Is rent payment going to count as income?

[ssmdem]

Just thought about something - have never included the $1000 we make a month on our rental as income - which would put us over the average median income -- because the mortgage payment is $1150 - so in reality, we make NO income off the rental.

BUT, will they average that in when looking at the six month lookback? We plan on surrendering the rental, and we're keeping the mortgage on it current as long as the tenant continues to pay. I see no reason why she won't until her lease is up in January - which coincidentally is when we plan to file.

Never thought about this messing with our numbers, as we're under the median income, and we're negative with our DMI (without calculating in the mortage payment, which I didn't do because I knew we won't have it at the end of the year.)

Any opinions? I'm fine with telling her to quit paying and stay for free, and we can stop paying that mortgage now -- but I know she's going to feel weird about it -- and would telling her to do that be doing something fraudulent anyway??

Just really wondering if that is going to be considered part of our income since in all reality, this property is a $150 expense every month.

[andy158]

I have a rental I am keeping through my bk only because my mother occupies it. The income minus the expenses are a wash to a slight loss each year and our attorney said it would make no difference since we were over the median anyway. The balance on the mortgage and the current market value of it would make no impact if sold.

Rental property is pita anyway. Part of the reason I filed bk is because of rental property gone bad. I owned nine at one time and they were nothing but problems. Somebody was always calling and complaining about something. Heard every excuse as to why rent was late. I was sued, fined and nearly arrested because of them. I will have nothing to do with them ever again. I would of surrendered the one I have left if it weren't for my mother.

[ssmdem]

If we were over the median, I wouldn't worry about it - but we're UNDER and I'm pretty sure we'll have a negative DMI. However, if I have to claim this $1000, that pushes us over. We should still have a negative DMI because they would have to account for the mortgage payment that is being paid with the rent, right?? I just would like our income to stay under the median so as not to draw any extra attention, i.e. I want this quick and as painless as possible.

[ssmdem]

When we first spoke to an attorney, he said to continue collecting rent and pay it towards the mortgage, even though it doesn't completely pay what is due on the 2nd mortgage. But that's when he and I were thinking I was going to be filing soon, so at that point, the six month lookup just was what it was. However, now that we're looking at January - don't know if his opinion would have changed. We're seeing another attorney on Thursday - still trying to decide who to use - and guess I'll see what she thinks about the situation.

[scrapiron53]

I wonder about that too. I get $1,300.00 on a property with a $2,500.00 mortgage. we don't pay the mortgage because they sent it back (the $1,300.00). Will it be considered income? My wife is on unemployment and togethr we are over the median by gross income. Do they go by gross or net? I'm confused. Please help. The lawyer says we might be ok.

[ssmdem]

If they are sending it back, honestly - I'd stop collecting rent, because yes, I would think it would be considered income at that point.

My mortgage on the rental is current, as I've been paying the extra $150 out of pocket. But, we are going to stop that soon. I don't know if they'll quit taking payments or not. My 1st mortgage is about $800, 2nd is $350. I can't make partial payments on the 2nd mortgage, so I guess I'll just apply the extra to the principal on the 1st mortgage. They are both at the same bank, so it's possible they may start sending that back too as well - guess we'll see.

[ssmdem]

We did think about calling them (Bank of America) and tell them we get $1000 a month and we can't afford to pay out the extra ourselves - how do YOU want us to apply it? I don't know whether to do that or not. I guess we could just wait until the phone calls start, which I'm sure they will when we miss that HELOC payment.

[scrapiron53]

The rental is over on June 30th. The house is in foreclosure. I just stopped paying all cc's. I pay my truck and RV notes. Capitol One has already given the account over to a collection agency and it is only 30 days past due as of today. The phone has been ringing every hour on the hour from collector. I sent then a letter saying i refuse to pay and a copy of the fair credit collection act section 805, 6 & 7 concerning harrassment and not calling me. I will see if they stop by wednesday or, I'll send a certified letter.

[LadyInTheRed]

ssmdem, I don't think the rent will increase your income since you have the mortgage payment as an expense. The rent payment should be listed as business income on line 4 on Part II of the means test. You put gross receipts on line 4a and business expenses on line 4b. You subtract 4b from for 4a and put the result (or zero if you have a loss) in column A as your business income.
You can see the form at: http://www.uscourts.gov/rules/BK_For..._022A_0410.pdf

The only question is whether your entire mortgage payment can be considered a business expense. The portion that is principal may be considered an investment in an asset and not a business expense. But, it may not make a difference since you have to pay the mortgage in order to continue receiving rent payments. Definitely ask the attorney on Thursday.

[ssmdem]

The only question is whether your entire mortgage payment can be considered a business expense. The portion that is principal may be considered an investment in an asset and not a business expense. But, it may not make a difference since you have to pay the mortgage in order to continue receiving rent payments. Definitely ask the attorney on Thursday.

Thanks!! Even if I can't subtract the principal, it still shouldn't matter. Just double checked and only $129 of my payment goes towards principal anyway - so I'm still losing money every month regardless.

[scrapiron53]

I have too little income to even cover the mortgage, it is curently in foreclosure. When the $1,300 is done in June, I'll really be in a hurt. How long do I wait before declaring BK 7?

[andy158]

When we first spoke to an attorney, he said to continue collecting rent and pay it towards the mortgage, even though it doesn't completely pay what is due on the 2nd mortgage. But that's when he and I were thinking I was going to be filing soon, so at that point, the six month lookup just was what it was. However, now that we're looking at January - don't know if his opinion would have changed. We're seeing another attorney on Thursday - still trying to decide who to use - and guess I'll see what she thinks about the situation.

Take your tax schedule E to your attorney from your prior year tax returns. If you show any kind of profit or loss it will be calculated in your DMI. Yes it is income, but it is offset by expenses. Mortgage, insurance, taxes, etc. If your are planning on surrendering it that in itself should keep you under the median.

If you are showing a negative DMI your attorney should look into filing under bk7

[ssmdem]

Take your tax schedule E to your attorney from your prior year tax returns. If you show any kind of profit or loss it will be calculated in your DMI. Yes it is income, but it is offset by expenses. Mortgage, insurance, taxes, etc. If your are planning on surrendering it that in itself should keep you under the median.

If you are showing a negative DMI your attorney should look into filing under bk7

Oh, we're definitely going for Chapter 7. Right now, looking at the median income alone, we're almost $1000 under. Factor in expenses, and we do have a negative DMI. I guess what I was concerned about was the $1000 being added to the income, putting us over the median income. I knew we'd still have a negative DMI when the expenses were factored in, but I was counting the mortgage as an expense - not using it as an operating expense as it is on the form LadyInRed posted. Using this, my income will still be under the median.