Living Expenses concerning means test

[cjbaum]

Hey all,

Looking to file, hopefully chapter 7, although im afraid im dangerously close to failing the means test. I have a TON of questions about what qualifys on the means test and cant really find any good answers.

Question #1

I own a home that i now longer live in due to separation. The taxes and insurance are not included in the monthly payment, can these additional expenses be included on the means test ?

Questions #2

Being that i dont live in this home, i rent it, i have rental expenses elsewhere, can i include both my mortgage and my own rental costs ?

Thanks All,

This is all is so overwhelming, and there doesn't seem to be and cheap answers.

[mountanddo]

Wouldn't you have to list the rental fees as income?

[cjbaum]

Cost of Renting ??

This is somewhat related to my other post, but ill try to explain it more clearer.

Can i deduct my housing expenses under this circumstance...

Girlfriend and i own a house together that we rent out and neither one of us live in, as we have since split. We now rent the house at less than the mortgage.

If i have to claim the rental income for the house that i own, can i deduct the rental costs i incur as a result of living elsewhere ?

[LadyInTheRed]

The rental income is listed on line 4 of the means test. You list the rental receipts and subtract "ordinary and necessary operating expenses."

Your own housing expenses are separate and are listed on lines 25a and 25b, according to local standards.

[LadyInTheRed]

cjbaum,

I combined your two threads because they ask the same questions. Please do not post the same question in two threads. If you want to restate your question, either edit your original post or post a reply to it. Thank you.

[cjbaum]

The rental income is listed on line 4 of You list the rental receipts and subtract "ordinary and necessary operating expenses."

Your own housing expenses are separate and are listed on lines 25a and 25b, according to local standards.

So let me sure i understand this correctly

Deductions i can use ...

Mortgage Cost - $2K
Renting Cost - $600

Income i must state ...

Rental Income - $1250

[LadyInTheRed]

By the way, if you are using the Nolo Press means test calculator, your rental income and expenses are entered on line 5 and the calculator automatically inserts your housing allowance on lines 20A and 20B based on your household size and zip code.

[LadyInTheRed]

So let me sure i understand this correctly

Deductions i can use ...

Mortgage Cost - $2K
Renting Cost - $600

Income i must state ...

Rental Income - $1250

I should have said that your mortgage payment is listed under payments on secured claims (line 42). In the section for rental income, you should enter $1250 for the rent you receive and then subtract $600 in expenses, for total net rental income of $650. The mortgage payment will be subtracted later on.

[momofthree]

I should have said that your mortgage payment is listed under payments on secured claims (line 42). In the section for rental income, you should enter $1250 for the rent you receive and then subtract $600 in expenses, for total net rental income of $650. The mortgage payment will be subtracted later on.

I think you're confused on what he is asking.

The mortgage payment is on the rental property that he rents out at a $750 loss each month. ($1250 rental income - $2k mortgage)

He separately rents an apartment that he lives in for $600 a month.

He wants to know how that will work. Can he claim both expenses? Will he have to surrender the rental property since it is underwater and costing him close to $1000 a month to keep?

[cjbaum]

For the record I don't want to keep the rental property.

[LadyInTheRed]

I think you're confused on what he is asking.

The mortgage payment is on the rental property that he rents out at a $750 loss each month. ($1250 rental income - $2k mortgage)

He separately rents an apartment that he lives in for $600 a month.

He wants to know how that will work. Can he claim both expenses? Will he have to surrender the rental property since it is underwater and costing him close to $1000 a month to keep?

I did find the post confusing. I understand that he rents his property out and pays rent on his residence. But, thought that last post all had to do with the property he owns and is renting out.

cjbaum, you get the local housing standard regardless of any other property that you own and rent out. The actual rent you pay is irrelevant. So, lets simplify things by removing that from the conversation.

On the means test, you include the amount of income your tenant pays and subtract whatever expenses you pay for the property that are not included in your mortgage. Then, you list the mortgage payment under secured debt. (If you only get half of the income, you should only include half of the income and expenses)

Momofthree raises a good point when she asks whether you can keep the house that is running in the negative. I think you can keep the house as long as you keep up the mortgage payment and you can exempt any equity. But, if you state on your petition that you are surrendering the property (which is what you should do rather than continuing to throw money away), you won't be able to include the mortgage payment on the means test. Even if you could use the payment on the means test, the trustee would still likely object to a Chap 7 based on a totality of circumstances because that $1,000 you are losing every month on the house would go to the unsecured creditors in a Chap 13. When calculating your disposible income available for your plan payment in a Chap 13, you would not be allowed deduct the expenses related to the rental property unless the rental was at least breaking even.

[LadyInTheRed]

For the record I don't want to keep the rental property.

In that case, I think you would still include your avereage rental income over the last 6 months (less expenses other than mortgage) in the income section of the means test. You would not include the mortgage payment as a secured debt because that section is for future payments.

[LadyInTheRed]

I need to correct myself. According to this helpful document: http://www.baumerlaw.com/pdfs/B22A.pdf, The mortgage payment on the rental property should be included in the calculation of your 6 month income and not on line 42. So, your total net rental income will be zero because you cannot enter a negative number.

Sorry for the confusion.

[cjbaum]

You've completely lost me in all that.

So if the Property i own zeros out due to the rental income and the mortgage expense. Do i just take the allowed housing to cover my rental costs ? Seems like they cant hit me up for rental income if i cant claim that payment in the test ?

[LadyInTheRed]

You've completely lost me in all that.

Sorry about that.

So if the Property i own zeros out due to the rental income and the mortgage expense. Do i just take the allowed housing to cover my rental costs ?

Yes. (I assume that by "rental costs" you mean the rent and other expenses you pay for the place where you live). The fact that you own property that you do not live in has nothing to do with your allowed housing expenses. They are two completely separate items. The rent you pay is an expense. The rent you receive is income that gets offset by the related expenses.

Seems like they cant hit me up for rental income if i cant claim that payment in the test ?

I'm not sure what you mean by "hit me up for rental income." In the section about rental income, you should enter the amount of rent you receive on line a and the expenses you pay related to that property (property taxes, insurance, maintenance expenses, any utilities you pay for that property, the mortgage payment) on line b. Subtract line b from line a and you get a negative number. So, enter zero on line c to show that you have no net income from rental property. No expenses related to the property you own should be entered elsewhere.