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

[gman]

I think you answered your own question a long time ago. Walker isn't 11th Circuit material, but many judges refer to it in making their decisions on this matter.

The Walker case happens to be in my district - not the 11th - so it is very relevant to my situation.

The Means Test includes all scheduled secured debt (period). This is also the case in just about every other Circuit since most have addressed the Means Test.

Which leads to the question about judicial liens being secured debt....as in the state of Georgia, once a judicial lien of any kind has been perfected, it is against all property and wages....I posted a link to this fact.....I do not see why you do not understand the implication of a debt moving from unsecured to secured status. Even more so, cases exist where these secured credit card debts receive preferential treatment over unsecured credit cards in a Chapter 13 (assuming a debtor is forced into a 13 - which I am personally looking to avoid.) This opinion that all credit card debt is unsecured is simply not factual....yet people continue to insinuate that it is fact.

Why do you even care? Walker also concluded that nothing stopped the UST from a motion to dismiss and getting a dismissal under a totality of circumstances objection under 11 USC 707(b)(3)(B).

Why do I care? As stated before, and I'll state it again, my hurdle is getting past the Means Test....period. I have no worries about projected disposable income on Schedule J because I am currently unemployed. If I can simply pass the Means Test, the likelihood of a Trustee arguing that my case should be dismissed due to totality of circumstances is next to zero. This seems like an easy concept to swallow....

The judge in Walker stated the obvious. A debtor who passes the Means Test can still be denied a Chapter 7 if the Trustee argues (and wins) the totality of circumstances angle. What the judge did not say was...Mr. Trustee...this debtor got off on a technicality.....if you had only used the totality of circumstances argument you would have won....

The fact is that debtors over the median income must pass the Means Test to even be able to file for a Chapter 7. If a debtor cannot pass - though they can still proceed with their own totality of circumstances argument - their likelihood of filing and winning a Chapter 7 discharge is close to zero.

The Means Test -- for a Chapter 7 -- means nothing, really, if you are over-the-median.

This is simply not true. What would you have me do? So today I am over the median for my state. If I follow what you are saying - the Means Test "means nothing." Let's see...perhaps I should waltz into court this week, say I am over the median income and still proceed with a Chapter 7. When the trustee asks if I pass the Means Test I simply tell him: "Sir, you and I know the Means Test means nothing...so just discharge my case..."

C'mon. There are a slew of people who have been over the median and still passed the Means Test, filed for a Chapter 7, and won.

To me, you are not sensing the entire picture of my specific case and are applying a solution that might work for others but would not work for me. You are also continuing to post without backing up with any facts, weblinks, etc. specific to my original questions.

Look, everyone is entitled to their opinion....I totally agree.

But when someone on this board asks for something specific, maybe it makes sense to chime in accordingly?

There was a guy just the other day asking about taking a job before a 341. He wanted facts and not opinions....and that's what most people chimed in with....

[gman]

I don't know what you want gman. It is well accepted in the 11th Circuit that the Means Test includes all secured debt "contractually" due at the time the case commences (period). There is nothing to look up, but here are ALL the cases that ever have a 11 USC 707(b)(2) motion to dismiss on a presumption of abuse, due to a person surrendering property or otherwise include "other" secured debt on the Means test, will reference these three "landmark" cases:

In re Walker, 2006 WL 1314125 (Bankr. N.D.Ga. 2006)
In re Oliver, 2006 WL 2086691 (Bankr. D.Ore. 2006)
In re Hartwick, 352 B.R. 867 (Bankr. D.Minn. 2006)

There is nothing else to look for and you're asking for information on WELL SETTLED law (even though it hasn't gone to the Supremes).

If you have Westlaw... or Bankruptcy Reporter... have at it. You may be able to find Hartwick which is another great ruling as well. However, in all cases, beware of the 11 USC 707(b)(3)(B) motion to dismiss.

And just so you know...in my particular case, I would be including the (now secured) credit card judgment lien on my Means Test but would not be including it on my Schedule J because I will have a much lower income on Schedule I and only would "need" this expense on the Means Test. This move should circumvent the Trustees position to file for totality of circumstances.

My case is, and always will be, about passing the Means Test.

[justbroke]

The Means Test means nothing, really, if you're over the median. It will always come down to Schedule I/J. What I keep saying and you keep dodging is the fact that the Means Test is absolutely irrelevant if you pass it.

