Under median vs means test

[Lockeout]

I thought I had everything figured out, but the more I read on here (which is almost non-stop) the more confused I get.

I thought that being under the Median bypassed the means test and would automatically put us into a chapter 7, without the need to calculate DMI--but then I see threads where under-the-median filers still had to calculate DMI and worry about being forced into a 13.

So I calculated expenses and income just in case and fall comfortably into the negative--but then I see people saying that student loan payments don't count as expenses since they can be deferred (although I fall above my non-federal lender's hardship threshhold and can't get deferment, and my wife already used half her allowed deferrment years), which would take a whopping $1500 per month out of expenses, even though it's the student loans that forced us to consider bk in the first place (if we could have deferred them we would have, since we could have paid our cc's with that money. Not much more than mins., but still). Needless to say, disallowing student loans actually gives us DMI.

We have no mortgage, no car payments, and we still might have to file a 13? Or am I just confusing myself?

[rjmwx81]

Being below the median just removes the "Presumption of Abuse" on a Chapter 7. There's no such thing as automatically qualifying. I thought the same thing as you when I first started this process. In general, you have to show, with Schedules I & J, that your disposable income wouldn't make a dent in your unsecured debt over 60 months. That's the general idea, anyway. Justbroke and a few of the others will, I'm sure, explain it far better than me...since I'm still wandering through the same maze myself...just without the student loans.

[scorpion35]

I thought I had everything figured out, but the more I read on here (which is almost non-stop) the more confused I get.

I thought that being under the Median bypassed the means test and would automatically put us into a chapter 7, without the need to calculate DMI--but then I see threads where under-the-median filers still had to calculate DMI and worry about being forced into a 13.

So I calculated expenses and income just in case and fall comfortably into the negative--but then I see people saying that student loan payments don't count as expenses since they can be deferred (although I fall above my non-federal lender's hardship threshhold and can't get deferment, and my wife already used half her allowed deferrment years), which would take a whopping $1500 per month out of expenses, even though it's the student loans that forced us to consider bk in the first place (if we could have deferred them we would have, since we could have paid our cc's with that money. Not much more than mins., but still). Needless to say, disallowing student loans actually gives us DMI.

We have no mortgage, no car payments, and we still might have to file a 13? Or am I just confusing myself?

u can't use student loan payments in your bk

[tcreegan]

Hi lockeout,

DMI comes in two places: the means-test and Schedules I & J

The means-test is the 6 month lookback and I & J is the forward looking post-BK picture

The means-test uses IRS standards, allowing this much, that category, etc. I & J will be your actual income/expenses

Positive DMI in either place could put you into a Ch 13

On the issue of using student loan payments as an expense......well, that is a mess. The expense is not included on the means-test, but would be used as a "special circumstance" to rebut the presumption of abuse (=failed means-test) that would occur w/o the student loan expense.

Will the court allow you a special circumstance for your student loan? Depends on what court circuit you are in and how they have ruled on this issue. The courts are all over the place on this....

Yes you can use student loan expense as a "special circumstance"
In re Templeton, 365 B.R. 213 (Bankr. W.D. Okla. 2007);
In re Delbecq, 368 B.R. 754 (Bankr. S.D. Ind. 2007)
In re Knight, 370 B.R. at 438-39;
In re Martin, 371 BR 347 (Bankr. CD. Ill. 2007);
In re Haman, 366 B.R. 307, 318 (Bankr. D. Del. 2007).

No, you cannot use student loan expense:
In re Lightsey, 374 B.R. 377 (Bankr. S.D. Ga. 2007);
In re Carrillo, 421 B.R. 540 (Bankr. D. Ariz. 2009);
In re Vaccarielo, 375 B.R. 809 (Bankr. N.D. Ohio 2007);
In re Pageau, 383 B.R. at 228; Eisen, 370 B.R. at 773.

If you are going to try to use student loan expense as a 'special circumstance' you need to be prepared to...
a) document the expense
b) explain the necessity of the expense
c) show that there is no alternative

And this is with the assumption that if it is OK on the means-test it will be OK on schedule J

Since your case relies heavily on the student loan expense issue, you need to get some concrete answers from how your local BK court has ruled, and how your judicial circuit has ruled on this issue.

Good luck with this, don't go in with the blinders on, be prepared.....

Tom in Colo

[Lockeout]

Thanks for all that info Tom. We mentioned the student loans when we first met with our attorney, and he didn't seem to think it was a big dea. Either means he's confident it's not a problem in our district (Alaska, 9th Circuit) or just didn't realize it would be an issue (again, reading this forum too much has made me doubt everything).