Met with atty: A few more questions about filing Ch 7

[sealpup]

Question for HHM- When doing schedule J, can you use the IRS standards that you would use in the means test as a sort of *guideline* for what is allowable? Like if I know I put x amount for my groceries/clothing, etc and that x amount is under the IRS exemption for my area/family size, that's probably not going to raise a red flag to a trustee? And if it's over, I just need to be prepared to prove it? Generally do you only need to be prepared to show proof of expenses that may be over these standards?

Also is the $200 allowance for each vehicle? We have 2 that we own and they are both 100,000 miles + and over 6 years.

[HHM]

The thing with schedule J, if "asked" to prove the amount you listed, could you?

As a practical matter, if you list an expense within IRS guidelines, it is not likely to be questioned. But realistically, you should have some factual basis for the expense. (don't over think this; just list what you need to list to make your BK work so long as you have some basis for listing what you did).

Yes, if you have 2 cars, and 2 debtors, each car gets the +$200 operating expense.

[csonly]

I need to talk to my attorney about this $200 operating expense, can someone tell me exactly whats its called, so I can be prepared if my attorney says "what?" I may have asked this before, but can't find a response, what is the basis of this operating expense for older cars, is it due to more repairs that it requires to keep on the road? Just want to be prepared when I approach my attorney with this.

[HHM]

It's buried in the internal revenue manual

5.8.5.20.3 (10-22-2010)
Transportation Expenses

Transportation expenses are considered necessary when they are used by taxpayers and their families to provide for their health and welfare and/or the production of income. Employees investigating OICs are expected to exercise appropriate judgment in determining whether claimed transportation expenses meet these standards. Expenses that appear excessive should be questioned and, in appropriate situations, disallowed.

The transportation standards consist of nationwide figures for loan or lease payments referred to as ownership costs and additional amounts for operating costs broken down by Census Region and Metropolitan Statistical Area. Operating costs include maintenance, repairs, insurance, fuel, registrations, licenses, inspections, parking and tolls.

Ownership Expenses – Expenses are allowed for purchase or lease of a vehicle. Taxpayers will be allowed the local standard or the amount actually paid, whichever is less, unless the taxpayer provides documentation to verify and substantiate that the higher expenses are necessary. Generally, auto loan or lease payments will not continue as allowed expenses after the terms of the loan/lease have been satisfied. However, depending on the age or condition of the vehicle, the complete disallowance of the ownership expense may result in a transportation expense allowance that does not adequately meet the necessary expenses of the taxpayer. See paragraph (5) below for the definition and allowances of an older vehicle.

Operating Expenses – Allow the full operating costs portion of the local transportation standard, or the amount actually claimed by the taxpayer, whichever is less, unless the taxpayer provides documentation to verify and substantiate that the higher expenses are necessary. Substantiation for this allowance is not required.

In situations where the taxpayer has a vehicle that is currently over six years old or has reported mileage of 75,000 miles or more, an additional monthly operating expense of $200 will generally be allowed per vehicle.

Understand, this provision is NOT part of the IRS standards. It is an interpretation and allowance that the IRS allows as part of the Offer in Compromise process. The bankruptcy code makes no mention of this. The legal dispute is whether the BK code, by making use of the IRS standards, also incorporates the IRS's interpretations and guidelines related to those standards (that issue is still very much up in the air, and the trustees try to have it both ways when it suits their needs).

[ValleYum]

I need to talk to my attorney about this $200 operating expense, can someone tell me exactly whats its called, so I can be prepared if my attorney says "what?" I may have asked this before, but can't find a response, what is the basis of this operating expense for older cars, is it due to more repairs that it requires to keep on the road? Just want to be prepared when I approach my attorney with this.

Very last bulleted item on Page 5:

http://www.justice.gov/ust/eo/bapcpa/docs/ch7_line_by_line.pdf

[csonly]

Just to clarify, this $200 is per month and also in addition to other transportation expense, such as gas, car maintenance, etc?

[HHM]

Just to clarify, this $200 is per month and also in addition to other transportation expense, such as gas, car maintenance, etc?

There are only 3 categories of Transportation Expense when it comes to BK.
1. Public Transportation.
2. Vehicle Ownership Cost (Car loan / lease payment) (as of the U.S. Supreme Court ruling in Ransom, you can only take if you actually have a car payment).
3. Vehicle Operating Cost (everything else, gas, maintenance, insurance, etc).

The older/high mileage vehicle allowance, $200, is an "additional" allowance added to Vehicle Operating cost category. (in most districts, you can only claim this addition if you DO NOT have a Vehicle Ownership (car payment) cost).

Also, we are ONLY talking about the MEANS Test, not schedule I&J.

[csonly]

Is is possible to make changes to the means test and/or the I-J schedule mid stream or do you have to wait and see what the trustee's response is regarding their investigation of presumption of abuse?

[HHM]

Isn't it sort of late for that questions, you filed your case 11/03/10

But yes, you can amend your petition anytime before discharge. But since you are post 341, no point in doing so unless there is a problem.

[csonly]

HHM - yes, I'm late.....what can I say? Thanks for responding.