Is the trustee allowed to make judgements?

[time4cake]

First please note that my house is fully exempt for the purposes of this question. My mortgage deduction on line 42 of the "Means Test" will be $4,420. Can the Trustee tell me that my mortgage is too high for my income, effectively forcing me to move from my residence and thereby making me inelligible for Chapter 7?

[djk]

it's better to know what you are claiming as income, cause if it is 70K a year
and your mortgage is 53K the I'd tend to think it is too high.

[time4cake]

My income is $104,000, but the question is on what grounds can the Trustee make judgements? Does anyone have a similar example happening to them?

[alh]

Not positive but I dont' think the trustee can make those judgements. If that is what the payment is that is what it is. I had my attorney tell me that he had a guy the week before with an income over 100,000 (family of 4 and the median income is a little over 60,000 here ) pass the means test because of sky high expenses that sound similar. My attorney is a trustee so I assume he knows how things work.

Of course this is just conjecture.

[Jenny]

Under the current bankruptcy law, there are set amounts for expenses. My guess is that $4,420 for a mortgage is probably above the allowable housing expense for every state. The trustee doesn't make these judgments. They just follow IRS guidelines.

[time4cake]

Under the current bankruptcy law, there are set amounts for expenses. My guess is that $4,420 for a mortgage is probably above the allowable housing expense for every state. The trustee doesn't make these judgments. They just follow IRS guidelines.

Mortgage payments are secured debt debt deductions. These appear separate from the IRS allowable housing expense on the means test. The allowable housing expense is reduced by the mortgage payment, and in my case it is reduced to zero. There would be no reason for this calculation if what you are suggesting is true. If what you suggest is true than the allowance would be placed into the means test and that would be it.

It is my understanding that the Bankruptcy code considers secured debt to be more important than unsecured debt, and as such has made special allowances to try to get them paid first and in full.

Please feel free to comment

[SinkingFast]

There are schedules for average allowable expenses set by the IRS.

Some Courts and/or Trustees/Judges are sticklers while others allow you what you actually spend. It kinda varies from Court to Court, District to District, and State to State what is and is not allowed.

Evidently, from chatting with attnys here, the Court here will allow what you actually spend for rent or mortgage payments on Schedule J. The Means Test is still the IRS allowable.

But in our case,............ We have rent AND a house payment. Our attny is going to enter the IRS allowable for rent on the Means Test and then enter a 60 month annualized mortgage payment amount under the "Other Secured Priority Debt" portion of the Means Test. It's debt we are responsible for until we sell the house and has been a factor contributing to our filing BK.

If the Trustee wasn't going to allow you your actual mortgage payment, you should have at least gotten the IRS Schedule allowable for "rent and utilities" payments. At least that's my opinion.

Everybody's gotta have some place to live, and it's gonna cost something. To not put anything in the Means Test seems a bit Questionable to say the very least. Not having a rent or mortgage payment basically says you're living on the streets. That your homeless.

You are right about the order of succession. Priority payments such as child support, alimony, etc. come first. Secured Debt is second. Unsecured Debt is dead last on the ladder of importance to receive payments when a debtor files BK.

Sounds like the Trustee is trying to boot your Ch 7 and get it dismissed because they think your mortgage payments are too lavish.

Just a side comment. And I do not mean to sound rude at all, but,............. Your one month of mortgage payments equals 3 months of ours. I don't personally know anyone with a mortgage payment that high.

[time4cake]

I haven't yet had my 341 meeting. The reason my mortgage payment is so high is because I thought it was an investment. I built the home myself. When I started construction in 2001 it appraised for $685,000. Shortly after that a neighbor with a similar house sold his for $750,000. Starting December 2003 I listed the property and have been trying to sell the house since. After GM laid off half the state of Michigan I watched my property drop at least $185,000 in value. The only offer I received in the last 27 months was for $500,000. This offer minus commission of $30,000 and local transfer tax of another $4,000 would net me $466,000, too bad I owe $550,000. If I walked away at that point I would likely be facing a deficiency judgement of $84,000. Then my interest only ARM expired, and my mortgage payment went from $2400 to the obscene $4,400. I kept thinking that someone would buy it for a reasonable price and continued to live on credit cards. I owe $550,000 and just can't get out from under it.

Looking back I still can't think of a point where I could have jumped off the runaway train of debt and not ended up in the same place. Can you suggest a place where you would have jumped off in my shoes?

I guess I wish I would have never gotten on the train, and never will again.

[djk]

My income is $104,000, but the question is on what grounds can the Trustee make judgements? Does anyone have a similar example happening to them?

most likely on the grounds of abuse which is open to interpretation by
him/her & you and/or your attorney. may try to move to convert to a 13.
it seems like you are asking a hypothetical question anyway and have
yet to be challenged on it. the house would be considered a huge asset
by the trustee, i would imagine and even though you mention it is
exempt a lot of trustees look at the overall "balance" of a petition. like
if you have a half million dollar property yet can not afford to pay
a credit card bill cause you are "broke", so to speak.

[Pinktiger]

Your situation is just as serious as any of ours, Time4Cake. I think under the circumstances you could easily go Chapter 7, surrender the house and get out from under the deficiency. That would be a viable option, if it would work for you under the means test. Have you thought about that option?
Just an idea.

[time4cake]

Your situation is just as serious as any of ours, Time4Cake. I think under the circumstances you could easily go Chapter 7, surrender the house and get out from under the deficiency. That would be a viable option, if it would work for you under the means test. Have you thought about that option?
Just an idea.

