Interesting article on the 707(b)(2) section (median income rule)

[LostOne0069]

This article I found tends to support what I am HOPING is true about the new median income law. Meaning that it doesn't matter how much disposable income you have... if you're below the median income, you can get a chapter 7... as long as there's no fraud involved, of course.

http://blog.startfreshtoday.com/archives/cat-bankruptcy-means-test.html

Thoughts anyone?

[cpw111]

BARF....I like that. I've been wondering if and when the crediors would start objecting b/c the household is over median income. Still no definite objections. I am over my state's median income by $5K. I have 15 days left for the trustee,judge or creditors to BARF. LOL.

[aa06a47]

I believe if your below the medium income, you do not even have to take the means test, there is no presumption of abuse. If your above the medium, you can still file a chapter 7 but you have to show you have less than 100 a month in disposable income, and/or, not be able to pay at least 25% on your unsecured creditors (this is my interpretation...might not be accurate)

THis 25% is one of the things the cc industry, in my opinion, screwed up when "THEY" bought ther bk reform bill. They felt that hell, we wouldn't give out credit lines so high that people unable to pay there bills would ever fall under that...guess again, you make 75K a year and have 400K in credit card limits (using me as an example...now I don't owe 400k, but if I maxed out all of my credit cards, I would owe that much).

So, the more you owe, the more likely you'll be able to get a discharge in a chapter 7. I'm 98% sure I'm going to be chapter 13, every lawyer I've got the free consult on has said it (without doing the means test of course). What they of course don't realize, with the increased interest rates, my debt is going up 10K a month and more without me even charging a penny. Won't be too long and I'll definatly not be able to pay 25%.

[SinkingFast]

Kewl link, Lost.

I saw something there that may have answered my question about our truck. We have a chunk of equity, and I worry the Trustee will sell it. I couldn't get a straight answer from any of the attnys why the Trustee wouldn't sieze it and sell it. At the website you linked:

Tax advice in BAPCPA - A Taxing Experience
Saturday, September 24, 2005
If a debtor makes more than the median income and, therefore, The Means Test applies, the amount of priority tax debt has to be evaluated to 1) determine how much to claim as an average monthly priority debt payment, and 2) resolve whether disposable income will provide for payment of the lesser of $10,000 or 25% to unsecured creditors over 60 months. In the past, an attorney may have recommended to a client to diminish cash assets by paying down priority tax debts. The trustee would have been unlikely to bring a preference action against the IRS as the IRS would have been paid first out
of the proceeds of the preference action. So, rather than letting the cash
asset be liquidated, better to use that asset to pay down non-dischargeable
tax debt.

Under the BAPCPA, an attorney may have to tread a bit more lightly. If the
client pays off priority IRS debt, it will serve to 1) reduce the average
monthly priority debt payment and 2) reduce the total amount of unsecured
debt. In the post Bankruptcy Reform Act world, you may want to think twice
about advising your client to pay down the priority tax debt as you may need
the additional priority debt payment to reduce disposable income and to keep
unsecured debt at a high level so that disposable income will not afford the
ability to pay $10,000 or 25% to unsecured creditors.

But I don't get it.

We're just a tad over the Median for a family of 5. I figured $115/month disposable on the Means Test without including the Trustee's Admin fee, since I don't know how to figure that. Even at $115/month, that's not enough to pay 25% of the debt. So we don't have to worry that way.

The attny we've settled on going with says since Mom meets the IRS guidelines and Census Bureau guidelines for a member of our household, he's gonna include her as well. With a family of 6, we are under the Median and no worries.

Is it because we owe the IRS so much money and Trustees typically don't wanna go up against the IRS that the attnys think the truck is safe?? Wouldn't the Trustee get their cut/fee anyway if the Court sells the truck??

If we sell the truck ourselves, before filing, and pay off the Lender and the IRS, the Trustee won't go back to the IRS for preferential treatment/payment. At least that's what I'm reading that statement means.

