Mean Test and Collecting Unemployment Benefits

[IOEveryone]

I just spoke with an attorney regarding a possible Ch. 7 filing. In going through my monthly income for a family of four we realized that we're $256.33 over per month (over a six month period).

Here's my question.....

I'm currently collecting unemployment benefits. What if I were to stop claiming for 3 weeks to make up the difference. Would the Trustee ask why I'm no longer collecting? Would unemployment close my case and cause me to re-apply? Does that affect the benefits I would be receiving in the future?

Any experience with this?

Thanks!

[Peeps]

I don't know about your state's administration of UI benefits, but do you have the flexibility of considering other "timing" options? For example, what if you continued to collect your benefits in a normal fashion and waited to file your BK for another month or two (presumably allowing a couple of higher income months to drop off the back-end of the 6-month income calculation)? I don't know if your situation would support the approach, but waiting for a little while might have some additional benefits besides just impacting your 6-month cash flow. Just a thought. Best of luck.

[justbroke]

Are you over the median, or is the Means Test showing that you have $253.33 in disposable monthly income (DMI)?

It reads as though you ave $253.33 over the median income. Please know that being over the median income does NOT PREVENT YOU from receiving a discharge in a Chapter 7 at all. It only means that you don't need to complete the rest of the Means Test (where the DMI is calculated)! Being under-the-median is nice because you will get less scrutiny from the UST, but many people, including myself, have been $100K over the median and still received a discharge.

Did your attorney tell you that they won't file a Chapter 7 because your $253 over the median? I would run, not walk, away from such an attorney, unless that's not the only reason. If your DMI is over $182.50/month, then that may be the real reason.

DO NOT STOP COLLECTING just to play with the numbers. That's bad faith and you can have your case dismissed for that!

Peeps has the better suggestion of maybe waiting for other income to "drop off" IF YOU really need to be under-the-median. However, just being under-the-median will get you a discharge! It always comes down to your DMI.

[IOEveryone]

I'm A Sponge Just Soaking It All Up!

Peeps & justbroke-

Thanks for the replies. Each day I feel as if I'm gaining greater clarity on the whole bankruptcy arena, then, I find myself going to sleep even more confused. Although I have prided myself on my numerous business successes, today I feel like my first grade daughter attempting to grasp calculus. It's all Greek to me. Moving on.....

Approximately two years ago during the early signs of the end of my most recent business, I sought the advice of my business attorney who in turn recommended me to someone who specialized in bankruptcy filings (Florida). In short, that individual indicated:

1. If I attempted to declare for any kind of bankruptcy, my debts had to be aged at least one year otherwise I could be counter sued for fraud.
2. As long as I made over the median income for the state in which I declared my primary residence, I could not file for a Ch. 7.
3. If I could not file for a Ch. 7, Ch. 13 would be my next option. At that point, I would then take the Means Test and based upon my county’s expense allocations, I could better calculate my 3-5 year payment plan.
4. If I ever went back to corporate America and became unemployed, after six months of being beneath the state median income, file for Ch. 7.

So, I become gainfully employed and a year later, I’m unemployed (August 2010). My wife makes under the state median income so I wait the six months as advised above and speak to an attorney in the area that appears to have 25 years in the industry (locally), graduated from a great law school (locally), has no black marks from the BBB and holds an adjunct professorship at his alma mater.

During my conversation today, I learn that my UI benefits are included in my household gross income and I’m now $250.00+ over per month in gross income. The attorney indicates that this won’t work and we should discuss a Ch. 13. I indicate that I will first go through our individual bank records monthly to ensure my calculations are accurate and follow up. After doing so, I realize I was right the first time.

My first thought is to not file (UI benefits) for three weeks and that decline will average the six months below my states (Washington) median income. My rationalization is, UI doesn’t care if I don’t collect money, they just want to ensure I don’t collect more than my fair share.

Justbroke – you indicate that you HAVE earned $100k over the median (annually I will assume) and filed successfully. I was led to believe that the Means Test was a set series of expense limits and anything over that could / would be paid to the Trustee for distribution. That can’t be accurate if you were six figures over the income. Please share.

Also, I noticed under your signature that you filed non-consumer. I just learned of that term today and will spend the rest of the evening Googling the details behind that. In short, a colleague explained that if I can prove at least 50% of my debt was business related, the median income and Means Test are moot points. Now, my debt (HELOC, 2 lines of credit and 2 credit cards) are all under my name and not the LLC (at credit tightened I had to personally guarantee). I can prove that the money was deposited into a company account and have all of the bank transactions to prove what the monies were used for. Is this an option and do I have my facts somewhat straight? When I mentioned this option to the attorney over the phone, he mentioned he knows of it but has never filed one.

