Chapter 7 With Income Higher Than Means Test. Is it Possible?

[mjengineer]

It took me a long time to come to the realization that filing for bankruptcy was something I should have done a long time ago. Now I have talked to a few lawyers and some think I can get chapter 7, but others think it's slim to none chance.

I make almost double what the value of the means test for my state (FL) is, but I don't understand why that makes me "too rich" for Chapter 7. I work three jobs to make that much so I can pay my debts, and I just don't want to do Chapter 13 if I don't have to.

Most of my debt is from failed businesses (sole prop), and like everyone else there are some credit cards in there. But the business debt is more than the personal debt, so I thought from what I read that made Chapter 7 an option for me. I talked to an attorney and he said it's not close and because I was no longer paying some of the debt because of lack of funds I can't count it as an expense? But, another lawyer I talked to said if the business debt is more than the personal debt income is not even considered and I could do chapter 7.

I am interviewing several lawyers to get a definitive answer, but I am annoyed by this. Does anyone here have any insight? I read the Chapter 7 wiki pages and I could not find specific verbiage on it. Help!

[Jacey]

You may have to decrease your income and wait a while to file? It's true that if your unsecured debt is your big expense it won't count on the means test.

[daytona]

Over median people file CH7's all the time...it depends on what your "expenses" are going towards. High secured debt payments (like mortgages) really help. If your debts are over 50% business, then I don't believe the means test applies and you can automatically do a CH7. Some things in BK law a "quirky" and these are a few of them...

[mjengineer]

Over median people file CH7's all the time...it depends on what your "expenses" are going towards. High secured debt payments (like mortgages) really help. If your debts are over 50% business, then I don't believe the means test applies and you can automatically do a CH7. Some things in BK law a "quirky" and these are a few of them...

That's what my lawyer friend told me, but this stiff with a wrinkled shirt acted like it's not really possible because you make too much. Here are the numbers I compiled for him:

Mortgage Debt: $208442.33 (Business)
Primary Mortgage (I live in): $184000

Credit Card Debt: $41311.00

Here is the issue I used about half of that credit card debt to buy stuff for the rental properties, and for business purposes. The other half was personal expenses, and my lawyer friend told me I would just have to testify to that at my 341 hearing and I should qualify.

They don't count the primary mortgage as business debt, so it counts against me as a personal debt. I was wondering if I should payoff one of the personal credit cards to make sure I won't have an issue qualifying because the mortgage amounts would definitely be higher.

[Dee]

We are also in Florida. Our attorney originally tried to tell us we could not do a 7 because we were about $20k over median, but I had done my homework and knew that wasn't true. Our $70k debt was almost all unsecured, with the exception of our car loan of $9k. Not only did we qualify for a 7, but we are set to be discharged next week. Do not take the attorney's word for it - work the numbers yourself don't let them try to push you into a 13 if you don't have to go there.

[olivies]

I swear, if I hear of one more Floridian who is well over the median income but manages to get a 7 thru with nary a problem, I'm going to cry.

[Dee]

I swear, if I hear of one more Floridian who is well over the median income but manages to get a 7 thru with nary a problem, I'm going to cry.

Oh, Olivies - I'm so sorry! I know you have been having a terrible time with your trustee. Have you had any new developments? I sure hope this works out for you. It sounds like you have been put through the ringer - completely unwarranted, IMO.

[tcreegan]

Hi mjengineer,

During your attorney consults, ask about a business (non-consumer) vs personal (consumer) BK. If your debt is over 50% business, you can file a business Ch 7 BK where the means test doesn't apply. Given your income, a personal Ch 7 might not fly, but a personal Ch 13 might be possible.

Ask the attorney about a "Chapter 20" and if you get the deer-in-the-headlights look, try someone else.

Good luck w. this,

Tom in Colo

[SunshineGal]

Hi mjengineer,

I was just reading a blog and came across this entry, thought it might help you.

http://www.bankruptcyorlando.com/2011/01/misunderstanding-the-business-debt-exemption-from-the-chapter-7-means-test.html

Be sure to interview several attorneys. We had an attorney tell us that you can't get a 7 if you're over the median (not true) and that there was no such thing as Tenancy by the Entirety for personal property, also not true. Do your own research and then chose an attorney who knows what they are doing, lol.

SG