Qualify for 7 but "forced" into 13??

[ssmdem]

I keep reading this but HOW would it happen? I understand for the purpose of stripping a 2nd lien on a property. Is that the only circumstance it could happen with? I absolutely just do not want to go the CH13 route. I want this done and over with and start over fresh.

[SMinGA]

Are you sure you have not misread something?

Someone might 'qualify' for ch. 7 based on means test/dmi but not be eligible. Such as if you have a privious ch. 7 in the past 8 years but now you're behind on your mortgage, want to save your house, etc.

The means test uses IRS guidelines based on family size, etc. It may say you're entitled to $800/mo food and $240/mo medical and $500/mo utilities putting you at -$200 dmi. But perhaps your groceries are only $600 and medical only $150 and utilities only $350, resulting in an actual dmi of $240.

In my opinion, when someone is trying to do a ch. 7 they look at the IRS guidelines to see what they could/should be spending. Expenses after BK are often different than before since before many can't afford the things they need since they're sending so much $ to credit cards each month. But if someone needs a ch. 13, its more about finding a way to have a doable budget each month AND still manage a plan payment. I think people tend to cut back more, conserve more, make more personal sacrifices when they feel they must.

[ssmdem]

But if your income is already under the mean amount without factoring in expenses, you're automatically fine to go the Ch 7 route, correct? No previous bankruptcies, surrendering house. Only loan reaffirming is a vehicle we just purchased. Only other asset is another vehicle completely paid off. We are keeping track of all receipts showing where all of our money is going right now - as we have sold some assets (total of $6800). We don't plan on filing for a few more months - just trying to make sure I'm understanding everything correctly.

[SMinGA]

If you're under the median AND your schedule I/J shows little or no DMI, there should be no problem with filing ch. 7. Just keep in mind schedule J is actual expenses, and your attorney will know what is standard for your district. If there is anything in your situation that might make ch. 7 difficult - your attorney should discuss that with you pretty early on I think.

I know there are posts here from time to time about someone who seemed blindsided at the last minute, either to find out they couldn't do ch 7 or that their 13 payment was to be higher than expected. I have to think these cases are 1) poor attorney-client communication and/or 2) people sticking their head in the sand and not knowing what is going on with their petition.

But if your income is already under the mean amount without factoring in expenses, you're automatically fine to go the Ch 7 route, correct? No previous bankruptcies, surrendering house. Only loan reaffirming is a vehicle we just purchased. Only other asset is another vehicle completely paid off. We are keeping track of all receipts showing where all of our money is going right now - as we have sold some assets (total of $6800). We don't plan on filing for a few more months - just trying to make sure I'm understanding everything correctly.

[ssmdem]

Why is it when I take that means test online then that after I key in my income amount, it says I qualify for Chap 7 - no need to go any further. Is it because it's already factoring in the standard expenses at that point and shows that I am at a negative with the standard expenses?

[ssmdem]

Okay - just looked at it again - I guess this is where that "note" plays in.

(Editor's note: Although the official form says "do not complete [the rest of the form]," you can go ahead and do so if you want to get a sense of how the means test formula computes your monthly "disposable" income. Even if you pass the median income test, some judges may deny you the right to file for Chapter 7 bankruptcy if it looks like you can afford to make significant monthly payments into a three-year Chapter 13 plan.)

[momofthree]

Okay - just looked at it again - I guess this is where that "note" plays in.

(Editor's note: Although the official form says "do not complete [the rest of the form]," you can go ahead and do so if you want to get a sense of how the means test formula computes your monthly "disposable" income. Even if you pass the median income test, some judges may deny you the right to file for Chapter 7 bankruptcy if it looks like you can afford to make significant monthly payments into a three-year Chapter 13 plan.)

This is it exactly. Even those people who are under the median must show (on their schedules I & J) that their expenditures each month leave them no extra money to fund a ch. 13 plan. There are some ppl under the median who live well enough within their means that the trustee will push for a ch.13. All it takes is about $180/mo give or take to make the trustee start salivating....

