Very interesting paper on the median income/Means test part of the BPCA

[no_it_all]

It's just a way for someone who is over the median income to still get a chapter 7 discharge. Since they get to include all secured debt as an expense, it's MUCH easier to pass the means test.

This wouldn't be so remarkable except the authors go on to explain that there is no explicit rule about what kind of secured debt is allowed or when it was purchased... so you could buy a new mercedes or a new house and put the payments into the means calculator and show that you can't afford a chapter 13.

OK, and what is so special about obtaining a Chapter 7 over a Chapter 13 ???

[SinkingFast]

Because a 7 is over and done with relatively quickly. Generally 4-6 months from the time you file until you're discharged and closed.

Ch 13, 3 years is minimum. With most plans under the New Law being 5 years long. The whole time you're in a 13 plan, you're under the Trustee's thumb. No new debt except to buy a house or a car. And that's with the permission/approval of the Trustee, in advance. If you have an increase in income, your payments increase. If you have an emergency affecting your ability to pay your plan payments, the Trustee has to approve that your payment plan be ammended to accomodate the expenses.

[aa06a47]

OK, and what is so special about obtaining a Chapter 7 over a Chapter 13 ???

Chapter 7 is like dieing and going strait to heaven, Chapter 13, you gotta spend 5 years in pergatory before you get to the promised land.

[aa06a47]

I plan on offsetting any income increases with increases in my charitable giving. I really don't think I'll allow my payments to increase. After reading that article, I wish I would have gave a little more to charity...guess they are not even allowed to verify it if I read that correctly.

[no_it_all]

I mean what is the difference between Chapter 7 and Chapter 13 regarding secured creditors...If you put secured creditors in your Means Test Calculator (so you can claim the monthly payments) you still have to pay them, same as a Chapter 13, right?? So in that <particular> regard, it seems to make no difference..........BTW, some thoughts regarding the excellent article: Note that it is an "article" not law...It happens to be two attorney's opinion, and is part of an ongoing research grant funded partially by the Nebraska State Bar Association's Bankruptcy Section.

[FoolAndHisMoney]

It's just a way for someone who is over the median income to still get a chapter 7 discharge. Since they get to include all secured debt as an expense, it's MUCH easier to pass the means test.

This wouldn't be so remarkable except the authors go on to explain that there is no explicit rule about what kind of secured debt is allowed or when it was purchased... so you could buy a new mercedes or a new house and put the payments into the means calculator and show that you can't afford a chapter 13.

Be very carefull with this one. The new laws were changed to prevent this for sure. It even stated on page 690 that if you buy a more expensive car on the eve of filing you could be dismissed depending upon your situation since this is done in bad faith. If you need to buy an expensive van with a wheel-chair lift then that's not considered bad faith. Debtors should most certainly exercise common sense when getting a secured loan just before filing or it will be bad faith.

[SinkingFast]

Be very carefull with this one. The new laws were changed to prevent this for sure. It even stated on page 690 that if you buy a more expensive car on the eve of filing you could be dismissed depending upon your situation since this is done in bad faith. If you need to buy an expensive van with a wheel-chair lift then that's not considered bad faith. Debtors should most certainly exercise common sense when getting a secured loan just before filing or it will be bad faith.

And that application was taken with us wanting to do a cash out refi of our truck to pay our taxes. Annys said No can do. Not on the eve of filing BK. In our case, we woulda been trading Priority Debt for Secured Debt. Both are allowable on the Means Test. And as No pointed out, both would have to be paid after filing BK.

[LostOne0069]

I mean what is the difference between Chapter 7 and Chapter 13 regarding secured creditors...If you put secured creditors in your Means Test Calculator (so you can claim the monthly payments) you still have to pay them, same as a Chapter 13, right?? So in that <particular> regard, it seems to make no difference..........BTW, some thoughts regarding the excellent article: Note that it is an "article" not law...It happens to be two attorney's opinion, and is part of an ongoing research grant funded partially by the Nebraska State Bar Association's Bankruptcy Section.

Well, yes, you have to pay them... but if it gets you into a chapter 7 then your unsecured credit is wiped out... if you were in chapter 13 you'd have to pay some of that back.

Mind you, I'm really not trying to advocate doing any of this stuff.. I was just pointing out that there are plenty of legal loopholes for those with the $$$ to pay an attorney to use them. That would include almost no one here... but see posts on here all the time where people say that if you have $100 left in disposable income that you'll be forced into a 13 and that if you are above the median income then you have to have $1000 a month in medical expenses or some other "extraordinary circumstances" to get a chapter 7.

