Coming Over Limit On Means Test by $700

[Dinero]

What are some ways to get over the hump if the means test shows you're a bit over?

Suppose I am being forced into bankruptcy Chapter 7 by being unemployed for 12 straight months and have a lawsuit hanging over me.

Running the numbers I see that my annual income works out to $38,376, but the median income for Texas is $37,676.

That means I am $700 over the allowable to qualify outright.

Is there some way to still qualify? I am looking further into the NOLO calculator to determine this and I know I am one payment behind on my car and had to borrow some money to pay the rent and need to find some relief from these bill collectors hounding me every day of the week.

I don't have the cash to pay an attorney to file so if I do this, I have to do it per se which means I'd better be completely certain that I qualify before I even start the mountains of paperwork required by the court.

Otherwise, I need to find another way out the financial situation I am drowning in!

My debt is about $20,000 in credit card debt.

[scorpion35]

What are some ways to get over the hump if the means test shows you're a bit over?

Suppose I am being forced into bankruptcy Chapter 7 by being unemployed for 12 straight months and have a lawsuit hanging over me.

Running the numbers I see that my annual income works out to $38,376, but the median income for Texas is $37,676.

That means I am $700 over the allowable to qualify outright.

Is there some way to still qualify? I am looking further into the NOLO calculator to determine this and I know I am one payment behind on my car and had to borrow some money to pay the rent and need to find some relief from these bill collectors hounding me every day of the week.

I don't have the cash to pay an attorney to file so if I do this, I have to do it per se which means I'd better be completely certain that I qualify before I even start the mountains of paperwork required by the court.

Otherwise, I need to find another way out the financial situation I am drowning in!

My debt is about $20,000 in credit card debt.

u need to take the means test to see if u qualify for ch 7
i would not file bk over $20000

[justbroke]

That means I am $700 over the allowable to qualify outright.

It's not whether you're over or under the median income that determines whether you are entitled, as a matter of law, to receive a discharge in a Chapter 7. It's your income less expenses. What the means test does, it serve as an initial test. If you pass the first part of the test, are under the median income, it is presumed that you qualify and are entitled to receive the discharge.

The second test is the expense test where your income less expenses is judged. If your disposable monthly income (DMI)_is under $182.50 after completing the next sections of the means test, then you qualify. If it is over $182.50, then you can rebut the presumption of abuse -- which is what it's called when you have enough "DMI" to fund a Chapter 13 -- by showing special circumstances.

So what does the Legal Consumer Means Test calculator determine as your disposable income?

Additionally, $20K is not "really" that much money to file a Chapter 7. You usually save the Chapter 7 for something big. If you can deal with using Chapter 7 -- I call it the "nuclear option" -- for that amount, then realize that you can't file another Chapter 7 for 8 years. Just something to think about from a strategy standpoint.

Also, since you're behind on your car, it's not going to save your car. You will need to come current before filing or before discharge.

[Dinero]

Practical Lower Limit

So why would you not file bankruptcy if you owed only $20,000 in credit card bills?

You didn't say.

Is there a practical lower limit of debt that makes filing for bankruptcy a viable option?

This thing has been hanging over my head for months and at first I was fighting it, but then I thought perhaps a fresh start would give me the good night's sleep all this worrying and bill collectors and lawsuit has stolen from me.

I didn't want to file bankruptcy on moral grounds, but then thought maybe it was just my pride that was holding me back and wiping out all this debt would be liberating once and for all.

Right now, I just want to make the wisest business decision I can make in my situation and take whatever action I need to in order to do it as quickly as possible.

[Dinero]

Saving My Car

It's not whether you're over or under the median income that determines whether you are entitled, as a matter of law, to receive a discharge in a Chapter 7. It's your income less expenses. What the means test does, it serve as an initial test. If you pass the first part of the test, are under the median income, it is presumed that you qualify and are entitled to receive the discharge.

The second test is the expense test where your income less expenses is judged. If your disposable monthly income (DMI)_is under $182.50 after completing the next sections of the means test, then you qualify. If it is over $182.50, then you can rebut the presumption of abuse -- which is what it's called when you have enough "DMI" to fund a Chapter 13 -- by showing special circumstances.