[SinkingFast]

I believe if your below the medium income, you do not even have to take the means test, there is no presumption of abuse. If your above the medium, you can still file a chapter 7 but you have to show you have less than 100 a month in disposable income, and/or, not be able to pay at least 25% on your unsecured creditors (this is my interpretation...might not be accurate)

THis 25% is one of the things the cc industry, in my opinion, screwed up when "THEY" bought ther bk reform bill. They felt that hell, we wouldn't give out credit lines so high that people unable to pay there bills would ever fall under that...guess again, you make 75K a year and have 400K in credit card limits (using me as an example...now I don't owe 400k, but if I maxed out all of my credit cards, I would owe that much).

So, the more you owe, the more likely you'll be able to get a discharge in a chapter 7. I'm 98% sure I'm going to be chapter 13, every lawyer I've got the free consult on has said it (without doing the means test of course). What they of course don't realize, with the increased interest rates, my debt is going up 10K a month and more without me even charging a penny. Won't be too long and I'll definatly not be able to pay 25%.

We got the Ch 13 run around too. From all but 2 attnys. One said we sounded like a 7. She'd have to run the Means Test to be sure. The other one, in going over our income and debts, I told the attny I'd run the Means Test. He asked where I came out. I said $115/month and that was without the Trustee's Fee. I told him I knew the %'age but didn't know how to figure it. 8.5% of what? He commented the Trustee's Fee would eat that $115/month under his breathe, then asked out loud how much was our total debt. We told him $120K. He said, "Yep. You're a 7 for sure."

We told him about the other attnys wanting us in a 13 and he explained what they were trying to do to us. File 13 now. For a higher fee. Knowing full well we'd be back to them in a couple years to file 7 for another fee. He went on to explain that the remainder of the attny's fees are paid to them, off the top, outa plan payments, before any Creditor ever sees a penny. So the attnys get to double dip on the same clients.

[FoolAndHisMoney]

I imagine many debtors will simply have more priority debts and pension loans since this will lower disposable income. The old law didn't even allow this.

Any creditor can file a motion to dismiss or convert under 707b if a debtor is over the median, but how will this work? Like the US Trustee they can file a motion if they feel that your expenses are too high to get you into a chapter 13, but why would a creditor pay thousands in legal fees to argue that someone has high expenses when if that debtor goes into a chapter 13 plan the creditor that paid to file the motion will get such a small amount and they will have to share it with the rest of the creditors that file a claim if they win. If they lose they will pay their legal fees and yours all for nothing.

Another part of the new law that probably won't be used much. It's just there for intimidation I guess.

[aa06a47]

We got the Ch 13 run around too. From all but 2 attnys. One said we sounded like a 7. She'd have to run the Means Test to be sure. The other one, in going over our income and debts, I told the attny I'd run the Means Test. He asked where I came out. I said $115/month and that was without the Trustee's Fee. I told him I knew the %'age but didn't know how to figure it. 8.5% of what? He commented the Trustee's Fee would eat that $115/month under his breathe, then asked out loud how much was our total debt. We told him $120K. He said, "Yep. You're a 7 for sure."

We told him about the other attnys wanting us in a 13 and he explained what they were trying to do to us. File 13 now. For a higher fee. Knowing full well we'd be back to them in a couple years to file 7 for another fee. He went on to explain that the remainder of the attny's fees are paid to them, off the top, outa plan payments, before any Creditor ever sees a penny. So the attnys get to double dip on the same clients.

Yeah, I don't think any of my attorney's that I have talken to have considered my 401K loans in the calculation. That is a hugh payment I make every month. I am going to see one on Tuesday though that wants me to bring everything including my kitchen sink with me. I asked how long it would take, and they said as long as it needed to. The other 2 I have been to seemed to want to get me in and out as quickly as possible. I am afraid I might have too much equity in my house (about 10K to much)though to consider a chapter 7 though???

[Armmick9]

[SinkingFast]

Generally, people will go Ch 13 if they have a fair amount of disposable income, OR, they're in arrears on their mortgage and/or car payments.

Ch 7, you have to be current to keep your home and/or car. Ch 13 will allow you to make up arrears in the payment plan.