Over Median with CH7 Dreams

[ConfusedinOC]

A lawyer has ran my numbers for means test. She stated that I am $1,300 over on the means test but that my payment plan would be $500(due to 401K loan payment and contributions allowed in CH13). My questions are as follows:

1. If I was to add term life and disabiltiy insurance (myself and spouse) my plan payment would go down dramatically even be negative. This is due to the fact that my premiums would be high due to being on the heavy side. Would this be accceptable?

2. If the plan payment is negative or extremely low could it then be converted to a CH7?

[gwar11d2]

I've been down that road... although we lowered everything we could to plan for a Chap 7...BK admin forced us to a 13. Not that that is a terrible thing...the only thing we will probably be paying for is our car and the lawyers fees for the next 5 years. It seems as though a lot of districts are forcing 13s on borderline 7s. Good thing is we haven't payed any credit cards for the past 6 months while going through the process

[momofthree]

I believe it's the means test that has to be low or negative, not the plan payment. There are expenses allowed on schedule J (monthly expenses) that are not allowed on the means test, and it;s the means test that determines chapter 7 eligibility. So, if you're over $1300 on the means test, you'd need to come up with another $1300 of allowable expenses, not $500.

If the means test requires a chapter 13, but your expenses put you into the negative, then the trustee will probably make you stop the 401k contributions or cut back somewhere else. You could just end up paying trustee fees and attorney fees. The only thing we're paying in ours is our car payment + trustee fees + attorney fees. It's basically only costing us $96 per month since we'd have to pay our car payment regardless.

This is from what I understand, I could be wrong. If I am, I'm sure someone will correct me.

[DeadManCrawling]

Check with your attorney before adding these expenses.

I had 600/month or so in term life, for several million dollars on the policy. This would have been a huge red flag, except that the policy had been effect for 7 years, well before my financial troubles.

Attorney told me that had it been added in the previous two years, the trustee would have argued against it and won.

May be a district specific thing, but you want to ask first.

good luck