Means Test Questions Yet Again

[DirkDiggler]

Ok, I'm wanting to make sure I have everything understood.....

Vehicle Operating Expense and Vehicle Ownership Expense. We have two vehicles, currently financed with payments of $373 and $372. The Nolo Means Test is showing that we get $123 and $124 for ownership expense ($496-payment amount) Is this correct? Also we get the figure ($472) for operating expense for 2 vehicles, correct?

For the taxes, what I did is take our tax liability for last years tax return and divided by 12. We are on track to make a tad more this year (about $2,500 more than last year even with me quitting my job recently) but I'll go with the smaller amount. Is this advisable? Also this is not the amount that has been taken from our checks. That is a much larger amount, but we recieved a refund. Should we change withholding on my wife's check or just report the smaller amount on the means test, or will a look at the paystubs raise red flags?

Basically if the means test is filled out without trying to use amounts larger than the IRS standards, does that make it "iron-proof"? Is putting short term and long term disability insurance payments on line 34 going to raise flags? Or do those go on Schedule J? What I want to do is only enter income, taxes, life insurance, and health insurance premiums as well as our secured debt on the means test form to try and avoid attention from the UST. Will that work?

Thanks, and I apologize for asking so many darn questions about this!

[DirkDiggler]

Well I did some searching around the forum and I found my answer to the Vehicle question HERE That is a great link that explains line by line the means test.

I still am confused about the tax issue....could I just put the smaller amount on the means test?? Or do I have to have my wife actually change the withholding? Its not that big of a deal I guess to have her change it, just wanted to make sure before I have her do it.

Thanks!

[ValleYum]

Ok, I'm wanting to make sure I have everything understood.....

Vehicle Operating Expense and Vehicle Ownership Expense. We have two vehicles, currently financed with payments of $373 and $372. The Nolo Means Test is showing that we get $123 and $124 for ownership expense ($496-payment amount) Is this correct?

This is where it gets confusing (as if it isn't already!).

You won't list your actual monthly payment amount on Line 42 of the Means Test (B22A) - unless you have a car that you owe more than 60 payments on.

You list the average monthly payment which you would calculate by totaling all the payments coming due in the 60 months following filing (typically your loan balance) and dividing that amount by 60.

Why? This is because the purpose of the Means Test is to calculate what you would have left over to pay into a Chapter 13 (hypothetically speaking) over the next 5 years (60 months).

Therefore, to obtain the amounts that you can list on Lines 23 and 24, you will take the IRS standard of $496 per vehicle for ownership cost and subtract your Line 42 average monthly payment amounts to obtain these figures.

EXAMPLE: You will owe lenders a total of $15,000 on car 1 and $16,500 on car 2 during the next 5 years.

The calculations to get the average monthly payment amounts to list on Line 42 are:
Car 1: $15,000 ÷ 60 = $250
Car 2: $16,500 ÷ 60 = $275

Therefore, on Line 23 you should see $246 and on Line 24 you should see $221 - (which is the $496 allowed less your averaged payment amounts).


Also we get the figure ($472) for operating expense for 2 vehicles, correct?

Yes. (Finally, a simple answer - yay!!)

For the taxes, what I did is take our tax liability for last years tax return and divided by 12. We are on track to make a tad more this year (about $2,500 more than last year even with me quitting my job recently) but I'll go with the smaller amount. Is this advisable? Also this is not the amount that has been taken from our checks. That is a much larger amount, but we recieved a refund. Should we change withholding on my wife's check or just report the smaller amount on the means test, or will a look at the paystubs raise red flags?

For Line 25 on B22A, my attorney had us take the 6 months of paystubs that we used to state our income for the Means Test and had us use the averaged tax amounts (FITW, FICA, Medicare) from those.

CAVEAT: You must then make sure to cover any amount that you may have overpaid and would typically receive as an income tax refund with an available exemption. So, if you file in October you would need to cover 10/12s of your anticipated refund amount with an exemption or you will likely owe this money to the Trustee. There are many income tax calculators out there where you can plug your projected earnings and tax amounts in to get an anticipated refund or payment amount due. When you use a calculator, make sure to print out the results for your documentation file.

IMHO, you don't need to change anything regarding withholding - you simply need to have an exemption available to cover an anticipated refund or be prepared to be an asset case and pay the Trustee the portion of the refund he would be due based on your filing date.

Same goes for Line 26 on B22A - use your actual paystubs and get a 6 month average for any of these expenses you may have incurred.

Basically if the means test is filled out without trying to use amounts larger than the IRS standards, does that make it "iron-proof"?

I don't think anything in bankruptcy is "bullet-proof"; but I imagine this would make it harder to make a case for dismissal based on 707(b)(3)B - totality of the debtor's financial circumstances -or- 707(b)(3)A - a petition filed in bad faith warranting a dismissal. Oh, and can I say documentation is your friend?

Is putting short term and long term disability insurance payments on line 34 going to raise flags?

No. Why would it? The expense is available for use on the Means Test on Line 34b - why would it raise a flag if you have the policy/receipts to back the expense? We live on the West Coast and had earthquake insurance listed on our Means Test too. The Trustee never blinked.

Or do those go on Schedule J?

Short term and long term disability insurance would go on Schedule J (on Line 11e with an explanation) as well as the Means Test - Line 34b.

What I want to do is only enter income, taxes, life insurance, and health insurance premiums as well as our secured debt on the means test form to try and avoid attention from the UST. Will that work?

Why not use the line items that are available to you? We were "over the median" but used the expenses we could in the Means Test and never had a blink from the UST.
Thanks, and I apologize for asking so many darn questions about this!

