Incompetent attorney? Schedule I/J & Means test clarifications

[Trying2Smile]

I am filing next week and I am starting to worry about the competency of my BK attorney. I've already paid so I don't think I really have an option to switch at this point. My attorney will file what I ask her to but I want to make sure I'm correct on these points before she files like this:

1) My income took a big dip the last 3 months - my attorney said I need to put my taxes currently withdrawn (at lower income) on the means, not the amount paid monthly the last 6 months. I think it should be the amount owed from my income the last 6 months which is higher due to higher income. But I think current taxes on schedule I

2) My cost for health insurance has increased in January due to adding my children to my plan and working less hours. She said I should but put my current health insurance expense on the means test. I think it should be what I actually paid the last 6 months on the means test and current only on schedule I

3) She included my flexible spending deductions in my health insurance decisions. I showed her where it said not to do this and she is okay with moving it to the health expense line instead of health insurance

4) My attorney said it is not okay to have a negative income when looking at schedule I & J. She wants to adjust the numbers so that my income in slightly positive - to keep it at about $35. This could potentially cause a problem if I have to give up my car to my creditor (will likely happen) and get a new car that has a lower monthly payment by $300-400 per month. She says of this happens we will just adjust my other expenses at that time. I think this will be a flag to the trustee that my numbers are inflated

5) She didn't list my child support income on my statement of financial affairs. I think it should be listed as other income. She listed it in means test and schedule I though

6) She didn't list my car payments ($770/month) on my statement of financial affairs in the section for payments over $600/month and said it wasn't necessary. Really high car payment is due to high interest, no credit check title loan. I think it should be listed

I think there are more things that I don't agree with and will post them as I think of them, but these are ones that come to mind right now. Is she right? Am I right? I'm mostly worried about schedule I/J since I've over the median and her not deducting all my expenses accurately In an effort to keep my DMI positive

[LadyInTheRed]

I am filing next week and I am starting to worry about the competency of my BK attorney. I've already paid so I don't think I really have an option to switch at this point. My attorney will file what I ask her to but I want to make sure I'm correct on these points before she files like this:

1) My income took a big dip the last 3 months - my attorney said I need to put my taxes currently withdrawn (at lower income) on the means, not the amount paid monthly the last 6 months. I think it should be the amount owed from my income the last 6 months which is higher due to higher income. But I think current taxes on schedule I

2) My cost for health insurance has increased in January due to adding my children to my plan and working less hours. She said I should but put my current health insurance expense on the means test. I think it should be what I actually paid the last 6 months on the means test and current only on schedule I

I initially agreed with you, but then decided to look up what the BK Code says. Monthly expenses for purposes of the means test are at Section 707(b)(2)(A)(ii). Subsection (I) starts:

(I) The debtor’s monthly expenses shall be the debtor’s applicable monthly expense amounts specified under the National Standards and Local Standards, and the debtor’s actual monthly expenses for the categories specified as Other Necessary Expenses issued by the Internal Revenue Service for the area in which the debtor resides, as in effect on the date of the order for relief, for the debtor, the dependents of the debtor, and the spouse of the debtor in a joint case, if the spouse is not otherwise a dependent

http://www.law.cornell.edu/uscode/text/11/707

The date of the order for relief is the date you file BK.

3) She included my flexible spending deductions in my health insurance decisions. I showed her where it said not to do this and she is okay with moving it to the health expense line instead of health insurance

I think you are right. But, no harm would have come from listing it the way she did.

4) My attorney said it is not okay to have a negative income when looking at schedule I & J. She wants to adjust the numbers so that my income in slightly positive - to keep it at about $35. This could potentially cause a problem if I have to give up my car to my creditor (will likely happen) and get a new car that has a lower monthly payment by $300-400 per month. She says of this happens we will just adjust my other expenses at that time. I think this will be a flag to the trustee that my numbers are inflated

I have never heard that you need to show slightly positive income. But, you shouldn't have to worry about needing to adjust your expenses later. Your statement of intentions should indicate your intention regarding the existing loan. If you say you intend to reaffirm or do a ride through (if you are allowed to do a ride through in your district), then your current car loan payment should be included. If you say you will surrender, then you would include what your estimated new payment would be. This decision should be made before you file. I agree with you that trying to increase other expenses later would be a red flag.

5) She didn't list my child support income on my statement of financial affairs. I think it should be listed as other income. She listed it in means test and schedule I though
6) She didn't list my car payments ($770/month) on my statement of financial affairs in the section for payments over $600/month and said it wasn't necessary. Really high car payment is due to high interest, no credit check title loan. I think it should be listed

The instructions for the form agrees with you on both these items: http://www.uscourts.gov/uscourts/Rul...TIONS_1209.pdf

[AngelinaCat]

We were told to have as close to zero '0' in our account as possible on the day we filed. We were actually a bit overdrawn, so that worked out well.

If you are able to wait out the three additional months until the higher income drops off the '6 month look-back' radar, that will help too. But you may have to wait the full 6 months past the last date of your wife's last high paycheck.

