffirm this debt, I don't believe it would be listed as an expense. Did they creditor place a lien on any of your assets (i.e. real estate) after obtaining the judgment? If so then you might be able to put it into play somehow.

I do not own any assets. The only thing the creditor could go after in the future would be my wages.

Any ideas?

[nceguyfromne]

I do not own any assets. The only thing the creditor could go after in the future would be my wages.

Any ideas?

I'm sorry, I should have read your post a little more carefully. I see what you're saying now. It is obviously not a Schedule J expense but in terms of the Means Test, I am pretty sure you are correct that this judgment is a legitimate non-priority debt that can be factored into your Means Test formulas to determine whether or not you have the means to pay at least 25% of your non-priority debt over the next 60 months and avoid being converted to a Chapter 13. It shouldn't matter at all that it is not being actively collected. A court has ruled you owe the money.

I guess the question is, after you factor every possible necessary expense you can justify and add up every unsecured debt you have, is there enough left to pay 25% of your unsecured debt? Hopefully not!

Of course, your other option is to wait it out until you're able to get your income snapshot low enough that you do not even have to take the Means Test. As long as there are no creditors nipping at your heels about to collect on another judgment any day now, you probably have some time.

[Floridagail]

We are planning my bf chptr 7 as well, He wants to give up house as underwater. The attorney basically told us nothing to help him be able to file. I guess she wanted the money for 13. He bought another car to use for job so he would have 2 cars expenses.
replaced old car with new car so will have dependable car for 5yrs. He may lose job anytime so he stopped making mortgage and ccs. HE has not been sued or anything.
But I am wondering also if a judgement would go on means test? I know if he is behind in house pmts it would go there. So hoping he can go until next year before being sued , or if laid off comes first then he can wait 6mos and file. We are close to retirement not wanting to carry this upside down house or cc debt into retirement.

[gman]

Perhaps a good lawyer could find a loophole, but traditionally speaking, a debt that is going to be discharged is not going to be factored into your expenses because it is not going to exist anymore. Similarly, you would not factor your soon-to-be-discharged monthly credit card payments in your expenses. For all intents and purposes, that debt is no longer collectible the moment you file and get your automatic stay and I assume you could have no possible reason to want to reaffirm this debt and pledge to continue paying it. Seems like that would defeat the purpose of eliminating your crippling debt. I'd say you are best off waiting until you've been unemployed long enough that you are able to pass the Means Test.

The lawyer believes that a recent case in my state (Georgia) allows for me take something as a secured payment so long as it was "contractually due" at the time the petition is filed. I'm uncertain if this argument would have merit in court.....

[nceguyfromne]

The lawyer believes that a recent case in my state (Georgia) allows for me take something as a secured payment so long as it was "contractually due" at the time the petition is filed. I'm uncertain if this argument would have merit in court.....

I updated my previous post if you want to look at it. I think I was misunderstanding your intention before. I do agree with your lawyer. A court has ordered you to pay this debt. I don't see why it would matter that it is not being actively collected. I am a little uncertain that it would be a "secured" debt but it should be equally as helpful as a non-priority debt to help ensure you can argue that you do not have the means to pay 25% of your non-priority debt over the next 60 months, as Chapter 13 would require.

[gman]

I'm sorry, I should have read your post a little more carefully. I see what you're saying now. It is obviously not a Schedule J expense but in terms of the Means Test, I am pretty sure you are correct that this judgment is a legitimate non-priority debt that can be factored into your Means Test formulas to determine whether or not you have the means to pay at least 25% of your non-priority debt over the next 60 months and avoid being converted to a Chapter 13. It shouldn't matter at all that it is not being actively collected. A court has ruled you owe the money.

I guess the question is, after you factor every possible necessary expense you can justify and add up every unsecured debt you have, is there enough left to pay 25% of your unsecured debt? Hopefully not!

Of course, your other option is to wait it out until you're able to get your income snapshot low enough that you do not even have to take the Means Test. As long as there are no creditors nipping at your heels about to collect on another judgment any day now, you probably have some time.

