new bk law: means testing, median income, chap 7 or 13, presumptive abuse

[bkfiler]

why dont we try to figure it out and then we can go help the attorneys and judges figure it out lol.

here are my current notes. they go something like this so far. were am i wrong. lets hash this out.


Below Median Income

1 - if your average last 6 months income was less then the median for your state then you can file a chapter 7.


Above Median Income

2 - if your income was more then the median for your state then you have to take the means test. the means test restricts your main categories of expenses by using the IRS standards and state accepted levels.

3 - calculate your disposable income by taking your total monthly income and subtract allowed deductions. these are being listed as payments on secured debts like mortgage, rent and car loans as well as payments on priority debts such as child support, alimony, tax debts and school tuition. some sites say to not subtract things such as food, gas, clothing, etc. some sites also indicate that expenses for reasonably necessary health insurance, disability insurance, health savings account expenses for the debtor, the spouse of the debtor, or the dependents of the debtor can be used. some sites saying that student loans cannot be subtracted but chap 13 admin costs for that region up to maximum of 10%.

3.1 - if disposable is under $100 ($6,000 in 5 years) then you can file chapter 7. this is not presumed abusive.

3.2 - if disposable is more than $166 ($10,000 in 5 years) then you can not file chapter 7. this is presumed abusive.

3.3 - if disposable is between $166 and $100 inclusive then you can only file chapter 7 if your disposable income will not allow you to pay 25% or more of non-priority unsecured debt within 5 years. if you can pay it is presumed abusive.


Cases Presumed Abusive

4 - duties of the US trustee in presumptive abuse cases:

4.1 - the UST must review all materials submitted by the debtor and within 10 days after the 341 meeting, the UST must file a statement with the court as to whether the debtor’s case raises a presumption of abuse.

4.2 - if the presumption applies and if the debtors income is at or above the applicable median then within 30 days after filing a statement the UST must file either a motion or a statement explaining why such a motion is not being filed.

4.3 - UST gets no additional compensation for statements or for unsuccessful motions. (poor guy lol)


Notes

A - two sets of guidelines describe permissible expenses for the means test:

A.1 - the IRS expense guidelines consisting of "National Standards, Local Standards," and Other Necessary Expenses, as prescribed by the Internal Revenue Manual

A.2 - the list of additional permissible actual deductions prescribed by Bankruptcy Code § 707(b)(2)(A). The bankruptcy code allowable expenses at §707 shall include reasonably necessary health insurance, disability insurance, and health savings account expenses for the debtor, the spouse of the debtor, or the dependents of the debtor.

B - the means test applies only in cases with ‘primarily consumer’ debts. taxes are not consumer debts. question is then how are non-consumer debts handled?

C - there is still a question regarding income that is less then the median and your expenses allowing you to have a decent enough disposable income to pay creditors back. question is then would you be denied a a chapter 7. this is similar to the old law. what if you do have more then $100? some sites had the $100/$166 routes under this path but i dont think that is the case at all. some sites are saying that a 707(b) motion could be filed but it is certainly not presumed bad faith and is against the logic of the new laws.

D - UST handles presumptive abuse cases and can approve special circumstances after a 341 exam. special cases might be recent unemployment. to rebut presumption debtor must show income under trigger points by following the steps below:

D.1 - showing special circumstances that justify additional expenses or adjustments of current monthly income for which there is no reasonable alternative.

D.2 - itemizing each additional expense or adjustment of income.

D.3 - providing documentation for such expense or adjustment to income and a detailed explanation of the special circumstances that make such expenses or adjustment to income necessary and reasonable.

D.4 - attesting under oath to the accuracy of any information provided to demonstrate that additional expenses or adjustments to income are required.