Means test vs, schedule J - what is the point?

[StrawberrySu]

I guess I am just too thick to get it... on the means test, you would list all your secured creditors, I have been told.
means test numbers:
2000 gross income
1600 gross retirement
3200 total mortgages (home + 2 rentals)
final means tests is -2965 DMI

but when i fill out schedule J, there is no place for the mortgages other than home mortgage, and I actually will be paying rent, not that mortgage
average monthly income of $3200
expenses on J $3095
so I came out with a DMI of $105

my question is, what is the point of the means test if on schedules I & J it is a totally different scenario?

[justbroke]

Technically speaking, the Means Test is just an arbitrary set of numbers, based on your income in the past, which uses fixed amounts (IRS Expenses) when you are over the median. Schedule I&J are "actual" with a slant towards the future. Mortgages go on Line 1 of the Means Test. You will also need to properly show the rental income as well. It cannot be negative (just like on the Means Test).

If you are surrendering that property, some Districts won't allow you to include the payment anyhow, on Schedule J.

Also note that the numbers between Form B22A/C and Schedule I&J are usually different due to the nature of the forms in and of themselves.

[StrawberrySu]

Technically speaking, the Means Test is just an arbitrary set of numbers, based on your income in the past, which uses fixed amounts (IRS Expenses) when you are over the median. Schedule I&J are "actual" with a slant towards the future. Mortgages go on Line 1 of the Means Test. You will also need to properly show the rental income as well. It cannot be negative (just like on the Means Test).
Did you mean Line 1 of schedule J? Otherwise I am confused as I don't see a line 1 on the means test. The mortgages on rental properties total $2200, the rent I can collect is $1500. So..that's negative. Now what?
If you are surrendering that property, some Districts won't allow you to include the payment anyhow, on Schedule J.
Am surrendering all property.

Also note that the numbers between Form B22A/C and Schedule I&J are usually different due to the nature of the forms in and of themselves.

Lastly, I don't know what to do about seeking legal advice. I currently live in Ohio, but will be moving to North Carolina in a few months. Filing there after 91 days have past, using fed exemptions. Talked to two OH attys, both say file in NC, and are not helpful once they realize I am leaving. NC attys won't talk to me till I move there. I would like to have advice to properly and safely plan, but can't get anyone to talk to me. Any advice?

[StrawberrySu]

Sorry, I asked questions within the quote, didn't know what I was doing!

[tcreegan]

Hi StrawberrySu,

I was kinda drifting there and wrote a very long winded answer. I won't delete it, just move it to the bottom of the post in case someone is bored enough to read it.....

Simple answer:

Means-test is supposed to divert high income filers to Ch 13. Think of it as a college "entrance exam"
Sched I minus Sched J determines if you have enough DMI to fund a Ch 13 plan or not. Think of it as "passing the class"

The means-test has a strict 6 month lookback. It is your condition coming into the BK

Sched I minus Sched J is DMI after the BK, going forward. Specifically, going forward to the next 3 or 5 years. That is the "lookforward" to see if you can fund a Ch 13 plan or not.

The mortgage payment on the house you are surrendering goes on the means-test
The rental payment for the house you will be renting after the BK goes on Sched J

If you are keeping, say, a car. The payment going into Bk is the same as you exit BK.
Goes on the means-test and on Sched J

Here is a major grey area: On the Statement of Intentions you mark reaffirm for the mortgage and cars. Since you "intend" to keep everything, those payments go on Sched J. Later the reaffirmation doesn't get done or doesn't get approved or gets rescinded, ...in the meantime discharge gets ordered, the trustee files the final report, and no one bothers to check on the reaffirmation status and demand Sched J gets amended.

And before anyone blasts me, I AM NOT RECOMMENDING YOU DO THIS Just want people to know the score if their attorney does this and they wonder why.

Tom in Colo

The means-test is a new animal born in the 2005 BK reform laws (BACPCA). Its was intended to divert high income filers into a Ch 13 instead of a Ch 7. It does work, a couple ways...

a) It autmatically flags high-income filers for UST review at the beginning of the case instead of waiting midway through a case to get a referral from the panel trustee. Along w/ the huge increase in UST review came rules making it easier for the UST to dimiss cases which are expected to be converted to Ch 13

b) The rules are standardized, mechanical, they tried to get all the grey out. This makes it much easier for BK attorneys to screen their clients into the right chapter in the first place.

And it works, DoJ #s for consumer BKs filed:
2004 Ch 7 = 72% Ch 13 = 28%
2006 Ch 7 = 58% Ch 13 = 42%

BUT, this is just the "entrance exam" ...once you get admitted to University of Ch 7, you still have to pass your classes or get kicked out.

Ch 7 classes include "How to write a creditors matrix" "Whats fraudulent, whats not" "Its 10 o'clock, do you know what your exemptions are?" But the final exam is "Is Schedule I minus Schedule J less than ~$150?"

Dang, I am getting long-winded these days!!

[StrawberrySu]

Thanks Tom, I can always count on you to clear things up for me. The means test just doesn't seem to jive with reality, so I couldn't see the point of it. You have explained it in a way that makes sense to me!

[daylate]

StrawberrySu- As you know I'm in a similar situation- I'm definitely happy to use Fed over Ohio because of the bigger wildcard for unused household exemption-although if I recall correctly you are planning on using the hh xemption for a small house in NC. Bottom line is if you move then I don't think you have a choice-you have to use Fed or postpone for 2 years which is probably not feasible(?). I still say drive to NC when spring hits and talk to a couple of attorneys in person.

[StrawberrySu]

StrawberrySu- As you know I'm in a similar situation- I'm definitely happy to use Fed over Ohio because of the bigger wildcard for unused household exemption-although if I recall correctly you are planning on using the hh xemption for a small house in NC. Bottom line is if you move then I don't think you have a choice-you have to use Fed or postpone for 2 years which is probably not feasible(?). I still say drive to NC when spring hits and talk to a couple of attorneys in person.

Hi daylate! I am happy to use the fed exemptions too, planning on moving this summer, and filing in the fall. My problems with driving down in the spring is I want to know NOW, IMMEDIATELY, TONIGHT, THIS WEEKEND!!! I can't wait till spring! I am an obsessive planner and I am not going to be able to sleep thru the night unless I get all my questions answered! But other than that, a spring trip down south sounds lovely. My SIL's parents live there and would prolly let us use their address to have a base we can give to the BK attys. So I guess until then I will haunt the BK forum and try to piece together a strategy, lol