I am cutting it close on qualifying on the Means Test. If I can include this $25k judgment (about $416/mo) in the Means Test as an expense, I would definitely qualify for a Chapter 7.

I have a boatload of debt and there is no way I could pay 25% of my unsecured debt.

Seems strange that the judgment granted to a credit card company would "help" me qualify...but I guess the whole process is a bit screwy in general.

[Freddy03]

Wouldn't just 25% of your wages be included then?

Because if they do garnish wages it would just be 25%.

I think I'm not understand it correctly.

I have a recent judgment for 6500. I have up to mid Sept to get them my finanical info I plan on retain a BK attorney before then but here in FL they can't garnish my wages b/c I'm head of household but still want the info.

I'm wondering if I could include it on my means test also so then I'm def under.

Just curious

[nceguyfromne]

I am cutting it close on qualifying on the Means Test. If I can include this $25k judgment (about $416/mo) in the Means Test as an expense, I would definitely qualify for a Chapter 7.

I have a boatload of debt and there is no way I could pay 25% of my unsecured debt.

Seems strange that the judgment granted to a credit card company would "help" me qualify...but I guess the whole process is a bit screwy in general.

If you think about it, most people stop paying most or all of their non-priority debts for some period before filing BK. They debts still exist, though. Bankruptcy requires you to spill your guts so by all means spill them all. You owed the creditor before it became a judgment and presumably -- after attorney fees and interest -- owe them even more now. Use it to your advantage to argue Chapter 13 is beyond your means.

Give this a read: http://bankruptcy.lawyers.com/consum...ounseling.html

Good luck!

[gman]

I was told my judgment didn't go on the means test. It just acts like a regular creditor.

I'm really not sure.

Was you judgment for an unpaid credit card debt?

Did the creditor try to collect the judgment yet?

The reason I ask is that I have actually had 2 judgments already, and one collected their entire balance using wage garnishment while the other creditor has the judgment but has not done anything yet.

[Freddy03]

Was you judgment for an unpaid credit card debt?

Did the creditor try to collect the judgment yet?

The reason I ask is that I have actually had 2 judgments already, and one collected their entire balance using wage garnishment while the other creditor has the judgment but has not done anything yet.

Yes unpaid cc - I lost in court on 8/6. I have 45 days to get them mine and my husband's finanical info (car registrations, pay stubs, 6 months of bank statements) Judgment is in only my name.

I can claim head of household so they can't garnish but we are taking the BK route b/c why have a judgment for 20 years!

They can't collect it until I supply them with my info.

[gman]

Yes unpaid cc - I lost in court on 8/6. I have 45 days to get them mine and my husband's finanical info (car registrations, pay stubs, 6 months of bank statements) Judgment is in only my name.

I can claim head of household so they can't garnish but we are taking the BK route b/c why have a judgment for 20 years!

They can't collect it until I supply them with my info.

From what I have learned, ASSUMING YOU CAN INCLUDE THE JUDGMENT IN THE MEANS TEST, you could claim an "expense" on Line 44 (I think that's the line) for 6500/60 = 108.33/month

In qualifying, you quickly realize that every penny counts!

The crazy thing is that I used to have a $4,000 mortgage that could have been used in the Means Test even if I surrendered the home! Now I rent and I cannot claim my rent payment in full because it is more than the IRS standard for my area.

I wish there was a case out there where a ruling on including a credit card judgment on the Means Test was decided. I just have not found one anywhere on the Internet. (Note: I did see one where a debtor tried to claim the judgment on his Schedule J expenses, and this was denied by a Judge, but again the ruling had nothing to do with the Means Test.)

[coldbusted]

Gman,

Thanks for asking this question. My question is very similar to yours, and I think I know the answer now for me, but I'm going to ask for clarification because it is the difference between my clearly qualifying and my maybe scraping by.

I owe a large amount in federal tax liens. Am I right in thinking that I can add them up, divide by 60 and figure that into my monthly budget for the means test Line 44 even though I am not on a payment plan for them right now?

Judgment questions seem like they would come up a lot on the forums, but I don't see them here. At least not in regards to the means test.