We get a yearly stipend in January of each year from a Retirement Instrument. Although that is an exempt fund, and exempt monies, because it was co-mingled with other funds, and we had to wait until at least August to file, so that figure could drop off the radar.

[tobee43]

as angelinacat points out when they filed they may have been told to have zero in their account. in florida the amount is no more than $150. however, it really doesn't work that way. we had over 3k in our account on our filing date. why? because rent wasn't due until the 15th, nor any of the other expenses that indicated we had a neg balance once we completed our payments. that is clearly indicated when one submits their bank statements when filing.

as for showing a positive or negative balance on your schedules, i have mine in my hands now our schedule J indicated a -2899 monthly.

[Trying2Smile]

Thanks so much for the replies! They ask for bank statements when you apply? My attorney said they don't need to have the bank statements. When we had our meeting I brought them and she said he won't need them. I'm in California and we have high exemption. I don't have much in my account but I do indicate about $2000 cash on hand

And I didn't think negative on schedules I/J was a problem either. I'd rather have cushion in case something gets disputed.

that is clearly indicated when one submits their bank statements when filing.

as fSor showing a positive or negative balance on your schedules, i have mine in my hands now our schedule J indicated a -2899 monthly.

[Trying2Smile]

I don't have much money in my bank account, but my attorney didn't say anything about that. She didn't want me to show negative disposable income. She thought the trustee would question me about how I plan to live in the future if I have negative net flow of money. Any thoughts on what the trustee might say and how to respond about negative DMI?


[QUOTE=AngelinaCat;614207]We were told to have as close to zero '0' in our account as possible on the day we filed. We were actually a bit overdrawn, so that worked out well.

If you are able to wait out the three additional months until the higher income drops off the '6 month look-back' radar, that will help too. But you may have to wait the full 6 months past the last date of your wife's last high paycheck.
/QUOTE]

[tobee43]

i have never heard of not requesting bank statements. it was an absolute requirement of at least 3 months worth, in our case i insisted on submitting 6 months to the trustee and told my atty to do so. at which point and i expected i was asked for more. i am not familiar with calif. bk filings. however, once again i have never heard of a trustee not asking for them. also, i am the one that insisted on certain submissions during my filing. it's me paying and i wanted no stone unturned. actually what ended up happening to us, which i know is very unusual, is due to our petition and the way i insisted it be documented the trustee office contacted me directly prior to our 341 for some clarifications. we communicated directly on all issues. when my 341 came it took approx 2 minutes. ours was an extremely complicated case and still one question came up to us which i thought was covered. the trustee looked over at our atty and said oh! we will discuss that one over lunch. later when i asked my atty why the question was asked since i already discussed this with her office, my atty said she wanted it on "public" record, that was all.

i know my bank statement were closely reviewed, but it could be a case by case basis in calif. LadyInTheRed, who knows calif law extremely well, will most likely be on later, and she is the perfect one to direct this question to.

[tobee43]

i know what angelinacat told you but in florida it's $150 on the date of filing. which, is not necessarily always the case. we filed in the same district with over 3k in our accounts since our bills were not paid for the month yet. our bank statement backed up that we were at a neg of over- 2899 at end of the month.

[LadyInTheRed]

How much cash you can have on the date of filing depends on how much cash you can exempt. This will vary by state and what your other assets are.

There is no absolute requirement about bank statements. You must provide a trustee with whatever the trustee requests. Based on what people have said here, the statement for the month you filed BK is typical so the trustee can verify the balance on the date you filed. If a trustee wants to dig, he may ask for more. An attorney may ask for more statements then required by the trustee so that she can look for things that may cause problems. She may also not request any statements not requested by the trustee and instead rely on information provided by her client on a questionnaire or during an interview. This is something that varies by trustee, the case and the attroenymore than by state. It's possible that some courts have local rules about providing statements to the trustee, but I haven't run across such a rule.

As far as negative DMI is concerned, I would talk to your attorney about your concerns about the car patyment and then take her advice.

[Trying2Smile]

Thank you for your thoughtful reply and looking into the expenses. Do you think that current expenses holds true for taxes too? What if a person has lost their job and is paying no income taxes - are they not able to deduct this expense from the means test?

My concern with flexible spending the way she did it is that including it in the value for monthly medical costs instead actually does make a difference. This is due to the fact that for my household (family of 3), $180 of the amount would be deducted in the standard deduction first, right? I might be thinking about this wrong...

I initially agreed with you, but then decided to look up what the BK Code says. Monthly expenses for purposes of the means test are at Section 707(b)(2)(A)(ii). Subsection (I) starts:

The date of the order for relief is the date you file BK.

I think you are right. But, no harm would have come from listing it the way she did.

[/url]

[LadyInTheRed]

Thank you for your thoughtful reply and looking into the expenses. Do you think that current expenses holds true for taxes too? ]

Yes. The code section I quoted refers to "Other Necessary Expenses" which is exactly what the line on the means test where you enter your taxes says (line 25). The means test relates directly to section 707(b).

