Reaffirmation of Secured debt to pass means test?

[time4cake]

Do I have to reaffirm my secured debt to use it as an allowed deduction for the the "Means Test?"

I have an ARM and the payments will sky rocket in a year. I would like to walk away from the house, but if I don't have the house payment as a secured debt deduction I will be forced into Chapter 13.

I can't find anywhere that it states that the secured debt deductions must be actually paid or reaffirmed.

Please advise

[SinkingFast]

Edited to add:
Our attny says the Means Test is not only a 6 month snap shot of income. It's also a 6 month snap shot of debt as well.

We have a house for sale outa state, and we rent here in the new State.

Our attny is gonna plug in the IRS allowable for Rent and Utililities at the start of the Means Test,............. And then, he's gonna put our mortgage payment in as "Secured Priority Debt" annualized over 60 months. We've owned the house almost 14 years now, so that's not a problem. We plan on letting the house go in the BK (if it doesn't sell to a contingent buyer first), but the attny says it's debt we've been responsible for. It's debt that helped push us into the financial situation we're in right now.

You might see if you can use the IRS allowable at the top of the Means Test. That would take the spot of your primary mortgage and the Schedule allowable is all you can enter anyway. Then plug your 2nd Mortgage payment amount in the "Secured Priority Debt" section. Try running that by your attny. Even if you intend on letting the house go in the BK, it's secured debt you are responsible for.

It may work. It may not. At least it's a creative way to try.

[time4cake]

You helped to confirm what I believe, which I appreciate.

One point of clarification, I believe the debt deductions is calculated based on the future 60 (sixty) months, where as the income is based on the last 6 (six). This relevant to me, because if the debt deduction was based on the last six or sixty months I would be forced into chapter 13 again. But, if I remember right the line says what you are contractually obligated to pay to secured creditors for the next 60 months after filing.

Care to weigh in?

[SinkingFast]

Interesting take there.

I'm not sure if he intended to project it out or not.

When the attny first said he was going to do that, I immediately said all the other attnys said we couldn't include expenses for our house. Which blew my mind. Because we are paying both rent for where we live now, and the mortgage payment on the house outa state.

Then the attny said, "The Means Tests isn't just a snapshot in time of income. It's also a snapshot in time of expenses as well." He asked us how long we'd owned our house. We said 13, going on 14 years. He said he'd have no problem annualizing that over 60 months. That he would include that expense in the "Secured Priority Debt" portion of the Means Test.

And the attny knows full well we have no intention of keeping the house. We have a contingent buyer. We're in Breach on the brink of Foreclosure. If we don't sell to the buyer before we file for BK, the house is going in BK. And the attny is fully aware of that. But still he intends on including the prior debt on the Means Test.

So I don't know now, by your question, if he meant annualizing BACK on our mortgage payments, or annualizing FORWARD based on what we'd already paid in mortgage payments. One way or the other, he intends to use that debt to our advantage.

But all the other attnys said there was no way to use the expenses for the house in any way for the BK because we weren't keeping the house. Which I didn't get at all. After all, that house is a huge part of the reason we're in the position we're in right now. Acting like those expenses didn't exist would be like saying we'd lived on the streets before or were homeless, and suddenly moved into a house to rent.

[SinkingFast]

I just took a look at the Means Test and you are right. It's future payments.

So I did a little math,............

If that attny takes what we've been paying in house payments for the last 13.5 years, adds an extra 60 months and divides it out, it still comes out to a signficant number.

We currently pay $1650/month, roughly. We had a HELOC for several years that added another $350/month to that. Before that we had a first for 5 years that ran nearly $1000/month. Then we had a 2nd for 5 years where the payments were nearly $500/month. Then a few years ago, that's when we refi'd and got the 2 notes that totalled nearly $2K/month.

So if the attny goes back the full time we've owned the house, and then adds an extra 60 months, and divides it all out, and annualizes it all forward, it still comes out to in excess of $1000/month anyway.

[time4cake]

I have noticed that most of the attorneys I have talked to, all be it on the phone, jump to conclusions. They seem to either have preconceived ideas leaning towards Chapter 7 or leaning towards Chapter 13. I rarely get the sense that anyone of them is truly listening. With this in mind I have tried to carefully read and understand the code, but unfortunately I go into that with my own bias. This being the case I truly appreciate any confirmation of my own beliefs with someone's real world results.

I guess I will just continue to move forward, demand that my attorney file chapter 7, and I will be prepared to answer the trustees questions.

[time4cake]

I just took a look at the Means Test and you are right. It's future payments.

So I did a little math,............

If that attny takes what we've been paying in house payments for the last 13.5 years, adds an extra 60 months and divides it out, it still comes out to a signficant number.

So if the attny goes back the full time we've owned the house, and then adds an extra 60 months, and divides it all out, and annualizes it all forward, it still comes out to in excess of $1000/month anyway.

I don't think he has to go back to annualize the number. I think it states what you are contractually obligated to pay in the next sixty months. I read an example where someone who only had a year left on their mortgage could get a little screwed. In that example they had 12 more payments of $2,000 or $24,000, but they had to divide that number by 60 or $400 as a secured debt deduction. In that example they were then allowed to take the IRS allowance for housing for the remainder. Still a bit of a raw deal.

[SinkingFast]

Yeah. Same thing happens with car notes. If you're at the beginning of a 5 year note, no problemo. If your at the end, you take a hit, big time.

No worries for us there. We refi'd nearly 5 years ago on a 30 year note. So annualizing the debt over 60 months won't be a problem at all there.

[SinkingFast]

I have noticed that most of the attorneys I have talked to, all be it on the phone, jump to conclusions. They seem to either have preconceived ideas leaning towards Chapter 7 or leaning towards Chapter 13. I rarely get the sense that anyone of them is truly listening. With this in mind I have tried to carefully read and understand the code, but unfortunately I go into that with my own bias. This being the case I truly appreciate any confirmation of my own beliefs with someone's real world results.

I guess I will just continue to move forward, demand that my attorney file chapter 7, and I will be prepared to answer the trustees questions.

That's the same experience we had until we met this guy. He's very knowledgeable about the Code. Quotes it right off the top of his head. Pulled the book out once and showed us something in Black and White that was in direct contradiction to what other attnys had said. The most comfortable we felt talking to anyone. He decided after he chatted with us and looked at our situation.

I just found out this guy isn't just any old Joe Blow attny. We live in Indiana. Most of the attnys here went to Indiana State, Indiana Univ, Butler, Purdue. The guy we settled on, I can't even begin to figure how he got here. He got his Bachelors from Rutgers and his JD from Seton Hall. Those are like Ivy Leaguers as far as Universities go. So how did he land in the hinterland I wonder??!!

[time4cake]

Just to answer my own previously started post:

My attorney made it clear that the debt does not need to be reaffirmed to count as a deduction on the means test.