Interesting Ch7/13 question.

[alh]

I thought of an interesting question earlier. Lets say someone is below the median income. They have disposable income so the trustee attempts to convert them to a Chapter 13 (whether the new law when challenged will allow that is another question) Will it be a 5 year or a 3 year Chapter 13. The new law states that if you are below median you can file a 3 year plan. Most of the posts I have seen mention a hypothical 5 year plan. But that would seem to only apply if you did not pass the means test.

I don't guess this is really a question but it might come into play in some situations.

[aa06a47]

I believe if you are below the means test, there is no presumption of abuse. You would only want to file a chapter 13 (and then only a 3 year plan) if you were behind on your mortgage or car payment or wanted to keep non-exempt assets. Your lawyer cannot push you into a chapter 13 if no presumption of abuse is there.

Only issue with that is, if your chapter 13 has to give them what they would have gotten in a chapter 7. If you have no assets, no problem. If you have $10,000 of non-exempt property, you would either have to pay a min of $10k or 100% of your balances (whichever is less).

If I were you, and had an opportunity to plan for the bankruptcy, I would make sure I had no disposable income, at least as long as possible before filing...how do you do that you might ask......buy life insurance policy, upgrade your internet service to DLS (if you do that, you will never go back to the slow modem though), get cable tv, get a cell phone if you don't have one, buy renters insurance or lower your deductibles on your insurance to get a higher premium (then after your case is dismissed, go back to your old lifestyle).

If your below the medium income, it wouldn't take many expenses like that to get you with zero disposible income. Trustee wouldn't even think about trying to convert you to a chapter 13.

[aa06a47]

Remember, my advice is free, you get what you pay for. I just know when it came to expenses, they used actuals in my case.

So, had I not had a cell phone, I would now be paying 40/month more into the plan. Cell phones are not a necessity, IMO. (of course teen age kids would disagree). Just get those expenses up to eliminate your disposable income...

If you go in with bag lady expenses, you going to have bag lady disposable income when you come out.

[SinkingFast]

I thought of an interesting question earlier. Lets say someone is below the median income. They have disposable income so the trustee attempts to convert them to a Chapter 13 (whether the new law when challenged will allow that is another question) Will it be a 5 year or a 3 year Chapter 13. The new law states that if you are below median you can file a 3 year plan. Most of the posts I have seen mention a hypothical 5 year plan. But that would seem to only apply if you did not pass the means test.

I don't guess this is really a question but it might come into play in some situations.

Our attny said the US Trustee is making a big push for Ch 13's. There's no figuring about the debt repayment between $100 and $166/month to pay back 25% of debt now. $10,000 repayment went out the window. Now it's, "Can the debtor repay $6000?" Flat out $6K. No if's, and's, or buts.

So it will be interesting as others relate thier experiences to see if this holds true or not.

[time4cake]

Means Test / Schedules I and J

I keep going down this same circular mental trap. The Means Test references the $6,000 amount, but the schedules I and J are more of a judgement call from my understanding. I sail through the Means Test, with negative disposable income at the end, but not so easy with schedules I and J. In schedules I and J it could be determined that I have marginally over $100 a month to pay creditors.

The circular part of the argument that is so frustrating is "What is the point of the Means Test, if the trustee can just disregard it entirely when looking at the schedules I and J?"

[alh]

I totally agree with the circular part. I have even posted on another thread several times regarding that.

I guess my thought here is that if you are below the median and they still try to convert you to a 13, can you force it to be over 3 years. New law say that if you are under the median you can choose a 3 year plan. Would seem that if you were shooting for a 7 in the first place you would have no reason to go longer.

I would really love to see how things play out in the courts in Sinking Fast's district. If they are doing what she describes, they are totally ignoring the new law. They are ignoring ALL aspects of the means test, not just part.

If they are doing that are they attempting to force those below the median into 5 year plans? I really think all that would be ripe for a big challenge.

[SinkingFast]

I keep going down this same circular mental trap. The Means Test references the $6,000 amount, but the schedules I and J are more of a judgement call from my understanding. I sail through the Means Test, with negative disposable income at the end, but not so easy with schedules I and J. In schedules I and J it could be determined that I have marginally over $100 a month to pay creditors.

The circular part of the argument that is so frustrating is "What is the point of the Means Test, if the trustee can just disregard it entirely when looking at the schedules I and J?"

That's it right there.

The New Law, with the Means Test, was only a free pass for the first round, so to speak. If you pass the Means Test, that gets you a free pass so Creditors cannot object to your filing a Ch 7.

But when I and J are compared, the Judge and/or Trustee can object and move the filer from a Ch 7 into a Ch 13. That's the way the law was written.

And evidently, according to our attny, the US Trustee's office is really cracking down. What I gathered is the US Trustee's office isn't considering the $100-$166 month range and if it will pay 25% of debt. The US Trustee is pushing for a Ch 13 if the debtor has sufficient disposable income to repay $6000. And that's $100/mo disposable income.

[djk]

I keep going down this same circular mental trap. The Means Test references the $6,000 amount, but the schedules I and J are more of a judgement call from my understanding. I sail through the Means Test, with negative disposable income at the end, but not so easy with schedules I and J. In schedules I and J it could be determined that I have marginally over $100 a month to pay creditors.