FYI, the 11th Circuit Court of Appeals covers Georgia, Florida and Alabama. With the exception of a few mistakes in 2008 and 2009, no UST has made the mistake of a 707(b)(2) attack on the Means Test in the 11th Circuit (Georgia, Alabama, Florida) because it's pretty settled.

I want you to get over this Means Test issue! I know more than most that a "lien" is secured debt. I said so in all my posts. I asked you to ignore it because it's your Schedule J that's the issue.

I guarantee you that this "move" will not "circumvent" anything. When you are over the median and a consumer case, you will feel the full power of the Office of the United States Trustee (OUST).

Don't know what else to say but this... the Means Test is nothing. You should be worried about getting under the median, or having the expenses which allows you to receive a discharge in a Chapter 7 case.

[blockhead]

Not asking about Schedule J.....asking about the Means Test (Form 22A).

I don't get it. If you can't put it on Sched J why would it matter if you use it on the means test or not? Anyway you lost me with all the secured/unsecured.
Have you run all this by an attorney?

[tobee43]

gman....i know exactly where you are coming from....

there are keys to making it work for you....expenses are really the key.

now i'm going to say something that is going to result in most likely a ton of pouches...but as many of you know, i don't mind a bit of controversy...LOL! once in a while.
"it depends on the trustee"

a trustee can turn your case one way or another...factoring in your age, your ability to recoup your losses...there are a number of issues here that go beyond every single law written....we can cite law all day. we need to remember law is not necesarily justice...and even if it were justice, justice is not for all as sad as that is.

for all the atty's out there, you ALL know too well, that a judge can in many instances use his/hers discretion and apply the law in a certain way that can very well change not only the spirit of that law, but how it applies and to whom it applies to. (directly affecting the outcome of the situation to one side or another).

[gman]

=justbroke;445854You should be worried about getting under the median, or having the expenses which allows you to receive a discharge in a Chapter 7 case.

Ahhhh...now we are getting somewhere.

Think of it this way:

1. If there was no Means Test, my current income would be around $17k / year based solely on unemployment income. This is well below the state median and a Chapter 7 should be a breeze as my DMI is literally negative $2,000 or more.

2. I am caught behind an 8 ball with the Means Test because my last 6 months average even at the end of Sep will amount to around $78k. Our state median is around $55k.

3. My focus has thus been on the expenses side specific to the Means Test, and you know that the expenses allowed beyond IRS standards are minimal and come under scrutiny.

4. I have a good amount of past taxes due - which helps boost my expenses to a level where $78k of income can be offset by expenses.

5. I rent - so the loophole some have used concerning mortgage payments for property they are surrendering is a moot point for me. As a matter of fact, my rent is over the allotted amount for my county so this shorts me a few hundred on expenses for the Means Test.

6. I am "cutting it close" so every allowable expense helps. I figure if I do not include anything other than the IRS allowed expenses I have a Means Test DMI of about $100. My Schedule J DMI will be very much in the negative....like a few grand negative.

7. My strategy is to load up on any and all allowable expenses and let the Trustee try and pick them apart. This includes telecom, the extra $35 for food/clothing (and yes I am collecting every receipt I have), charity, etc. I am hoping to add 1/60th of the secured judgment lien to my Means Test monthly expenses since it is a now a secured debt.

8. I am simply looking for any cases or personal experiences where someone tried to add this kind of secured debt. Maybe there are some examples...maybe there are not...who knows?

9. I can possibly wait one more month to file, which would be Nov 1 and a likely 341 in early December after which I could get a new job....but I am literally out of cash. I am worried about generating even a nickel of income directly (working) or indirectly (family, cracking an IRA) and this comes into play heavily in my decision making.

[justbroke]

I know that tobee43 wrote that it's a Trustee thing, but this is exclusively NOT a "panel" Trustee thing. This is the Office of hte United States Trustee. They seem to live for denying over-the-median income people from receiving a Chapter 7 discharge... pushing to a Chapter 13 or making sure they receive a dismissal.

If you have a VERY good attorney, you can usually overcome some Means Test issues, but the issue isn't the Means Test in an over-the-median income situation. The issues is Schedule I/J, and how you can show that you you deserve a discharge. However, just waiting the 6 months for income to roll off is usually FAR FAR better and cheaper than challenging the UST's office. Their argument will be that the six-month average just doesn't support your case.

