BK Eligibility based on income - How do they calculate it?

[jcharles00]

Hi all!
I'm considering trying for Chapter 7. As I understand it, the income requirement for eligibility is that you must be below the median income for your household size in your home county. I also understand that this is based off of your past 6 months income.

I've had a weird income situation, and I'm wondering how they calculate this, because how they do it could put me over/under the requirement. The situation is like this: I had a full time job that was just under the median income level. It got cut to half time. I picked up a part time job that still wasn't enough to get back up to full time pay level. for 3 months over the summer, I stopped that job, and took an internship in another state. (I'm a student). this internship paid a lot. More than my old job when it was full time. ..but only for 3 months. AND I used vacation days at my other job, so I was basically pulling 1.5 time pay. ..but only for 3 months. (it's not like I got to use any of that extra money.. I was still paying my mortgage back home and crazy high california rent at the same time)

If they just do an average income based on these 6 months, I probably am still eligible, but if they base it off of any one month, and choose one of my high income months, I'm not. Not to mention, the internship income was at a place whose median income was way higher than back home.

Anyone have insight on how this might play out for me?

[keepmine]

There are 2 parts to the means test. The 6 months of median income is the lookback portion. They don't base it off of one particular month in that period.
Step 2 is, filling out schedules I and J. These are forward looking and are where you plug in expenses like mortgage/rent/transporation, utilities, food and all the other thingsneeded to support a family. This will determine if you have sufficent monthly dispoable income to fund a 13.
Most bk lawyers will give a free or lowcost initial consultation. Speak with 2 or 3 and get all of your options explained.

[TXskyblue]

If your 6-month average is under mean, you pass the means test. You said you think you still pass even with all the extra income. Well, do the math and find out!

Also, there's no requirement that you work every hour you humanly can at three different jobs. It's good that you're working and trying to improve your situation, but that extra work may cause issues with passing the means test. Can you temporarily cut back?

To reiterate, they do NOT base it off any one month. It is the most recent 6 month immediately prior to filing BK. If you file BK today, it would be today to 6 months prior. If you wait 4 months to file, it would be from the filing date to 2 months prior to today.

Since you think you're close to passing if not already passing, a little strategic planning is probably all you need to ensure you pass. That may include putting time between your higher-paid internship and the filing date, or it may include not cashing in vacation days and not working every hour possible.

I think your best course of action is to speak to a few attorneys and then pick one to do a means test. Most attorneys seem to charge around $250 for this, which is credited to a retainer if you choose to retain him. They will be able to tell you exactly where you stand on the means test and if you need to do any strategic planning to pass.

[LadyInTheRed]

There are 2 parts to the means test. The 6 months of median income is the lookback portion. They don't base it off of one particular month in that period.
Step 2 is, filling out schedules I and J. These are forward looking and are where you plug in expenses like mortgage/rent/transporation, utilities, food and all the other thingsneeded to support a family. This will determine if you have sufficent monthly dispoable income to fund a 13.

It is true you can be denied a Chap 7 discharge based on your disposible income caculated on Schedules I and J and that Schedules I and J are forward looking. But, Schedules I and J are not part of the means test.

If your income in the 6 months before filing is under median, you pass the means test and don't have to complete the rest of that form. If your income is higher than median, then you have to complete the rest of the means test which deducts expenses based on national and local standards and your secured debt payments to determine if your disposible income is high enough to fund a Chap 13. That's the 2 steps.

Because the means test may not include a recent or guaranteed future increase in income reflected on Schedule I and/or your actual expenses on Schedule J may be lower than the local and national standards used on the means test, you could pass the means test but still get an objection to a Chap 7 discharge because your Schedules I and J show that you have enough disposbable income to fund a Chap 13.