Credit Card Debt - Include in MEANS TEST but not in SCHEDULE J - Why not????

[gman]

I know many people have said that you cannot include credit card debts in the Means Test for a Chapter 7 bankruptcy - but I have yet to find one real-life example of a Court denying this - and I've looked everywhere on the internet.

I completely understand and agree that trying to include credit card payments in Schedule J is a waste of time because one cannot claim this is an expense going forward after bankruptcy as the debts are wiped out in a Chapter 7.

Before people post that "it does not matter" - in my case, and in many others I'd expect, it would come into play.

I am unemployed now, so my FUTURE income is near zero and showing a negative DMI on Schedules I & J is difficult. However, I "made too much" in the last 6 months to pass the Means Test but I'd easily pass it if I could include my credit card debt - by listing the balance and dividing by 60.

To me, this is no different than debtors who are paying a mortgage and can include the payments on their Means Test but cannot include it on their Schedule J of expenses going forward.

Recent case law as noted in this other thread speaks specifically to this kind of scenario, so why can't credit card debt be handled the same???

http://www.bkforum.com/showthread.php?t=61498

Does anyone's opinion on this subject change if the debtor has been sued for the credit card debt and the creditor has obtained a judgment against wages and/or property? I would think that a move like this turns the debt into a 'secured' debt - and can then be listed on Line 43 of the Means Test (or perhaps Line 28.)

Please do me a small favor. If you think it is not possible to include this as a "current" expense on the Means Test - can you cite a source that shows it is specifically not included (as opposed to simply stating an opinion...)

Thanks to the board for chipping in on this one!

[scorpion35]

I know many people have said that you cannot include credit card debts in the Means Test for a Chapter 7 bankruptcy - but I have yet to find one real-life example of a Court denying this - and I've looked everywhere on the internet.

I completely understand and agree that trying to include credit card payments in Schedule J is a waste of time because one cannot claim this is an expense going forward after bankruptcy as the debts are wiped out in a Chapter 7.

Before people post that "it does not matter" - in my case, and in many others I'd expect, it would come into play.

I am unemployed now, so my FUTURE income is near zero and showing a negative DMI on Schedules I & J is difficult. However, I "made too much" in the last 6 months to pass the Means Test but I'd easily pass it if I could include my credit card debt - by listing the balance and dividing by 60.

To me, this is no different than debtors who are paying a mortgage and can include the payments on their Means Test but cannot include it on their Schedule J of expenses going forward.

Recent case law as noted in this other thread speaks specifically to this kind of scenario, so why can't credit card debt be handled the same???

http://www.bkforum.com/showthread.php?t=61498

Does anyone's opinion on this subject change if the debtor has been sued for the credit card debt and the creditor has obtained a judgment against wages and/or property? I would think that a move like this turns the debt into a 'secured' debt - and can then be listed on Line 43 of the Means Test (or perhaps Line 28.)

Please do me a small favor. If you think it is not possible to include this as a "current" expense on the Means Test - can you cite a source that shows it is specifically not included (as opposed to simply stating an opinion...)

Thanks to the board for chipping in on this one!

u cannot include your credit card debt
because it will be discharged

[gman]

u cannot include your credit card debt
because it will be discharged

But mortgage debt that someone is surrendering is discharged as well - and the courts have decided to allow people to include mortgage debt - even when someone is surrendering the property and therefore having the debt discharged.

The question centers around the Means Test and not Schedule J.

Hopefully someone can point to a case or personal experience in trying to include credit card debt where this has been decided one way or another.

[justbroke]

But mortgage debt that someone is surrendering is discharged as well - and the courts have decided to allow people to include mortgage debt - even when someone is surrendering the property and therefore having the debt discharged.

You're arguing the wrong point. The ONLY reason that mortgage debt is allowed to be included, because it's a secured contractual obligation. This has been argued ad naseum in the courts and is now the standard. It was introduced as part of the Means Testing in the BAPCPA 2005 amendments.

Just so you know, it wasn't the courts that decided this. It's Congress and how they wrote the amendments.

The argument is a non-starter. Any United States Trustee will pounce and easily win a motion to dismiss under 11 USC 707(b), (b)(2), (b)(3), or even 707(a) as an abuse.

[gman]

You're arguing the wrong point. The ONLY reason that mortgage debt is allowed to be included, because it's a secured contractual obligation. This has been argued ad naseum in the courts and is now the standard. It was introduced as part of the Means Testing in the BAPCPA 2005 amendments.

Just so you know, it wasn't the courts that decided this. It's Congress and how they wrote the amendments.

The argument is a non-starter. Any United States Trustee will pounce and easily win a motion to dismiss under 11 USC 707(b), (b)(2), (b)(3), or even 707(a) as an abuse.

What if the unsecured credit card debt becomes secured due to a judgment lien (against a car, home and/or wages?

Has this part of the Means Test truly been explored in court - and if so - where (as in what case can one find on the internet)?

[tanya0525]

This reminds me of the issue we had with our mortgage. We were planning to give our house up, because of that our lawyer said we couldn't include the mortage payment in our means test. Because of that we didn't qualify for chapter 7. We had planned to stay in the house as long as possible to save up money, but ended up finding a place so we could qualify.

But my husband argued the same thing. He didn't understand why we couldn't include the credit card debt on the means test.

[backtoschool]

One of the main points of filing bankruptcy is to discharge unsecured debt. The credit card debt is unsecured debt. If your bankruptcy is discharged you will no longer have that debt and therefore will no longer have that expense. You cannot put expenses on your schedules that you will no longer have post filing.

A great way to get your case dismissed is to include the credit card debt on your schedules. I agree with justbroke completely.