The reason I was strong on the "forget about the Means Test" is because you can certainly expect -- and should expect -- a challenge from the OUST unless your case is so well documented, and there are no questions of law, that it becomes a non-issue. The only over-the-median cases where I've read where it went through with a breeze were a.) like mine -- a non-consumer case, or b.) the debtor had real property (primary residence) and indicated that they were reaffirming or otherwise "riding through". Even in the cases where you're reaffirming, the UST can (and have) make a collateral attack on the "need" to have the home.

I learned something in Court from a well respected Florida bankruptcy judge who has written many of the awesome (debtor friendly) decisions in the 11th Circuit. Chapter 7 doesn't protects a primary residence the way a Chapter 13 does. Chapter 7 does not make the reaffirmation or keeping of the primary residence "necessary for a successful reorganization" as Chapter 13 so codifies in Title 11! (This was actually my case and I had the lender dead to rights and I was current! However, they still moved for relief from the automatic stay!!! And won!)

Anyhow, when you use "questionable" or even exceed IRS limits, you invite more scrutiny... and being over the median has already brought the "bean counters" from the OUST into your case anyhow. You want to avoid scrutiny. The fact that you're renting and don't have the real property, will certainly bring even more scrutiny.

Your thing really is to wait. There's no sense trying to make caselaw as this can get expensive.l I personally just believe that you will invite a level of scrutiny to your case that everyone fears. On top of that, the defensibility of your assumptions are what concerns me about including "dischargeable" debt on Schedule J.

[gman]

Your thing really is to wait. There's no sense trying to make caselaw as this can get expensive.l I personally just believe that you will invite a level of scrutiny to your case that everyone fears. On top of that, the defensibility of your assumptions are what concerns me about including "dischargeable" debt on Schedule J.

I just re-ran my Means Test numbers and put zeros in on every line item that could be questioned on the expense side (ex: charity, excess rent adjustment, secured credit card debt, and even telecom though my $50 for internet seems to never have been questioned in any cases I have seen...but let's assume that is zero for now.)

I did this to have a scenario where a Trustee would literally have no expenses to question.

Here is my picture on Oct 1 and Nov 1:

Nov 1
Avg Income = $59k - still over median of $55k
DMI = -$996

Oct 1
Avg Income = $78k - way over median of $55k
DMI = +67

Given this - is there any reason not to file on October 1st even though I am over the median?

I simply cannot see where a Trustee would challenge this given I am currently unemployed which means projected DMI will be -$2,000 or more and I "pass" the Means Test on that date by having a current DMI of only $67.

Comments?

[tobee43]

I know that tobee43 wrote that it's a Trustee thing, but this is exclusively NOT a "panel" Trustee thing. This is the Office of hte United States Trustee. They seem to live for denying over-the-median income people from receiving a Chapter 7 discharge... pushing to a Chapter 13 or making sure they receive a dismissal.

sorry, jb...i didn't mean to imply that it's solely a trustee thing. so i'm sorry if it came out that way.

it's just one of the factors involved with the complete picture. you know that a trustee can most certainly make or break you. and, i for one, think that a great atty is more that needed at all times.

i very much agree with you about the pushing towards the 13's...i say it over and over...13's were designed to line the pockets of the banks and the atty's.

this is just an extremely complexed journey for some and a cut and dry situation for others. our own personal experience was extremely complexed and each detail was required great thought and careful planning.

i think gman is trying to figure his strategy that will work for him. i think we can all agree that it is a difficult and stressful task.

[Fallonedward]

Thanks for the advice...and I may end up having to go down that path.

By the way - your severance payout may very well NOT have to be included in your projected current income.

Case where this applied is located here:

http://www.bkforum.com/showthread.php?t=57848

and here:

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

The first link only applies to 13"s and I'm going for a 7 so this is not relevent for my case and the 2nd link scares the jebbers out of me.

My hubby has been unemployed since March, spends 8 hours a day, 5 days a week looking for new opportunities and still nothing. Our attorney tells us we need to wait till Nov. 1 to file because our severence will have dropped off by then and its one less thing for the trustee to ding us on. We are older so our high earning years are behind us, so if we had to do a 13 I would have to argue with a trustee that they can only place us in a 13 that lasts for 1 year and 6 months as that is when the UI will end. We have a negative DMI but our expenses are over the IRS standards but I have receipts for everthing...

dang I just want November to get here

gman, thanks for the info and I appreciate your help

[tay666]

Which leads to the question about judicial liens being secured debt....as in the state of Georgia, once a judicial lien of any kind has been perfected, it is against all property and wages....I posted a link to this fact.....I do not see why you do not understand the implication of a debt moving from unsecured to secured status.