I want to point out to people that the law is for EVERYONE... not just debtors. You can use the law to improve your position just like the trustee will use it to improve his/hers. I see what is, IMHO, WAY too many people on here who are ready to roll over and play dead as soon as a trustee says "boo!" or their attorney says, "no way that will work". I realize that many, or even most, people will still end up screwed over if the trustee decides to do so and if their attorney decides to LET the trustee do so... I'm just trying to encourage people to take a bit of time and do some research so they understand the law and how it can be used to benefit them.

[LostOne0069]

Be very carefull with this one. The new laws were changed to prevent this for sure. It even stated on page 690 that if you buy a more expensive car on the eve of filing you could be dismissed depending upon your situation since this is done in bad faith. If you need to buy an expensive van with a wheel-chair lift then that's not considered bad faith. Debtors should most certainly exercise common sense when getting a secured loan just before filing or it will be bad faith.

Absolutely... what the paper, and myself, were trying to point out was that there is no EXPLICIT rule that says what is "bad faith". There is nothing that says you can't buy something the day before you file, there is nothing that says that if you buy something the day before you file that it has to be a wheelchair van or a heart/lung machine for your dying grandmother. There's a LOT of room for a GOOD attorney to work with. Yes, if you buy a mercedes just before filing, chances are you've just screwed yourself royally... I was just using that exaggerated example to make a point.

[LostOne0069]

BTW, some thoughts regarding the excellent article: Note that it is an "article" not law...It happens to be two attorney's opinion, and is part of an ongoing research grant funded partially by the Nebraska State Bar Association's Bankruptcy Section.

Yep, I agree completely. This paper was written by a couple of law professors.... although considering the fact that any sort of analysis of the law WILL be written by lawyers... and considering getting law interepreted and setting precedence is done by lawyers... I don't find the fact that this paper was written by lawyers a bad thing.

ALL I'm trying to say is: Don't give up without a fight! The law is ALWAYS up for interpretation... until the supreme court has a final say on it... and then, of course, you can always go ask them again at a later date if you don't like THEIR answer! (for example: the upcoming fight to overturn row v wade.)

[FoolAndHisMoney]

Absolutely... what the paper, and myself, were trying to point out was that there is no EXPLICIT rule that says what is "bad faith". There is nothing that says you can't buy something the day before you file, there is nothing that says that if you buy something the day before you file that it has to be a wheelchair van or a heart/lung machine for your dying grandmother. There's a LOT of room for a GOOD attorney to work with. Yes, if you buy a mercedes just before filing, chances are you've just screwed yourself royally... I was just using that exaggerated example to make a point.

It's actually up to the debtor to figure some of these issues out. The other thing in the law is that attorneys cannot advise a debtor of all this stuff under federal law. They cannot advise a debtor to get a secured loan for any reason or they will pay.

All in all Congress made the new laws very friendly to secured creditors and less friendly to unsecured. It's a good thing for sure. As soon as enough people figure this out I bet GM and Ford will have more business and keep them out of bankruptcy court.

[alh]

The other thing in the law is that attorneys cannot advise a debtor of all this stuff under federal law. They cannot advise a debtor to get a secured loan for any reason or they will pay.

There is actually a constiutional challenge to this that has been filed in Minnesota. I am guessing there will be more

[anonymuse]

There is actually a constiutional challenge to this that has been filed in Minnesota. I am guessing there will be more

It almost seems a diservice to their clients paying good money that they can't say "get your paycheck, pay all your bills, and then file".

[SinkingFast]

It almost seems a diservice to their clients paying good money that they can't say "get your paycheck, pay all your bills, and then file".

It's part of the wording of the New Law, tho. BK Practioners are expressly forbidden from providing financial advise to their clients. So, if a BK attny is following the "letter of the law" they won't advise you what to do in particular situations.

Even tho we'd read about using MO's, Cashier's Checks, and Debit Card to pay bills, and stop Direct Deposit of paychecks on here,............ Don't use checks so you get the money outa your acct ASAP,............. Only one attny told us that in person. When I mentioned we were doing all that stuff to the attny that we hired, he said it's a good idea, but by law now, he couldn't advise us to do things like that to protect our money.

[anonymuse]

SinkingFast,
If I was an attorney, I'd be pointing people to some web site for some "reading material" so it would be easier for them to "discover" themselves.