Will moving in with family affect our ability to pass the means test in California?

[Wowzers]

My plan is to really bite the bullet and change our living habits as part of filing BK. We felt it unwise to renew our home lease, leaving us no choice but to move in with family and hopefully save enough money to move on to greener pastures or conjure additional sources of income. Avoiding a lease will give us at least $1,000 extra a month. Will this affect our ability to pass the means test?

EDIT: Soon after posting this I discovered on the online means test this verbiage which is unclear what an 'extended period' means. Time to speak to an attorney?:

Debtor may not claim a Local Standard on line 20B when the debtor:
is and has been living with a friend or relative for an extended period of time at no cost;

Ironically my income is a few $1,000 over the median for a family of our size already. Those median incomes are a joke. I would need to earn at least $12k more per year and have cheap dependent health insurance coverage to stabilize us with a very modest lifestyle (few gadgets, one car, etc). And even then I'd be paying off debts for 3.4 years without really saving any money.

That being said, I take full blame for not seeing the writing on the wall years ago.

[Jongo]

Anytime you are over median income, Ch 7 becomes a tougher proposition. Dramatically cutting your expenses by moving in with family will certainly make it tougher. And, even though you disagree with the median income rules (lots of people do) that makes it an even more difficult proposition - you will have to convince a Trustee and/or a BK judge that you are unique. They won't have any patience for an "unfair median income" argument.

Having an extra $1000 a month, even though it seems like the right thing to do, is a Trustee's dream. Welcome to the twisted logic of Bankruptcy. You are headed to a Ch 13.

Get thee to an attorney. Most ricky-tick.

[Pjmax]

Can you pay rent to the family? Over-median doesn't automatically mean a 13.

[LadyInTheRed]

Paying rent to the family is what I would do. Get a standard residential lease form at a stationary store. Or you can download a form on line. Fill out the form completeley, sign it and have the family member sign it. Then actually pay the rent so you have evidence that it isn`t all a sham to pass the means test.

Or you could go rent a place.

[TXskyblue]

Over-median doesn't automatically mean a 13.

This.

It's not a good time to be rent-free.

[brokehmowner]

Anytime you are over median income, Ch 7 becomes a tougher proposition.

If you're within a couple of thousand it's probably a shoe-in. We had no problem whatsoever qualifying. Why don't you just wait until after your chapter 7 is closed to move in with family? From filing to discharged is only 3 or 4 months if I recall correctly. I don't know if I would risk renting from family.

[bcohen]

After your lease is over, can't you continue living there on a month-to-month basis? You do not need to have an actual contract in effect in order to claim a rent expense on your schedules and means test. Once the case is closed, you can always give the owner a 30-day notice, and move out after another month. At that point, you would be free to find a cheaper rental, move in with family, or relocate to a lower cost-of-living area.

[Wowzers]

We decided not to move in with family and we renewed our lease but were given a month-to-month option. I spoke to an attorney today and am going to gather the information he needs to determine whether we meet the means test. He thought so at a glance.

On a whim I just tried the means test over at http://www.legalconsumer.com/ and passed it, although I am unsure whether I did it all accurately. It calculated my monthly disposable income as in the -$1,000 range, which feels about right.

[brokehmowner]

I hope you pass it! I use to believe in chapter 13 until I began to see that the Trustees are the true benefactors.

[LadyInTheRed]

I hope you pass it! I use to believe in chapter 13 until I began to see that the Trustees are the true benefactors.

LOL. I have paid $23,000 in plan payments, not including the one that the trustee has not yet received. $17,323 has gone to pay off the car I bought a month before filing. $4,518.50 has gone to my attorney (well worth the cost of a trouble free 13). A whopping $1,158.50 has gone to the trustee! Creditors filed unsecured claims of $111,757.45 of which less than 1% will be paid by the time I finish my plan in 13 months. I am the true benefactor of my Chap 13. Based on what I've read from other members in Chap 13 and who have completed it, I don't think I am an exception.

If a trustee is the true benefactor of a Chap 13, then the debtor probably should not have been in a Chap 13 in the first place.

[bcohen]

I am the true benefactor of my Chap 13. Based on what I've read from other members in Chap 13 and who have completed it, I don't think I am an exception.

If a trustee is the true benefactor of a Chap 13, then the debtor probably should not have been in a Chap 13 in the first place.

While I don't dispute the usefulness of Chapter 13 to people in certain situations, it is generally a waste of money for people who are merely forced into it by the "means test". Chapter 13 is designed to help people who have SECURED debt on one or more assets which they wish to keep, or have defaulted student loans, tax arrearages, child support arrearages, or other similar non-dischargeable debt which they need to pay off over time without the threat of sudden garnishments and bank levies.

Chapter 13 is NOT designed for people who only have dischargeable unsecured debt, and when people in that situation are forced into a 13 by the "means test" then the trustee wins, the creditors win, and the person loses. It sounds like the person in this thread only has such debts, and has nothing to protect by way of a Chapter 13, so for him a Chapter 13 would be a waste of money.

[LadyInTheRed]

While I don't dispute the usefulness of Chapter 13 to people in certain situations, it is generally a waste of money for people who are merely forced into it by the "means test". Chapter 13 is designed to help people who have SECURED debt on one or more assets which they wish to keep, or have defaulted student loans, tax arrearages, child support arrearages, or other similar non-dischargeable debt which they need to pay off over time without the threat of sudden garnishments and bank levies.

Chapter 13 is NOT designed for people who only have dischargeable unsecured debt, and when people in that situation are forced into a 13 by the "means test" then the trustee wins, the creditors win, and the person loses. It sounds like the person in this thread only has such debts, and has nothing to protect by way of a Chapter 13, so for him a Chapter 13 would be a waste of money.

I am not saying Chap 13 is right for everybody and I'm not saying that the means test is a fair way to determine whether somebody should be entitled to a Chap 7 discharge. I think BAPCPA was a creditor created reform under the guise of stopping abuse that may have existed by a small minority of debtors. It is terrible legislation passed by politicians who get big money from banks.

I am saying that it is not the trustee who is the main benefactor in a Chap 13. A trustee fee is capped at 10% of the plan payments. That includes the expenses of running the trustee's office. Also, the trustee's annual salary, not including expenses, is capped. So if the fees for all of a trustee's cases exceed the cap in any year, the percentage will be lower than 10%. That is why I am paying far less than 10% to my trustee. If somebody other than the debtor is the main benefactor of a Chap 13, it is probably the unsecured creditors.

Nobody is forced into a Chap 13. If a debtor can't pass the means test or passes but their filing is ruled an abuse due to totality of circumstances, it is their own decision whether a Chap 13 will be more advantageous than no BK at all. There is no such thing as an involuntary Chap 13. Somebody with all unsecured debt but too much income to qualify for Chap 7 may find it worth paying trustee fees to protect their wages and get creditors off their back while they catch up. Simply eliminating interest on revolving debt can make a huge difference, even after paying trustee fees.

I am also not suggesting the OP should be in a Chap 13. Based on what little we know, I think the OP will get a Chap 7 discharge. I was responding to a blanket statement that I think is incorrect and might convey the wrong message to somebody else reading this thread who doesn't pass the means test, but very well may be helped by a Chap 13.