Means Test Income Question

[Jcg23]

If I've sold household items on craigslist / ebay and recieved "fair value" for them in the last 6 months are the proceeds considered income for the means test for chapter 7? It seems like that's an asset conversion and not additional income into the estate, but the means test is horridly complicated with it's definition of income being very different then the IRS.

I plan on asking our attorney at our next meeting, but I'm having massive axiety about whether they would consider a one time sale of a item as income and then double it for the yearly CMI and then we'd go over median for our state.

[Newday1]

Hi,

First, I just want to say to you to hang in there. We are in the thick of the beginning stages of BK and it is a hard place to be. But, this will all pass. I can tell you that our attorney advised us that our eBay income would be included. We had to turn in our PP records. It may be a district and a state specific issue, but we had to do it. It was a factor in putting us over median income, however our attorney at the time told us that because of the amount of exemptions we were claiming, he said we looked good for a chapter 7. However, due to other circumstances, things "may" not look so good for us at this juncture for a 7. Again, hang in there. Maybe someone else in your area could tell you if things are handled differently there. I wish I could help more...We sold things to get by and to pay our creditors. Many a sleepless night was spent packaging items up to pay our creditors b/c that was what we felt the right thing to do was at the time...

[momofthree]

It's only income if you made a profit on it. For example, bought the item for $50, sold it for $60. I'm guessing that you took a loss on most of the household items that you sold, so they are not considered income. There will be a place in the petition where you have to list property that you've sold or transferred, and you'll need to list the items there.

[Jcg23]

Well we're completely screwed... Attorney says the items I sold in November/October (even though they were sold for less then what was paid for it) will count as income and get doubled into the CMI calculation, push us over the median (we were only $100's under before), have us fail the means test (we owna 14 year old and a 10 year old cars and rent an apartment, so our means test expenses are low but actual fairly high), flag us as "presumption of abuse", and the UST will review our petition. Then the battle over "reasonable" expenses will ensue with the UST and judge will have to decide our petition.

The standard IRS allowance for transportation expenses simply doesn't come close to cutting it when you have 1000's of dollars in repairs each year on two older cars. I wish I had started researching BK earlier and bought a car while I still could have, attorney advised us we can't do so now this close to filing even if I could find a lender with our horrid credit. At the time it didn't make sense to me to buy a new car when I couldn't afford to pay the credit cards. But now to think having a new car and car payment could have prevented us from going to chapter 13 makes even less sense (why should someone be better off for taking on debt they know they can't afford). What happens when one of our cars dies a year into the 13 and we have a $3000 repair bill or need a new car loan? Does that reduce the payments into the 13 or are we even more screwed and have to take that out of food budget etc?

Anyone have any cases I could point our attorney to regarding selling of property at a loss and whether or not it counts as income or not for the means test? I've been looking but haven't been sucessful in finding anything supporting either way...

The UST site has a line by line analysis of chapter 7 filing (ch7_line_by_line.pdf) and it says for "Other Income"

"Whether it meets IRS test for income could be relevant, but whether it is taxable income or non-taxable income is not a factor."

I'm no accountant, but I'm 99% sure selling a household item at a loss does not meet the IRS test for income. If it did, the IRS would be tracking garage sales around the country... Anyone have any other info?

[Pjmax]

Don't forget the expenses eBay and Paypal both charge, and the shipping costs, etc. since atty. insists on including as income, make sure all your costs are deducted.

I would prepare a full statement listing the items, their cost, depreciation (bringing the items to current used value), all fees and shipping costs. It might take some work, but ebay & paypal both have monthly statements available that will help document.

Just curious, did you sell a lot?

[jst4f]

Check out a few other attorneys in your area. Get additional professional opinions. Something about your attorney's answer doesn't sound right.

[despritfreya]

Proceeds from the selling of an personal asset should not be income as all you are doing is changing the form of the asset (from hard property to cash). Now if you had a gain or were in the business of selling such items, then either the gain or the gross revenues would be “income”. But selling off your personal household items to raise some cash to me is not income and, unless there is case law in your district to the contrary (I did some searching, and like you, came up with nothing), I do not believe it is income to the UST either.

You have cited to the correct section of the UST’s guidelines. From experience. . . I have never included proceeds from the sale of a household type item as income for means testing purposes for any client. I think the “evidence” that such is not necessary is that, to date, no one has questioned any of these type cases filed through my office. Since the information pertaining the sales is readily available under question 10 of the Statement of Financial Affairs I would imagine that if it were an issue, someone would have raised it.

As previously suggested, seek out other opinions from various attorneys before making your final decision on how to proceed.


Des.

[helpmeout]

Then file in June. The sale of the items will not be a factor then as more than 6 months have passed.

I would also consult with a few other lawyers as listing that as income really doesn't sound right.

[heartheart]

Check out a few other attorneys in your area. Get additional professional opinions. Something about your attorney's answer doesn't sound right.

I agree. I had to sell my car (for fair market value) in the months before my filing and was told that this income would *not* count as income for means testing purposes. Get some second and third opinions on this.

Also, just because the UST may (or may not) question your expenses, that doesn't mean you're "totally screwed" at all. Even getting flagged with a 'presumption of abuse' isn't the end of the world or the end of your 7 case.

[pamkev]

I agree. I had to sell my car (for fair market value) in the months before my filing and was told that this income would *not* count as income for means testing purposes. Get some second and third opinions on this.

Also, just because the UST may (or may not) question your expenses, that doesn't mean you're "totally screwed" at all. Even getting flagged with a 'presumption of abuse' isn't the end of the world or the end of your 7 case.

I can attest it might not be the end of your chapter 7. We were flagged for our expenses that were way over what the standard Federal allowances were. We had 4 years of history to back up our claims submitted the forms and never heard from the UST again.

I do agree with others get that third or even fourth opinion on this.

Pam