What if a person has lost their job and is paying no income taxes - are they not able to deduct this expense from the means test?

If they currently have no tax liability, I read the code to say there is no deduction for income taxes. I'm not an attorney, so your interpretation is as good as mine [ETA: see the U.S. Trustee's position in the document linked below]. If it makes a difference between passing and not passing the means test, as AC suggested, the easiest solution is to wait to file until the income during the 6 month look back has sufficiently decreased. If there is some reason you can't wait to file, another solution is to try to rebut the presumption of abuse based on the decrease in income.

My concern with flexible spending the way she did it is that including it in the value for monthly medical costs instead actually does make a difference. This is due to the fact that for my household (family of 3), $180 of the amount would be deducted in the standard deduction first, right? I might be thinking about this wrong...

I misunderstood and thought you were talking about line 34. I also assumed flexible spending account is the same as a health savings account, which I just realized is wrong. According to the U.S. Trustee, the amount of your flexible spending contributions is included in the $180 on line. If you spend more than the $180 allowance through your flexible spending account or otherwise, you enter the excess on line 31. Here's the U.S. Trustee's position on legal issues on the means test. http://www.justice.gov/ust/eo/bapcpa...ne_by_line.pdf. Keep in mind that it is possible that in a fight with the trustee, a court could rule contrary to the U.S. Trustee's stated position. But, following these guidelines will help insure a smooth Chap 7. There is no point taking a position against the U.S. Trustee's position unless it makes a significant difference in your case, your attorney thinks the U.S. Trustee is wrong, has a good argument for that position and is willing to fight to defend it.

[Trying2Smile]

Thanks again for your replies!

The taxes thing honestly still puzzles me (at least from logic standpoint)... Doesn't affect my means test passing either way, but would like the form submitted accurately so no issues with it later.

I think you might still be misunderstanding what I wrote about flexible spending. I didn't want it included on the line 34 for health insurance. I wanted it on line 31 for health expenses - which is why the $180 standard deduction comes into play.


[QUOTE=LadyInTheRed;614246]Yes. The code section I quoted refers to "Other Necessary Expenses" which is exactly what the line on the means test where you enter your taxes says (line 25). The means test relates directly to section 707(b).

If they currently have no tax liability, I read the code to say there is no deduction for income taxes. I'm not an attorney, so your interpretation is as good as mine. If it makes a difference between passing and not passing the means test, as AC suggested, the easiest solution is to wait to file until the income during the 6 month look back has sufficiently decreased. If there is some reason you can't wait to file, another solution is to try to rebut the presumption of abuse based on the decrease in income.



I misunderstood. You said she included flexible spending with your health insurance. I assumed you were talking about line 34 that has spaces for both health insurance and health savings account. Combining the two in one line in that part of the form doesn't make any real difference, but could lead to easily answerable questions if the trustee looks at your pay stubs and sees the information is not consistent. The solution you should have suggested is to include the insurance and the flexible spending account as separate items on line 34. The $180 amount is covered on line 19B which is the national standard for out of pocket expenses not covered by insurance or reimbursed from your HSA (flexible spending account). If your out of pocket expenses exceed the amount on line 19B, you enter the excess amount on line 31. It is helpful to look at the form. QUOTE]

[LadyInTheRed]

Please re-read my last post. I've edited it regarding the flexible spending account.

[LadyInTheRed]

Thanks again for your replies!

The taxes thing honestly still puzzles me (at least from logic standpoint)... Doesn't affect my means test passing either way, but would like the form submitted accurately so no issues with it later.

Don't rely on the means test for logic. But, there is some logic to this. The deduction for taxes is your actual tax liability, regardless of what was withheld. If withholding is too high, even without a reduction in income, you don't get to reduce your income by the over withholding because you will get a refund. If withholding was too low, you would get to increase the tax liability to include the amount you would owe when you file your return.

I think you might still be misunderstanding what I wrote about flexible spending. I didn't want it included on the line 34 for health insurance. I wanted it on line 31 for health expenses - which is why the $180 standard deduction comes into play.

I understand that now and initially gave the wrong answer. Be careful about information you learn from a stranger on the internet. It could be wrong!
Based on the U.S. Trustee's position, if the $180 is insufficient to cover all of your out-of-pocket expenses, then you use line 31 for the excess. Consider anything you use the flexible spending account for as an out-of-pocket expense.

[Trying2Smile]

LadyInTheRed - thanks again for your comments and help. I have a question though. When looking at the Cornell site I see that this is for chapter 13 conversion - which makes sense. However, I am filiing chapter 7. This perhaps makes a difference? Or am I reading this wrong.

I initially agreed with you, but then decided to look up what the BK Code says. Monthly expenses for purposes of the means test are at Section 707(b)(2)(A)(ii). Subsection (I) starts:

The date of the order for relief is the date you file BK.