The circular part of the argument that is so frustrating is "What is the point of the Means Test, if the trustee can just disregard it entirely when looking at the schedules I and J?"

Both I & J have lines to explain future changes, use them. I think if you make the usage realistic then the trustee will accept it. Case in point, at the time I filled I was unemployed so I had a negative balance after the filed I & J, yet on both I & J I stated that within the next year both income & expense were expected to increase. I started work after filing and before the 341. I emailed my trustee the new income & expense numbers. I never filed a change with the court. My income increased to cover the filed expenses so I was now showing a positive balance. I covered the increase in income with an increase in expenses to balance to a positive $8 a month. My trustee had no problem with this. The point is to make the increase in expenses realistic. of course, trustees and courts are unfortunately very different, so your mileage may vary. good luck.

[aa06a47]

I am probably totally wrong here, but I don't see how the trustee can force someone into a chapter 13 when they pass the means test. If you just use what the IRS allows as expenses in I&J, (which I believe would be very possible and not be challanged), then you would have no money left over to get you that 100/month.

I don't see why the trustee would want to put someone in a chapter 13 unless they could gain alot of money from it. If you are below the means, his cost to administer the money coming in would be greater than he would get.

[time4cake]

I am probably totally wrong here, but I don't see how the trustee can force someone into a chapter 13 when they pass the means test. If you just use what the IRS allows as expenses in I&J, (which I believe would be very possible and not be challanged), then you would have no money left over to get you that 100/month.

I don't see why the trustee would want to put someone in a chapter 13 unless they could gain alot of money from it. If you are below the means, his cost to administer the money coming in would be greater than he would get.

Yes, that is the circular argument. As my attorney explained it to me the "Means Test" is additional law laid over the top of the old law. Just because you pass the means test does not mean the trustee can't make judgements about schedules I and J.

My problem comes in specifically because on the "Means Test" it states to use what you are contractually obligated to pay on you secured debt over the next 60 months, divided by sixty. Since I have an interest only ARM 3/27 that is due to be adjusted early in 2007 my payment is large on the means test. However, schedule "J" doesn't make the same distinction regarding the next 60 months. It really only cares about maybe the next year, and as such my mortgage payment on schedule "J" is significantly less than it is on the means test.

The ugly truth is that if the Trustee can not be made to understand this issue I will be right back filing chapter 7 next year at this time.

[LostOne0069]

Yes, that is the circular argument. As my attorney explained it to me the "Means Test" is additional law laid over the top of the old law. Just because you pass the means test does not mean the trustee can't make judgements about schedules I and J.

I'm hoping that your attorney is wrong here.

Here's a quote from the new code: 707(b)(7):

+++++
No judge, United States trustee, panel trustee, bankruptcy administrator or other party in interest may bring a motion under paragraph (2), if the current monthly income of the debtor and the debtor's spouse combined, as of the date of the order for relief when multiplied by 12, is equal to or less than-- {the median income level for your state/family status}
+++++

This states that if you're below the median income, NO ONE can bring a motion to dismiss or convert to a 13 using the 707(b)(2) section of the code as their reason. The 707(b)(2) section of the code is the one that talks about the income and expenses / disposable income.

Please note here that the 707(b)(2) section that they can't object under if you're below the median income is the one that includes the following:

++++++
In considering under paragraph (1) whether the granting of relief would be an abuse of the provisions of this chapter, the court shall presume abuse exists if the debtor's current monthly income reduced by the amounts determined under clauses (ii), (iii), and (iv), and multiplied by 60 is not less than the lesser of--

(I) 25 percent of the debtor's nonpriority unsecured claims in the case, or $6,000, whichever is greater; or

(II) $10,000.
++++++

So this says that the trustee can't say that you're abusing the chapter 7 rules just because you have more than $100/month in disposable income.

He HAS to come up with another reason why you are abusing the system.

At least I'm really HOPING that this is the case!

[SinkingFast]

I am probably totally wrong here, but I don't see how the trustee can force someone into a chapter 13 when they pass the means test. If you just use what the IRS allows as expenses in I&J, (which I believe would be very possible and not be challanged), then you would have no money left over to get you that 100/month.

I don't see why the trustee would want to put someone in a chapter 13 unless they could gain alot of money from it. If you are below the means, his cost to administer the money coming in would be greater than he would get.

I think there's some flexibility on I and J. The paralegal kept referring to the schedules about different expenses, but still wrote down what we said. Some areas she put + signs by the numbers. She said those were areas she knew we gave her a number below the schedules and the attny could "pad" our expenses in those areas based on what the schedules allow. But then there were other areas where we spent more than the schedules allowed, she asked why, jotted notes, and went on. So maybe if you can justify it it's allowed.

Like if you spend more for food than the schedules say. If you have special diets like we do in our family that might run the grocery costs up a bit over average.

Our heating bills were way over the schedules allowable. But we've got the bills to verify the payments. So she wrote it down.

So I think there is some flexibility when it comes to I and J. But you have to be able to back it up with acceptable reasons, receipts, and such.

[coma]

I don't know. We're below the HI median income by a lot and filed a 7 under the old law, but were forced to either dismiss or convert, so we converted, because it was the only way to get out of this mess. The UST didn't like out expenses, though none of the expenses were out of line with the IRS charts, so it think your mileage will vary.