So what does the Legal Consumer Means Test calculator determine as your disposable income?

Additionally, $20K is not "really" that much money to file a Chapter 7. You usually save the Chapter 7 for something big. If you can deal with using Chapter 7 -- I call it the "nuclear option" -- for that amount, then realize that you can't file another Chapter 7 for 8 years. Just something to think about from a strategy standpoint.

Also, since you're behind on your car, it's not going to save your car. You will need to come current before filing or before discharge.

Whoa!

What do you mean, filing for bankruptcy will not save my car if I am behind in the payments? That's a shocker!

Are you sure about that? Can you quote the section of the law that says that?

My car is a secured debt and I had planned just to leave it out of the filing and catch up by making the monthly payments plus $100 or so extra each month.

Second question, you don't think $20,000 is sufficient debt to file for bankruptcy chapter 7?

so just how much is sufficient debt to file for chapter 7?

[bk2009]

I personally think that it's all relative. If you don't make $40k per year, $20k worth of debt is a lot of debt to discharge, imo.

From my understanding, you'll need to be current on your car. Are you currently paying all your monthly debts? All the CCs? If you are, then you should stop paying those in order to catch up on your car payment. If you aren't currently paying on them and are still behind on the car and borrowing money for rent, how are you going to survive life post BK? I ask, not to be rude, but to see what your plan is long term. It'll do you no good to discharge your debts if you still won't be able to pay all of your monthly bills - you'll either need to cut expenses or up the income (which may not even apply towards you, ignore if it doesn't!).

[Peeps]

Hi Dinero,
I think the point is just that a Bk with all the work that it requires, all the emotional strain it causes, and the financial aftermath that lingers, it might be a whole lot to go through for $20k in credit card debt. Ultimately it's up to you, of course. Only you know what's right for you. I'm sure people have filed BKs for less. But once you play the card you don't get another chance to use it for a long time and you never know what might happen in the meantime (like unexpected medical expenses or that pending lawsuit you mentioned).

I haven't experienced it personally but a number of people on the forum have received offers to settle their CC debt for much lower amounts than what is owed. After missing some payments, the CC companies approach people with settlement offers. Although there's a lot to watch out for in terms of hidden fees, added costs, and tax liabilities that might still be an option for you to consider. There are several threads on the forum that you could search to get an idea of what you might expect with this option. And you could potentially avoid a BK. Whatever you decide to do, best of luck to you.

[tcreegan]

Hi dinero,

What do you mean, filing for bankruptcy will not save my car if I am behind in the payments? That's a shocker!

Are you sure about that? Can you quote the section of the law that says that?

No law, it is in your contract (loan papers) If you are in default prior to the BK, they can exercise their options to recover the collateral (a fancy way to say repo)

Ultimately it depends on your lender, you need to ask them what is going to happen if you file BK

To help you with the decision to file BK or not, find a local non-profit Consumer Credit Counsleing of [your state or city] Make sure it is the non-profit. Make an appt and take your numbers in and they can give you some impartial financial advice. Very helpful in my experience.

Tom in Colo
Tom in Colo

[justbroke]

What do you mean, filing for bankruptcy will not save my car if I am behind in the payments? That's a shocker! Are you sure about that? Can you quote the section of the law that says that?

Unless you are filing a Chapter 13 bankruptcy and filing a Plan of Reorganization that specifically addresses the arrears (past due payments), the lender is entitled to, as part of "non-bankruptcy law" to move to repossess or foreclose. This is just standard UCC (uniform commercial code) laws (combined with State laws on secured property). What the overwhelming majority of lenders will do if you are behind in payments when you file a Chapter 7, is to file a Motion for Relief From Stay (RFS) asking the court's permission to allow them to pursue repossession (or foreclosure). This motion is almost always granted. Then the lender would be allowed to collect on the collateral.

Bankruptcy only "stays" the repossession temporarily. Once the lender files the RFS and it is granted, life continued as if nothing happened and the lender is then permitted to repossess the property. Unless you reach some agreement, outside the bankruptcy, with the lender, you will have the car repossessed.

