Opting to use schedules I and J, instead of IRS Standards.

[optimistic1]

The IRS standards are too generous, to the point where, when I input my income, I end up with negative disposable income. Which obviously means I need to file a Chapter 7. However, I dont qualify for a Chapter 7 discharge, and the majority of the debt is in my wifes sole credit cards. But, I live in AZ, and its a community property state, and if she files without me, there is a risk that the creditors seek payment from me after her discharge, or they might object to the discharge all together.

So, if for some reason, we are slightly above State Median Income, and we are forced to use the IRS standards, can we instead try to submit a plan, based on the actual expense Schedule I to show we can actually make a payment of about $130.00?

[justbroke]

The IRS standards are too generous, to the point where, when I input my income, I end up with negative disposable income. Which obviously means I need to file a Chapter 7. However, I dont qualify for a Chapter 7 discharge, and the majority of the debt is in my wifes sole credit cards. But, I live in AZ, and its a community property state, and if she files without me, there is a risk that the creditors seek payment from me after her discharge, or they might object to the discharge all together.

So, if for some reason, we are slightly above State Median Income, and we are forced to use the IRS standards, can we instead try to submit a plan, based on the actual expense Schedule I to show we can actually make a payment of about $130.00?

Actually, you can submit a Plan above what your calculated "disposable monthly income" is. This is because there are other factors other than that really messed up means test (forms B22A and B22C) come up with.

I actually submitted a Plan which pays 2%, yet I have a negative DMI. This is because I have some equity that I need to pay in the Plan. Plus, I was very generous with my allowances to have cushion in my Plan (budget).

Do you have to pay $130/month? What's driving that number? Equity? You can just make it so your unsecureds get 0% ($0/month) for the duration of the Plan... unless you live in one of those 10% Districts.

[optimistic1]

1. But I thought, that if you are above the State Median Income, you are forced to use the IRS standards?


2. No, the amount could be less than that, zero for that matter, I simply looked at all of the allowable expenses, and adjusted them accordingly. All of the categories are significantly less than the IRS Standards.

I cant find any info on whether or not Arizona Bk Court is a 10% district.

I did find this particular subject for a case right here in Arizona, but at the end of the paper, there is no decision.

http://www.magtrustee.com/caselaw/KagenveamaDecision.pdf

[justbroke]

1. But I thought, that if you are above the State Median Income, you are forced to use the IRS standards?

Forced, only in that they don't want you to exceed them. Nothing stops you from having a negative DMI but contributing more (a positive number) in the Plan. Probably only your lawyer would stop you.

2. No, the amount could be less than that, zero for that matter, I simply looked at all of the allowable expenses, and adjusted them accordingly. All of the categories are significantly less than the IRS Standards.

Use the IRS allowance on the forms. What you decide to do with a negative DMI will depends on several factors (including, but not limited to, minimal amounts you have to pay due to non-exempt equity).

I cant find any info on whether or not Arizona Bk Court is a 10% district.

Assume it isn't.

I did find this particular subject for a case right here in Arizona, but at the end of the paper, there is no decision.

You have to remember that the case you reference is right after the BAPCPA modifications to the Bankruptcy Code in October, 2005. Courts were still bewildered by the "means test" and what it meant.

So, that "memorandum on decision" that you post exactly states what I talk about.

The Court recognizes that it is counterintuitive that a debtor may confirm a chapter 13 plan where she has no disposable income. However, that is where BAPCPA leads us. By defining “disposable income” in a way that is not based on actual money available going forward but rather as a matrix to determine the amount and duration of payments to unsecured creditors, BAPCPA has sanctioned the confirmation of plans with no “disposable income” where the debtor nevertheless has post-petition excess income from which trustee payments may be made.

[optimistic1]

geez, its like I need a law degree to fully understand this stuff. But it does give me hope that I will be able to obtain a confirmable plan. I have 4 consultations setup for the new year to obtain a attorney. I just hope that these creditors will back off until I file, which should be sometime in July, I want to wait until my new baby is born. Or file when I can and then just amend the plan, its seems like throwing this in the mix is making it a little more complex. I dont think creditors or collection agenices will bother trying to garnish if I am represented by a lawyer, it would be a big waste of money on their part. Thanks for you advice.

[justbroke]

I dont think creditors or collection agenices will bother trying to garnish if I am represented by a lawyer, it would be a big waste of money on their part.

Never think that. An actual judgment is worth money to a creditor. If you're getting to that point where you are sued and a summary judgment is about to be had, you need to file.

They don't just back off because you retained a lawyer.

And, it may not be wasted money if they can file against your bankruptcy estate for the attorney fees and other fees of collection (including court costs).

The Bankruptcy would take care of it, but just retaining a lawyer, won't.

[optimistic1]

How could I contribute more into the plan if the IRS Standards are showing me to have negative DMI? Only by instead, using the Schedule J?

I really dont have any non-exempt equity, if I understand what that means of course, your talking about anything out of the scope of exempt property as allowed by specific state bankruptcy laws?

This gets so much more complex than a straight 7, I am glad I am seeking a attorney to take care of this and help us out.

But this forum is shedding light on some of my fears about the 13, thanks for the advice and insight.

[justbroke]

How could I contribute more into the plan if the IRS Standards are showing me to have negative DMI? Only by instead, using the Schedule J?

Don't worry about what I wrote earlier with the exempt and non-exempt equity. I'll assume you're a so-called "No Asset" Chapter 13 (meaning you have no property with equity, or that all your property is covered by exemptions.)

If you have no assets, and no equity, and are not forced to pay a certain percentage to the unsecured creditors (like the reference to the 10% Districts)... then you don't have to contribute anything to your Plan.

What they will look at is, does your secured creditors along with all your allowances, make it impossible for you to really have a good faith plan.

Example, say your mortgage payment is so much that it eats into your Food and Clothing expenses, they may think the plan isn't feasible.

I don't know if I'm making sense.

Put it this way... in the end... is the plan affordable.

[optimistic1]

The unsecured accounts have been delinquent since about late October, so they would be about 9 months past due, charged off most likely, and in the hands of the dreaded collection agencies. I always find it funny how they call and act like they are a "firm", they even call it that, we are a "firm" instead of agency. Like to give the impression that they are attorneys.

[optimistic1]

The original $130 left me with more money for food and clothing and other expenses than I already spend now or in the past, so I don't see how it couldn't be affordable.

[UpsideDown]

tagged for later.....

[justbroke]

tagged for later.....

FYI, you don't need to post to a thread to subscribe to it.

All you need to do is look at the top of the thread and there's a link called Thread Tools. There will be another link in the drop down menu which will read Subscribe To Thread. It's that simple.

[HHM]

You can actually have a zero payment 13. If the BK laws do get amended to allow 1st mortgage write downs, I suspect we will see many more $0 payment chapter 13's (i.e. people who would otherwise qualify for a 7, but want the benefit of the 1st mortgage write down).

In any event, be prepared for a challenge from the Chapter 13 trustee, but there is nothing in the BK code that says you "actually" have to make a payment, it says you only need to devout all your disposable income, if you have no disposable income, you have a $0 monthly payment.

Strictly speaking, you need to write into the plan that "if, in the future, there is disposable income, you will devout it to the plan." However, if you are negative on the 2nd part of the means test and negative on I & J, you can get a plan confirmed that actually pays nothing. Note, if you have a liquidation value issue (meaning you must pay the value of non-exempt assets) or have priority debt, you need to devout funds to pay those values.