Please answer! qualification question

[catpatch515]

My husband and I will be filing for Chapter 7 in 4 months once our income falls below the median. He just lost his job (self employed) due to a bad back injury. We were already behind on debt before and this was the icing on the cake. Since when we file, we will be under the median income, do we still have to qualify as far as expenses, etc? For example, we are letting our home go and are no longer paying the mortage. I have read here that I can not use the housing exemption since we are not current on the loan, but does this even apply to us since we are under the median? I mean once our house is foreclosed we will have housing expenses again.

Frustrated and confused.

Sara

[AngelinaCatHub]

Sarah, you are prime meat for bk. I don't think you have to worry about means test at all. Your exemption is not due to the state, but the fact that you are behind in mortgage. Even here in FL a very strong homestead law, the right to repo for default is still in the plan. I wish you well and stick with us. We will help as we can. 'Hub

[free2breathe]

When you fall under the median income, the presumption of abuse does not exist, and you don't have to complete the means test. However, you still have to list your income on Schedule I and your expenses on Schedule J. If, for some reason, when you list your expenses and subtract them from your income, your DMI (disposable monthly income) x 60 = 25% of your unsecured debt, you could end up in a chapter 13. Most likely, with the little bit of info you've given, you'll be good to go on a chapter 7 though.

Go to this site, follow the links and you will find the national and local standards for housing, food, utilities, etc. If your actual expenses exceed these amounts, you just have to have proof to justify higher expenses. As far as housing, you have to have it whether you pay rent or a mortgage, so you are definitely allowed to use the expense on schedule J. Hope this helps

http://www.justice.gov/ust/eo/bapcpa/20101101/meanstesting.htm

[tcreegan]

Hi Sara,

Under median makes the means test a piece of cake....fill in parts II and III then skip all the expense stuff and sign at the end.

You will still list expenses, but it will be on schedule J Think of schedule J as your new, post-BK budget.

If you don't keep your house, you are still going to need $$ to live somewhere, that goes into the budget, if you lose your car in the BK, you are still going to need a way to get around, so $$ to get a replacement car goes into the budget, plus food, utilities, medical, and all the other assorted necessities of life. This is a "projected" or "forward" budget, so if you are going to stay in the house and bank the payments until you get evicted, you would still put down what would be reasonable rent for your area.

You post-BK income will go on schedule I Then you subtract schedule I from schedule J and the predicted number should be less than $150 I & J are "projected" so you use a reasonable estimate where necessary.

Hope this helps a little,

Tom in Colo

[catpatch515]

Thanks for the replies! I went to the website listed and read this:

"Maximum allowances for housing and utilities and transportation, known as the Local Standards, vary by location. In most cases, the taxpayer is allowed the amount actually spent, or the local standard, whichever is less."

So are you saying that even though at the time of filing, we are paying no money for housing, we can still use it for expenses? (after we lose the house, we will of course incur rent expenses.) I just want to be sure I am doing things right and fraud doesn't become an issue if I write "$800 for housing.

[BKIN2010]

My attorney used my mortgage expenses for schedule J even though I am not paying the mortgage. i am trying to get a modification. Is this not okay?

[catpatch515]

Also, on schedule I it says to list any increase or decrease for income in the next year. My husband will get a job after the bankruptcy. No idea what he will make. What do I need to put here?

[daylate]

If your husband does not have a job you can't be sure he will get one. Therefore I don't think you put anything down. If on the other hand he has a deal in place before you file (or before the 341) then you need to either include it or mention it at the 341 if asked if anything has changed. Not exactly sure what happens if he has a job post filing and pre 341 if you are not asked about it.

[tcreegan]

Hi all,

What I have seen, BKIN2010s experience shows up time after time. I think the idea is that the means test accounts for where you would be if you had to be making those payment.

Often people report being asked about employment by the trustee at the 341. But I haven't heard of anyone making a big deal about it. Use the "if they don't ask, don't tell" policy. If they do ask, keep the answer short and sweet, no long tales..

Tom in Colo

[debee]

If I was using the mortgage expense (on a house that I was surrendering), and if that expense was higher than the local standard, I would make sure that my DMI was not at the danger level even if the mortgage payment was backed out of my budget and replaced by the local standard. That would be the safeguard against any trustee objection.

The danger number for DMI is $117. If you have $117 in DMI there is a presumption of abuse. The only way to rebut the presumption is if $117x60 is less than 25% of your nonpriority unsecured debt. If your DMI is between $117 and $195, same thing. Once you get to DMI of $195.42, there is no such rebuttal.