Now, for another part that needs clarification. You can not just leave property out of the bankruptcy. The bankruptcy is all of your property that existed on the day you filed. It is not just what property you decide. In order to keep the vehicle, you would need to either Redeem it (under 11 USC 722) or you would need to Reaffirm the debt. Reaffirmation is a serious decision and you shouldn't reaffirm if you are underwater on the car (owe much more than it is worth). The other option is to surrender and return the car.

There is a "fourth" option in "some" States and that's not listed anywhere on the petition nor in the bankruptcy code. That's called a "retain and pay" and is also known as a "ride through". This allows you to keep paying while not redeeming, reaffirmation, or surrendering the car. Unfortunately, you MUST be CURRENT for the fourth option, the ride through. Additionally, in most cases, you need to be current in order to reaffirm as well.

Second question, you don't think $20,000 is sufficient debt to file for bankruptcy chapter 7?

I didn't say it wasn't sufficient, I asked you to consider all possibilities before using a grenade to destroy an ant. There is no magic number. If you don't own a home, and don't have any other debt, then it may be okay to use Chapter 7. I would ask myself if the problem is that you're only "temporarily" on unemployment? See, the key is if you own ONLY the car, and are on unemployment, then you are practically "collection proof". This means there isn't anything that they can levy against. Do you owe back taxes as well? All these things are financial issues that need to be considered together and determining when it's okay to pull the pin on the grenade (file Chapter 7).

I would suggest that you get a few consultations with bankruptcy attorneys in your area to see what they think. This is just my personal opinion and I in no way, have access to all your financial data (and I don't desire to have such access either). They can look at your entire picture and suggest the options available which may include bankruptcy.

[majorbk]

Justbroke, well said.

[mb10240]

[FONT="Georgia"][SIZE="3"][COLOR="blue"]What are some ways to get over the hump if the means test shows you're a bit over?

First off, you haven't indicated how you are filing... Are you married and filing without your spouse? If so, the marital adjustment will greatly help you. But based on the state median income you've specified, I'm guessing you're in a single person household?

How old is your car? I'm not sure if it's allowed in your circuit, but you may be able to take a higher car operation deduction depending on if your vehicle is 7 years old or older and/or high mileage.

Have you calculated a chapter 13 repayment plan? You can take the administrative costs of a Chapter 13 plan as a deduction on the means test. This might be enough to bump you out of "presumption of abuse."

Suppose I am being forced into bankruptcy Chapter 7 by being unemployed for 12 straight months and have a lawsuit hanging over me.

Again, depending on the case law in your circuit, long term unemployment may be a "special circumstance" that can be used to rebut the presumption of abuse if you can't "pass" the means test.

Finally, you could just wait a few months and wait for any income you have made during the six month look-back period to "drop off."

As for filing over only $20,000 in debt... I filed with $21K in credit card debt. Granted, I also have a car that I owe about $9K on, $100K in student loans (not being discharged, obviously), and limited prospects for employment (the legal sector stinks... I'm competing against attorneys with 5-15 years experience who have been laid off from the big firms for entry-level positions). Like justbroke said, it's the "nuclear option" -- be absolutely sure you want to do this, because you can't do it again for a long time and you never know what will happen. Get some free consultations from lawyers in your area: almost every bankruptcy attorney offers a free consult.

[Dinero]

Leasing New Car and Filing Single Status (If I file)

My car is new, I leased it and I am single. The lease is up in one year and that was the first reason I did not want to file for bankruptcy.

I got into this financial bind like most others because of this deep recession.

I still really don't want to file for bankruptcy, but the attorneys I've spoken to recommended Chapter 7 if I do file, but they are not objective. They primarily want to make money and my interests are only incidental to them. I understand how that works.

I actually went through a Chapter 13 bankruptcy in the recession of the 80's to save my home from foreclosure, but now I am single and live alone in an apartment. I know the anguish of the process and swore I would never go through it again, but who expected the recession to be so deep or so prolonged?

My prospects for work are actually looking better than they have in a year. I went on two interviews last week and I am expecting job offers soon.