That is exactly what I would like to do. However, I can not get a straight answer on the secured debt deduction portion of the means test. If I intend to walk away from the house do I still get to use the secured debt deduction on the means test, or do I need to reaffirm the debt? If I can't use the secured debt deduction on the means test I will not qualify for Chapter 7. At that point I would most likely face a Chapter 13, with an approximate $2,500 a month payment to the trustee for 60 months.

I understand I got myself into this, but paying $150,000 over the next five years sort of takes the incentive out of working at all. A better strategy would be go live on a beach for 6 months to a year, and come back with zero income an easily qualify for Chapter 7.

[keepmine]

For sure, do not reaffirm something with $100K negative equity. Surrender the house.
Have you actually filed? How is your income in relation to the median for your state?

[SinkingFast]

I haven't yet had my 341 meeting. The reason my mortgage payment is so high is because I thought it was an investment. I built the home myself. When I started construction in 2001 it appraised for $685,000. Shortly after that a neighbor with a similar house sold his for $750,000. Starting December 2003 I listed the property and have been trying to sell the house since. After GM laid off half the state of Michigan I watched my property drop at least $185,000 in value. The only offer I received in the last 27 months was for $500,000. This offer minus commission of $30,000 and local transfer tax of another $4,000 would net me $466,000, too bad I owe $550,000. If I walked away at that point I would likely be facing a deficiency judgement of $84,000. Then my interest only ARM expired, and my mortgage payment went from $2400 to the obscene $4,400. I kept thinking that someone would buy it for a reasonable price and continued to live on credit cards. I owe $550,000 and just can't get out from under it.

Looking back I still can't think of a point where I could have jumped off the runaway train of debt and not ended up in the same place. Can you suggest a place where you would have jumped off in my shoes?

I guess I wish I would have never gotten on the train, and never will again.

Gee,................ Your story sounds sooooooooo familiar!! And I am not kidding.

Our house isn't worth as much, but it was the driving force behind our debt. Even tho we were well within the bounds that mortgage lenders say you can go for a house, the house drove us into debt.

Immediately, we needed to buy a mower. Only it's not just a piddly little riding mower when you're talking 5 acres to mow. And utilities were higher. And we had a water bill we hadn't had before. And the phone bills were more expensive. And we lived 20 miles from anywhere so gasoline cost more. And, And, And,

In 5 years, we took on a $65,000 2nd mortgage to consolidate the debt. And the debt kept building. And in 5 more years, we did an outrageously inflated appraisal 100% refi. 80% 1st with a 20% HELOC. We borrowed more against the house 4.5 years ago than we can sell it for today.

Summer of 2004, Hubby lost his job. February 2005 Hubby finds another job in a different State and moved immediately. Poof! We are supporting 2 households. Have been ever since. Late summer the rest of the family comes and now we're making 2 mortgage payments a month between the mortgage and the rent. And the utilities were still turned on in the house for sale outa state.

We've used up every cent of personal savings. Sold every asset we had but the cars. Cashed out Hubby's retirement IRA to pay off the HELOC on the house so we could sell it.

Like you, we have nothing left.

I know where we shoulda jumped off the train years ago and landed where we are today. We woulda been sooo much farther into the BK process. We'd be a good ways along in reestablishing our credit, and still had our retirement savings.

But, you know hindsight. It's always 20/20!!

We have a contingent offer on our house. But we're in Breach. We've found an attny who will take us into BK as a Ch 7. If the buyer buys the house, at least the Realtors who've worked so hard will get some money. If the house doesn't sell, it's going in the BK. No deficiency balance that way. The debt will be discharged in the BK.

[time4cake]

Yep! Sounds all too familar -- our business was failing and we kept borrowing against the equity in our house. We basically refinanced ourselves out of our house......150k in unsecured debt and a $4,000 per month mortgage payment (includes PITI).....we're not losing our house thanks to the NY Exemption which is 50k for each owner, but we can't afford the payment anymore, we've got to get sell. We can't rent till we get our discharge, and can't afford to make the mortgage payment. It's a race now between foreclosure, discharge, sale of house. (we're current on the mortgage, but I don't have the money to make this months payment). Hopefully, we'll have our discharge in about 4 weeks. As soon as I get those papers, I rent an apartment, move and get the house on the market.

Oops, I just go on and on and this doesn't have anything to do with the original thread...............

Hindsight -- I would have jumped off BEFORE we re-fi'ed ourselves out of our home and let the business go.............

I think it relates. I asked the original question because I am afraid the Trustee will attempt to force me into a Chapter 13. But, your mortgage payment, I assume, was used as a secured debt deduction, and that is relevant. You have been through your 341 meeting and I am assuming your mortgage deduction wasn't questioned. Hey, by the way could you comment on what your income is?

[Jenny]

Mortgage lenders are in the business to make money. They aren't out to make sure you don't get into trouble. They'll lend you the most they possibly can and not break the law. Never trust a bank when it comes to how much you can afford. You have to look at your own finances. When I was looking at buying a house, the bank told me I could afford a mortgage payment that was almost four times my rent. No way! I wouldn't have had any money left for fun or savings or anything.

time4cake, I'm only writing this because you asked when would have been a good time to jump off the train. A good time would have been before you took out the loan. It's not really an investment if all the money you're sticking into it is borrowed and you can only afford to pay interest on the loan and the rate is adjustable at that. Really really bad move. Mortgage rates were at an all-time low a few years ago. People who took out ARMs usually borrowed way more than they could really afford. I've read a few threads here by people who had ARMs, and when the rate jumped, they couldn't afford the payment anymore. It's totally irresponsible for a mortgage lender to do that to someone, but it's our fault too as a consumer for being greedy. People are greedy by nature. Banks, consumers, everyone.