The thing is though. Once your CH7 is done, that lein is worthless.
They cannot collect on it!
There is no physical property for them to take back, as in a car or a house.
They cannot repossess anything, as they never possessed it in the first place.

Also, that lien can be stripped during the BK, which also renders it pointless.

So, it isn't really a secured debt.

[justbroke]

This is simply not true. What would you have me do? So today I am over the median for my state. If I follow what you are saying - the Means Test "means nothing." Let's see...perhaps I should waltz into court this week, say I am over the median income and still proceed with a Chapter 7. When the trustee asks if I pass the Means Test I simply tell him: "Sir, you and I know the Means Test means nothing...so just discharge my case..."

You quoted what I actually wrote -- the means test means nothing if you're over the median -- but then chop off the "over the median" to suit your counterpost? The Means Test is ONLY but ONE bright line test. The true test of obtaining a discharge in a Chapter 7, has been, and remains, your disposable income on Schedules I and J.

C'mon. There are a slew of people who have been over the median and still passed the Means Test, filed for a Chapter 7, and won.

I didn't say you could not achieve a discharge by "passing" the Means Test and being over the median. The fact is, that your "disposable income" primary dictates this, and for purposes of a Chapter 7 (not a Chapter 13), virtually all UST offices go by Schedule I/J and not the Means Test... because it means nothing in the context of an over-the-median debtor. The OUST looks specifically for this and looks specifically at attacking the expenses on Schedule J... not on the Means Test. Hence... the Means Test means nothing from a defense or offense standpoint.

I think you're trying to take the Means Test as an offensive tool, when it is not. You should read the Chapter 7 Trustee guidelines as published by the OUST.

But when someone on this board asks for something specific, maybe it makes sense to chime in accordingly?

I don't know what's going on with you, but I laid out the groundwork of what would work and why you will get scrutiny. In bankruptcy, time heals most wounds (lookback, preferences, etc).

There was a guy just the other day asking about taking a job before a 341. He wanted facts and not opinions....and that's what most people chimed in with....

It depends on two things. How he responds at the 341 Meeting about whether his financial condition changed. if you're out of work, they will ask if you found work. They can pursue a totality of circumstances objection. However, an under-the-median person who never had significant ($100K plus jobs in the past) employment would likely pass "under the radar" and go unnoticed.

However, you're asking about a person (yourself) who is clearly smack dab in the middle of the radar.

Given this - is there any reason not to file on October 1st even though I am over the median?

I am telling you right here, that you will receive a different kind of scrutiny. That will be on Schedule J. Now, some UST offices have messed up and let over-the-median income filers pass by because either they just plain didn't do their job, or because the debtors attorney prepared and documented the case well, where the debtor was deserving of a discharge.

I simply cannot see where a Trustee would challenge this given I am currently unemployed which means projected DMI will be -$2,000 or more and I "pass" the Means Test on that date by having a current DMI of only $67.

You're looking at this totally wrong. It's not just disposable income. This is where people get caught up by focusing too much on the Means Test (and perhaps even their Schedule I - Schedule J). Being over-the-median will flat out have the OUST looking at every line on your forms, your bank accounts, statements for credit cards, past tax returns, etc. They are going to attempt to find a way to make your expenses go away.

I think, that, however unfortunate it is, your $78K tax problem may be enough. At least that give you about a $1K(+) extra "secured" payment.

Hey, you might get lucky. I would rather not rest my case on luck. Your case could cost more to litigate. You may very well receive a discharge. I would stay this would be atypical for your situation. That's all.

[keptdigging]

x

[dumpinmydebt]

The thing is though. Once your CH7 is done, that lein is worthless.
They cannot collect on it!
There is no physical property for them to take back, as in a car or a house.
They cannot repossess anything, as they never possessed it in the first place.

Also, that lien can be stripped during the BK, which also renders it pointless.

So, it isn't really a secured debt.

This is correct. I got that info from my Nolo book.

It's just not viewed the same as how my car loan has my car as collateral, and how the mortgage has the house as collateral.