Sweating the Means Test

[cjbaum]

I know im over my state median (Washington, $51K) concerning income and im worried that i may not make the cut. Ive had one attorney take a quick look at it, and said id pass, although this was a overview. Im not sure i want to pay someone $500.00 to tell me i wont qualify for ch 7. Id really like to know whether or not attorneys will try to fit me into a ch 7, or tell me what i need to show (ethically of course) in order to qualify. Heres some of my details.

The ex and i split up a couple of years ago, i no longer live in the house, and its rented, although i dont really receive any money, as its underwater and rented for much less than the payment. She refuses to short sale / foreclosure

Annual Income - $62,500
Monthly Income - $4800
Monthly Taxes - $1028
Mortgage - $2000
Rent Elsewhere - $600
Vehicle - $504
Other typical stuff...

I feel like i can show i have no money, but whats reasonable ? Thanks for any help.

[debee]

It would help you to check out an online means test/ You can do that here. Some of your expenses will be automatically filled in based on your county of residence and family size.

Forget the rental. You won't be able to include those expenses. You'll need to be able to get through the means test without it. Remember, the means test is only your first hurdle. Once you pass that, there is still the issue of your schedules I/J.

Most people who find themselves on the brink of filing bankruptcy have distorted budgets because they've twisted everything out of joint in order to squeeze in their debt payments. It's worthwhile to examine your budget as well as the means test categories to see where you would be able to increase expense. For some people that means buying a new car in order to get the payment expense and increased insurance costs. If you don't have life insurance, disability insurance, health insurance, the time to increase your coverage and lower your deductibles is now.

We ran our budget several times before coming up with the right numbers. Once we knew we could pull it off, we made the necessary changes to our actual budget - purchasing hefty life insurance policies, buying new cars, etc. BUT we made sure we had the numbers right before we made a move.

Good luck to you.

[momofthree]

I see your monthly income and annual income differ, yet you're taking taxes out as an expense. Little confused, is the difference due to health insurance, retirement, etc? They're going to want your gross with the deductions backed out, so if your annual income is $62.5k, then your monthly is $5208.

Like Debee said, you can't use the mortgage expense unless you're living in the house. In fact, I'm pretty sure that in order to keep it, it has to be self-supporting (as in the rent received covers the mortgage and related expenses). You may be required to surrender it altogether. You'll definitely want to speak to an attorney about that.

Here is a link to the IRS standards that you are allowed: http://www.justice.gov/ust/eo/bapcpa...anstesting.htm

You'll probably be a ch.13 with that income and no mortgage.

[mountanddo]

Who's paying on the mortgage and collecting the rent income? You don't list rent income at all. Seems like she may not have a choice to short sale/foreclose. Can they force a co-owner who isn't in BK to forclose on a house?

[cjbaum]

Sorry that the details may be quite complicated. I have an appointment to meet with an attorney that i have already had a consultation with, she said then that i would qualify for a chapter 7, although im still nervous that when each line item is ironed out i wont anymore. Maybe ill post up after i get more details as to help anyone else in the future.

Thx

[cjbaum]

It would help you to check out an online means test. Some of your expenses will be automatically filled in based on your county of residence and family size.....

Thanks for the website, it helps although its still to close and convoluted to be able to know for sure.

[debee]

I would encourage you to sort it out. If you keep reading, you will get to the point where YOU know whether you qualify for a 7 or not. No surprises if you know the score ahead of time. Also, there are changes you can make prior to filing to help yourself qualify. Some lawyers are adept at communicating that option (& the specifics) to their clients but some are not. If YOU know what's going on, it won't matter. You'll have covered your own a$$.

Good luck to you.

[OhioFiler]

Too many people see the means test as the determining factor whether they qualify for a Chapter 7 or 13. All the means test does is determine whether the presumption of abuse arises. It basically moves the burden of proving the Chapter 7 to the petitioner's other schedules, particularly schedules I and J. Failing the means test will create more scrutiny for a chapter 7 filer but it's still easy to qualify if your expenses are greater than your income.

[cjbaum]

Good luck to you.

Thanks, i feel like im getting closer to figuring it out. Everything else of the case is easy. I own nothing besides a freezer. Nothing near the exemptions. Worst case scenario right now im looking at $116 dollars left over per month. Does anyone know how i could add in debt owed to back taxes as a deduction, an attorney mentioned it, but im not sure where and how its done.

[IamOld]

CJ back taxes are!!!!! a deduction - what you need to do (and collective wisdom please correct me) - is there is a line on the means test that asks for pre-petition taxes - if you don't have a payment plan already that says pay $X/mo then put in there total owed divided by 60 (months).

NOW - IF THESE TAXES ARE DISCHARGABLE then you cannot used them as a "deduction."

[cjbaum]

CJ back taxes are!!!!! a deduction - what you need to do (and collective wisdom please correct me) - is there is a line on the means test that asks for pre-petition taxes - if you don't have a payment plan already that says pay $X/mo then put in there total owed divided by 60 (months).

NOW - IF THESE TAXES ARE DISCHARGABLE then you cannot used them as a "deduction."

If / when i re file for last years taxes i should owe approx. $3000, and probably another $500 for 2011.

[IamOld]

Then if you have a payment plan set up OR proposed to the IRS (Whcih you WILL get for such "small" amounts) then take that and use it for the means test. OR 3500/60.

[cjbaum]

Another side question. Would student loan payments reduce my monthly income on the means test ? Obviously there not dischargable

[IamOld]

CJ, I BELIEVE on the MEANS TEST NO.

[cjbaum]

If i use the IRS numbers for housing and what not on the means test, do i still have to prove that i use all of the exemptions on another schedule. Such as food / power / water etc. ?