Chapter 7 Means Test Fail but no DMI for Chapter 13-Now what?

[407Broke]

I hope some of the wise members can shed some light on my options!

We are Middle District Florida above median filers and after all allowed expenses on the Ch7 Means Test we show DMI +$1000. Now this does not including any expenses on a rental property we are surrendering or any 401k loans or contributions (which are not allowed on a 7). However if we move to chapter 13 and factor in 401k contributions and repayments we are at $-300 DMI.

UST filed abuse and now we are scrambling on what the options are.

My assumption is a Chapter 13 would not fly, and they would say you need to file a chapter 7. Any thoughts?

Also can or can you not use expenses on a property to surrender on the 7 means test?
Will the court allow any 401k payments on the Chapter 7 means test?

Thanks for any insight!!!

[LadyInTheRed]

If you are surrendering a property, you cannot use the expenses for that property on the means test.

Have you spoken to your attorney about whether he/she thinks you can overcome the presumption of abuse?

Can you fund a Chap 13 without the 401 contributions? It may be that you will have to stop the contributions during your Chap 13. Either that or cut your budget elsewhere. But, you will be allowed a deduction for the 401K loan payment in a Chap 13.

[407Broke]

Yes our attorney thought certain things would fly, but that's not the the case and the UST is poking hard.

If my contributions (10% salary for the last 12 years) are not allowed or deemed excessive, then yes I would have $200+ for a Chap 13 payment plan. However I found a case in Jacksonville that ruled 401k contributions and/or repayments were OK and not an abuse.

[LadyInTheRed]

Yes our attorney thought certain things would fly, but that's not the the case and the UST is poking hard.

Just because the UST is poking, doesn't mean the court will agree with the trustee. I hope your attorney is working for you on this and is not afraid to take the issue to the judge if he thinks you have a chance of prevailing. In the end, you may find out that your attorney was right about what would fly.

If my contributions (10% salary for the last 12 years) are not allowed or deemed excessive, then yes I would have $200+ for a Chap 13 payment plan.

That may be how this will end up. But, your attorney may be able to convince the judge that you should be allowed the deduction.

However I found a case in Jacksonville that ruled 401k contributions and/or repayments were OK and not an abuse.

Is the case you are talking about In Re Christi Garrett? If so, that is a 2008 case that does not set precedent for other courts. If you are in the Jacksonville court and there have been no conflicting decisions in that or higher courts in the district or circuit, it is a good sign. If you are in any court other than Jacksonville, the judge does not have to follow the ruling. In fact, I don't think another judge in Jacksonville would even have to follow the ruling.

In the 9th district, 401k contributions are not allowable deductions, at least not for over the median income filers and perhaps not for any. I believe the same is true in the 6th circuit.

Florida is in the 11th Circuit. I can't find any appellate rulings on the issue in the 11th circuit.