[ssmdem]

Why am I suddenly depressed all over again?

[ssmdem]

Just looked at the schedules -- we are surrendering our home, so would we list the mortgage payment as an expense?? Seems like I wouldn't since I'm not going to be paying it -- but then we're going to have rent somewhere - but no idea how much - what do I do?

[SMinGA]

1st step: DISCUSS with your attorney. More than likely, your attorney will say to use IRS average for your family size/county/state for housing & utility expense. The trustee knows you'll have to pay these expenses. You won't have to claim $0 housing expenses on schedule J.

2nd step: Start researching rentals that meet your needs in terms of location, size to get an idea of what rent is going to be. Find a token house and write down the address. Even if you're not ready to move today, just to get an idea of utility costs. Call the local gas & electric & water company. Say you're considering renting at 123 Any Street, Yahoo USA 12345 and ask for the average utility expense at that address over the past 12 months.

I suggest that 2nd step so you can learn whether or not its reasonable to expect to find a place that meets your needs to be within the IRS guidelines. If your research makes you think your actual expenses will be higher than the guidelines, discuss with your attorney.

Just looked at the schedules -- we are surrendering our home, so would we list the mortgage payment as an expense?? Seems like I wouldn't since I'm not going to be paying it -- but then we're going to have rent somewhere - but no idea how much - what do I do?

[SMinGA]

The cases that Momofthree describes (below median but adequate DMI) are not shockers. Its not like you won't see your schedules I/J until the 341. Or at least, I hope you don't. That would mean you signed your petition & allowed your attorney to file without reviewing it.

A good example of below median but high DMI would probably be someone with a relative (to their income) low mortgage/rent and no car payments, no student loans, etc. Just housing & standard living expenses.

[ssmdem]

Guess we stand no hope then -- only one car payment. That being the case, we'll be renting forever with no way to ever save up to buy a home. My husband will be able to retire in 19 years, and we wanted this done and over with in hopes of getting into a 15 year mortgage afterwards and him not having to work until he's 80 to pay a mortgage!!

Other than this house that we just can't afford and unfortunately can't sell, which is the reason we now have credit cards maxed out, we don't live lavishly. We messed up in buying it, and I know that. I haven't bought a new item of clothing in over a year - can't afford haircuts - never eat out - have sold just about everything I can to stay afloat - our house is bare. I just want out of this mess and want to feel normal again. If we're put in a chapter 13, how do you save for the future? How do you even save for the unexpected? How do you put away the kind of money to get you a downpayment on a house? We have money going into a pre-paid college plan for the kids - are they going to continue to let us do that? What happens when my daughter is able to drive in a couple of years? How do we get her a car?

I'm honestly totally panicking here. We have been living like this for over six years - scrimping and worrying about money from the moment I wake up in the morning. I'm just so tired of it and would just like to get through one day without breaking down and crying.

[JEM]

What I have done is sit down and do "mock" Schedule J's.

I fill in all of our info to see actually what our DMI is.

You'd be surprised where you spend money. Some people think they spend a lot less than they actually do on things.

I've had to change a few numbers because I either forgot things, or things have gone up (util company raised rates, or gas has gone up etc...)

Make sure you include EVERYTHING. Car registration, car inspections (if you state requires). Renewing driver's licenses etc...

[helpmeout]

Why is it when I take that means test online then that after I key in my income amount, it says I qualify for Chap 7 - no need to go any further. Is it because it's already factoring in the standard expenses at that point and shows that I am at a negative with the standard expenses?

That is because you passed the first test. The initial means test is to determine if there is a presumption of abuse. Had your income been above the median, you would have had to complete the rest of it.

The schedule J is also a major factor in being able to file a 7 or having to go into a 13.

[angles]

ssmdem,

I am impressed that you lasted 6 years. we have been in that boat for a much shorter time and we are spent. we currently qualify for a 7, but after giving up the mortgage from our investment property we will have about 2K/month positive. my attorney knows this and has not said anything about being kicked out of a 7.