[gman]

Though I did not find any case law, I just found a couple of interesting items:

Some credit card debt can become secured (and thus I am 99% sure it can be placed on the Means Test)

The source links are below...but here is a summary:

1. If any of your credit cards are STORE CARDS (Best Buy, Old Navy, etc.) then by its very nature the debt you have is actually secured. Example: Buy a flat screen TV at Best Buy, do not make the payments and Best Buy can seek to repossess your TV.

Source:

http://bankruptcy.lawyers.com/Security-Interests-in-Bankruptcy.html

2. If the credit card company OR the collection agency sues you and gets a JUDGMENT LIEN on your property, this too is no longer an unsecured debt but becomes a secured one in the eyes of the court.

I happen to be in Georgia, and according to this BK lawyer's website: A judgment lien in Georgia attaches to any and all property you own. It can also be used to garnish your wages. As such a judgment lien is considered a secured debt since all of your property secures it. I would think this might vary from state to state.

Source:

http://www.thebklawyer.com/thebkblog/2007/09/14/will-a-bankruptcy-filing-stop-the-enforcement-of-a-judgment-lien/

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Since I am in Georgia and have a $25k judgment lien against me from a debt collection agency on a credit card debt they purchased - I am going to include it in my Means Test as a secured claim on line 43. I should note that the collection firm has not yet garnished my wages or taken funds from my bank account - but they legally could at any time in the future.

I will not include this same debt in my schedule J because it would be wiped away in the Chapter 7. If for some reason the court decides to push me into a Chapter 13, I will let the court will decide the priority of this particular claim vs other unsecured credit cards who have not taken me to court yet.

[gman]

One of the main points of filing bankruptcy is to discharge unsecured debt. The credit card debt is unsecured debt. If your bankruptcy is discharged you will no longer have that debt and therefore will no longer have that expense. You cannot put expenses on your schedules that you will no longer have post filing.

A great way to get your case dismissed is to include the credit card debt on your schedules. I agree with justbroke completely.

I appreciate your response.....I truly do.

However, I am not seeing any proof from a court case, website, etc. as to your position.

Plus, you state the "credit card debt is unsecured debt." This is true in some cases, but not in all cases as I listed in another post here.

Retail store credit cards and credit card collectors who have gained a judgment lien in court turn the debt from unsecured to secured.

[catleg]

I don't understand why you don't wait them out for the 6 months.
You said you have no income thus no wage garnishment.
You're talking about chapter 7 so I assume no non-exempt assets.
What am I missing here?

[backtoschool]

I appreciate your response.....I truly do.

However, I am not seeing any proof from a court case, website, etc. as to your position.

Plus, you state the "credit card debt is unsecured debt." This is true in some cases, but not in all cases as I listed in another post here.

Retail store credit cards and credit card collectors who have gained a judgment lien in court turn the debt from unsecured to secured.

By all means, go up against the US Trustee with your arguments. The US Trustee hates having his/her time wasted, and will not hesitate to dismiss your case. You can find no case history because most filers are not ill-advised enough to try to put their credit card debt on their expense schedules. Any lawyer will talk them out of such silliness long before the petition is filed.

[gman]

I don't understand why you don't wait them out for the 6 months.
You said you have no income thus no wage garnishment.
You're talking about chapter 7 so I assume no non-exempt assets.
What am I missing here?

True, I could simply wait until my "last 6 months income" is below the state median and waltz through the Means Test.

However, life is not that simple. I cannot readily survive on unemployment for that period of time unless I hit up my family for cash - which is an option. In addition, the longer one is out of work, the harder it is to become re-employed...these are the facts as employers start to wonder why you cannot find a job.

I'd like to get back to work ASAP. I just do not want to go back "too soon" and risk showing up at the 341 hearing and having to answer "Are you re-employed"?

[gman]

Any lawyer will talk them out of such silliness long before the petition is filed.

To the contrary....the reason I am posting this question here is because a lawyer advised me to do this!

Your comment had to do with unsecured credit card debt.

My question has to do with secured debts (via store cards and judgment liens.)

Perhaps other can weigh in???

[backtoschool]

To the contrary....the reason I am posting this question here is because a lawyer advised me to do this!

Your comment had to do with unsecured credit card debt.

My question has to do with secured debts (via store cards and judgment liens.)

Perhaps other can weigh in???

I am sorry you don't like the answer I am giving, and are going to keep posting this question until you like what you hear. Credit cards are not secured debt in bankruptcy. If the credit card company (let's say Best Buy for example) sued you and got a judgment and then got a lien on your television, then they have to come and get your television or put in a claim just like every other non-secured creditor. They cannot get a lien against your house or car for the money owed on your television.

So, when you file bankruptcy, you list the television as an asset, and the lien and debt owed on the television as a liability. You can exempt the television under your household goods exemption. You can choose to reaffirm the television debt (but this will not be considered a necessary expense on your expense schedules). If you do not reaffirm the debt, it gets discharged, and if you have a lien on the television set, best buy has to come to your house and get it. There is no monthly expense here for your schedules.

[Maine]

The means test is just that- a MEANS test...as in: after you pay all your living expenses do you have the means left to pay the creditors or not. Secured cards are treated no differently than unsecured cards- they all would be wiped out in bankruptcy, so none of them can go on the means test.

The reason you do not include credit card and store payments in the means test is simply that they want to see how much money you have left after you pay your day to day expenses. They are trying to prove you have money to pay back to your creditors.

The 6 month look back on the means test is difficult for the recently unemployed high income earner. They intend it to be that way to prevent people from filing sooner than they are truly insolvent. They want you to look for a new job so you do not have to file for bankruptcy. They want you to pay your creditors. And sadly, they do want to see people showing up at the 341 hearing saying they got a new job so they can be dismissed to pay their bills