I have never been sued before and the lawsuit is what has made me look at filing for bankruptcy Chapter 7 like foreclosure forced me into Chapter 13.

I have been pinching every penny while waiting for the economy to improve and trimmed every expense that I can. In my business it has always been a feast or famine cycle, but there are definite signs that we may be moving out of the odious famine side to the feast side.

If that is the case, perhaps I should wait until I get the job offer I am expecting.

What do you guys think I should do if you were in my shoes?

Once I am back in the saddle and working again, I will be making in a week what I have been making in a month, but then I won't qualify for Chapter 7.

My emotional state has been bouncing from one side to the other and I bought the NOLO book recommended on this forum and have been considering Chapter 7 now that the initial shock wave and denial has rippled through my system, but I am still undecided on what is the wisest course of action to get out this financial bind and get the wolves off my door!

[BKlooker]

Seriously, just to second what others have said, you really REALLY need to talk to a non-profit counseling service as soon as you can. Doing so will allow you and them to chart your monthly expenses and rolling debts, and from there you will get the square figures to best guide you to what you should do. I would recommend only seeing a BK attorney AFTER this point, given that you are testing out so much higher on the means test. A BK attorney is going to try and push you into some form of bankruptcy because that's what serve the attorney best...they make a profit off you filing one way or the other, hence why a non-profit group who has nothing to gain is best to try first. It may be that you aren't putting the numbers in correctly on the test, or it may also mean that you simply don't have much in the way of deductions and expenses to make it worth trying.

My personal 2 cents...20K is not a lot of debt to carry, even if you make 38K a year. You very well may want to consider debt consolidation. CH 7 is a "nuclear" effect of liquidation, as someone else said. If you aren't looking to tank a property AND forfeit more than say 30K in unsecured debt as a single person (or vice versa, over 50K+ unsecured debt) making what you make, I wouldn't go the CH7 route. It may be that CH 13 is what you really need to get things in order and knock down some of the strain of this 20K while teaching you to live within your means.

You say you want to keep this car....what's it worth, and how much in the hole are you on it? If you are willing to let the car go and the 20K, maybe BK is back in the picture. But seriously...talk to a non-proft group and have them help you chart your finances. That's going to be the most ideal way to see what's going to work best in the long run.

[Dinero]

Link To Recommended Non-Profit Credit Counseling

Thanks for all the insightful advice, friends. I need all the solid advice I can get right now. I feel like I am in a oppressive room and searching for the way out of this financial burden in the dark.

Does anyone have a link to a non-profit credit counseling organization that they personally recommend in Texas?

I had an attorney caution me recently about certain credit counseling organizations.

She said that she had had clients who lamented to her that they had been paying hundreds of dollars to some agencies who supposedly were going to help them get out of debt, but only to find out that none of that money went to the creditors, it all went to the credit counselors.

There are a lot of unscrupulous people out there who prey on emotionally distraught people by cloaking themselves as "non-profit", but are actually wolves in sheep's clothing.

If a person acts out of fear, he can easily make a bad situation even worse by taking the wrong advice and going down the wrong path, but I feel like I need to take some bold action to extricate myself from this financial hole.

The wolves have no mercy!

[scorpion35]

Thanks for all the insightful advice, friends. I need all the solid advice I can get right now. I feel like I am in a oppressive room and searching for the way out of this financial burden in the dark.

Does anyone have a link to a non-profit credit counseling organization that they personally recommend in Texas?

I had an attorney caution me recently about certain credit counseling organizations.

She said that she had had clients who lamented to her that they had been paying hundreds of dollars to some agencies who supposedly were going to help them get out of debt, but only to find out that none of that money went to the creditors, it all went to the credit counselors.

There are a lot of unscrupulous people out there who prey on emotionally distraught people by cloaking themselves as "non-profit", but are actually wolves in sheep's clothing.

If a person acts out of fear, he can easily make a bad situation even worse by taking the wrong advice and going down the wrong path, but I feel like I need to take some bold action to extricate myself from this financial hole.

The wolves have no mercy!

http://www.credability.org/en/homepage.aspx