There is no such thing as too many questions in bankruptcy! LOLOLOL

Well I did some searching around the forum and I found my answer to the Vehicle question HERE That is a great link that explains line by line the means test.

^^ I agree, that line-by-line position paper from the UST office is a miracle!! It became my reference of choice while fine-tuning my paperwork.



Thanks!

Sorry if I am too wordy - I was just trying to explain it like I needed it explained to me (which I grasped by much research, trial & error and an amused attorney who shared lots of info to me since he knew I was interested).

I am sure others will chime in here, too, with their valuable knowledge. So, as usual, your mileage may vary - make sure you check with your attorney!!

Hope this was helpful for you!!

[daylate]

I would change your with holdings to not get a refund. Why take the chance a trustee would take it if it were large enough? As to the taxes, I would base it on a projected this years taxes, especially if it is going to be more. As long as you have support for it I don't see a trustee objecting to it.

[ValleYum]

I would change your with holdings to not get a refund. Why take the chance a trustee would take it if it were large enough? As to the taxes, I would base it on a projected this years taxes, especially if it is going to be more. As long as you have support for it I don't see a trustee objecting to it.

NOT being argumentative, but wouldn't/couldn't that raise an issue with the Trustee when he compares your Means Test to your paystubs and finds you made withholding changes in order to avoid having the Trustee take a potential tax refund to pay creditors? Or am I putting too much of a 'Chapter 13' spin on it?

Thanks!

[daylate]

I'd make the changes immediately-the earlier in the year the better. In either case your tax expense should be the same. The only difference is your cash flow which shouldn't affect a 13 either. All you are doing is eliminating a refund, which you are entitled to do.

[DirkDiggler]

Sorry if I am too wordy - I was just trying to explain it like I needed it explained to me (which I grasped by much research, trial & error and an amused attorney who shared lots of info to me since he knew I was interested).

Not too wordy at all, I've been like a sponge soaking up all the info I can from this site, trying to learn all I can to hopefully help my case go smoothly and as well as I can plan it

This is where it gets confusing (as if it isn't already!).

You won't list your actual monthly payment amount on Line 42 of the Means Test (B22A) - unless you have a car that you owe more than 60 payments on.

You list the average monthly payment which you would calculate by totaling all the payments coming due in the 60 months following filing (typically your loan balance) and dividing that amount by 60.

Why? This is because the purpose of the Means Test is to calculate what you would have left over to pay into a Chapter 13 (hypothetically speaking) over the next 5 years (60 months).

Therefore, to obtain the amounts that you can list on Lines 23 and 24, you will take the IRS standard of $496 per vehicle for ownership cost and subtract your Line 42 average monthly payment amounts to obtain these figures.

EXAMPLE: You will owe lenders a total of $15,000 on car 1 and $16,500 on car 2 during the next 5 years.

The calculations to get the average monthly payment amounts to list on Line 42 are:
Car 1: $15,000 ÷ 60 = $250
Car 2: $16,500 ÷ 60 = $275

Therefore, on Line 23 you should see $246 and on Line 24 you should see $221 - (which is the $496 allowed less your averaged payment amounts).

Ok, when plugging in the numbers our DMI went up $10 using the average compared to the actual payment amount. I'm guessing its due to there being 57 or 58 months left on each vehicle loan....

For Line 25 on B22A, my attorney had us take the 6 months of paystubs that we used to state our income for the Means Test and had us use the averaged tax amounts (FITW, FICA, Medicare) from those.

CAVEAT: You must then make sure to cover any amount that you may have overpaid and would typically receive as an income tax refund with an available exemption. So, if you file in October you would need to cover 10/12s of your anticipated refund amount with an exemption or you will likely owe this money to the Trustee. There are many income tax calculators out there where you can plug your projected earnings and tax amounts in to get an anticipated refund or payment amount due. When you use a calculator, make sure to print out the results for your documentation file.

IMHO, you don't need to change anything regarding withholding - you simply need to have an exemption available to cover an anticipated refund or be prepared to be an asset case and pay the Trustee the portion of the refund he would be due based on your filing date.

Same goes for Line 26 on B22A - use your actual paystubs and get a 6 month average for any of these expenses you may have incurred.

So if we have enough exemptions to cover an expected tax refund, we can use the actual amount withheld for the means test even if our actual tax liability is less? Or would it be wise to figure out our tax liability and use that figure? Would that get less scrutiny from a trustee?

No. Why would it? The expense is available for use on the Means Test on Line 34b - why would it raise a flag if you have the policy/receipts to back the expense? We live on the West Coast and had earthquake insurance listed on our Means Test too. The Trustee never blinked.


Short term and long term disability insurance would go on Schedule J (on Line 11e with an explanation) as well as the Means Test - Line 34b.

The reason I ask, if we currently don't have any short term or long term disability insurance, but would be getting it prior to filing to help qualify for a Ch. 7, would that be ok? Or would that cause a closer look from a trustee?

Why not use the line items that are available to you? We were "over the median" but used the expenses we could in the Means Test and never had a blink from the UST.

Yes I know, its just our attorney made a comment about how if we tried to claim an additional expense for our auto operating expense, we'd likely have the UST get involved and then our entire filing would be under scrutiny. We're allowed $472, but our gas bill prior to me quitting my job was $700+ and thats not counting insurance($140), registration(12 month average of $55) and maintenance(about $30/mo). Now that I have quit my job, the reduction by $400 in our gas bill, allows us to use the IRS standard figure and hopefully avoid the UST.

There is no such thing as too many questions in bankruptcy! LOLOLOL

Aint that the truth!

Hope this was helpful for you!!

Very much so, thank you so much!