Ok. I find myself thinking, researching and communicating so much on this topic that sometimes I either ramble or don’t communicate nearly enough information to solicit an opinion.

Does this make sense? Help! Thanks!

[ameliabedilia]

Are you having taxes withheld from your unemployment? If not, you could knock that number down a little by having 10% withheld. Not sure how much it would help, but it would be an honest way of bringing your overage down.

Also - I agree that you should not stop collecting your benefits.

[IOEveryone]

I've been informed that household income is calculated at gross, not net. I'm not sure that approach will assist (but I like the way you're thinking!!!!).

[ameliabedilia]

Wait a minute- I just remembered that we were collecting unemployment we had a choice of counting it or not, due to it being considered social security benefits. You aren't in a state that allows that are you?

[ameliabedilia]

Are you filing in Washington State? Or will you be using the exemptions from your previous state?

[IOEveryone]

ameliabedilia -

According to the conversation with an attorney today, it appears my Washington State UI benefits are counted. I'll need to research the Internet to see if I can find anything supporting or contradicting that.

With regards to where I will file, it will be Washington State.

[IOEveryone]

justbroke -

I just took the means test (and believe I accurately inserted the necessary information) and it says I qualify for either a 7 or 13. Now I'm really confused. Why did the attorney solely focus on just the median income? <sigh>

[ameliabedilia]

I am confused for you! I just googled a bunch of things and everything is saying that unemployment is exempt in Washington state. Does that just mean unemployment benefits that you've accumulated in a bank account? It's been a while since I filed, so some of the terms are foggy to me...

[Peeps]

IO~

I think you may have some wiggleroom somewhere between your step 2 and 3. Justbroke already mentioned it...

Just because you're above the median income does not mean you're out of the ballpark for a Ch 7. The means test allows you to show your income and your expenses. If your disposable monthly income (DMI) after those expenses is under $182.50, you can still qualify for the 7. You've noted that you're $256 "over," but it's not clear if you're over the median income or over the DMI.

If you're $256 over the median, then you've got a pretty good chance at showing expenses that put you under the DMI cutoff on the means test. Then you'd be in Ch. 7 territory.

If you're $256 over DMI on the means test, then dang you're close enough to go back and scrutinize those numbers to see if there's anything you've missed. Got extra medical expenses? Utility bills? Insurance costs? Vehicle costs? Again, if you land under the $182, then you're still poised to do a Ch 7. If you can get your numbers to the $182, just be aware that a trustee is going to scrutinize them a bit to make sure he/she can't still kick you into a 13. But that's an issue for another day.

There are still a lot of variables around exemptions, assets, and your ultimate financial goals that might influence your choice between a 13 and a 7. But from what you've said so far it appears that you might not have to rule a Ch 7 out quite yet.

Sometimes the options all blur together when you first hear them. There really is a lot to understand. But it does get better. Hang in there and just know you've come to the right place to be a sponge & soak things up.

Oh and BTW... allow me to just put in a little plug for getting really smart with this stuff so you know enough to understand if your attorney is exploring all the options available to you. It probably wouldn't hurt to do a few consultations with different attorneys just to get more perspective.

[ameliabedilia]

Okay- line 9 on this form for your district states you do not have to include ui benefits in your calculations. You list them, but they do not get added to the totals. Would this apply to you?

http://www.wawb.uscourts.gov/read_file.php?file=2884&id=0

[Peeps]

When something is exempt, I think it just means it can't be considered an asset in a BK and therefore can't be taken and used to pay off creditors. But many states still use the amounts of the received benefits in the means test when calculating income. Hope that helps.

[ameliabedilia]

When something is exempt, I think it just means it can't be considered an asset in a BK and therefore can't be taken and used to pay off creditors. But many states still use the amounts of the received benefits in the means test when calculating income. Hope that helps.

That's what I thought about being an exemption, but did you see the spot for ui benefits on the means test for his district? It looks to me like he doesn't have to add them to the totals.

Also- agree 100% about knowing your stuff before hiring an attorney. I did so much research I ended up feeling more comfortable filing myself. I had too many questions about weird things just like ui benefits that I could never get a firm answer on that I just did it myself.