Seen a Bankruptcy Lawyer today and have many questions.....

[LadyInTheRed]

Sorry, Michael. I was confusing you with the OP.

I think I'll go back to work now!

[LadyInTheRed]

The DMI on 22C says I have DMI (after paying all secured) about $11.00 a month.

I think some other more specific figures may help us all see your situation more clearly. For each of your secured loans, it would be helpful to know the value of the asset, balance due and monthly payment.

ETA: Again, thought I was repying to OP.

[FishersMike]

I would not file a Chapter 7 if you paid me
It would not work for me in my circumstances. Here are my circumstances:

I have one vehicle worth about $21,000 (if I use high value guide books) and loan is $22,600 through Chrysler. It is a 2007 Jeep that I have a Lifetime Warranty on it -- full warranty that covers everything, not just PowerTrain, so no need to give up this car for a newer one - it has about 40,000 miles on it.

I do not have any other secured property.

I owe about $18,000 in back taxes with IRS & State. However, thanks to JB he advised that the Penalty & Interest on Penalty would be moved to un-secured so I am just guessing high to say my secured portion is about $15,000.00

I will also have the balance of my attorneys fees in it, so about $35.00 a month.

My district charges 9.1 percent Trustee fee.

So I could get my expenses even though over median to allow me to do a Chapter 7 but I need a vehicle and I need interest to stop occurring on tax debt.... plus want the penalties removed and pay off the debt in 5 years. If I were to go on payment plan with IRS I would never have it paid off.

The good thing is my Jeep payment was $599.00 a month, which I have been making. So about $100.00 more a month I can pay the Jeep and Government -- and wipe my un-secured debt in the same process.

[LadyInTheRed]

Hi Lady,

Okay I guess I have been confused too. I thought I read here that most Trustees make your plan payment off the 22C Means Test. So okay all the money I need to make for everything secured is about $700.00 -- so I need to have the Schedule J show at least $700.00 net income == so let's say it shows $750.00 net income - that would mean that my plan payment is $750.00 regardless of the DMI or plan payment figured on the 22C? So essentially 50 a month going to unsecured?

Also 401k voluntary contributions and loans can be deducted on line 55 of 22C -- where to we list on schedule J, other expense? Or do we not list it here and make it seem as though our monthly net is higher? Thanks!!

Michael

Sorry. When I was looking at my means test, I missed line 55, so didn't see anywhere where the 401k loan was deducted. Also, I wasn't very clear on the means test issue. I believe if you are over median, you need to keep the schedule J figure equal or below the 22c figure, but I'm not certain about that. I think there may be some conflicting case law about whether your plan can use actual reasonable expenses instead of the means test. It may depend on how the issues has been ruled on in your district. Maybe somebody else will chime in on that.

What you will be allowed for a 401k contribution depends on your district. I was allowed both the loan payment and a contribution, but the total of the 2 is about 5% of my salary which is a pretty low contribution. Also, my means test DMI was negative, so that may have given me more leeway. If you have a history of both the contribution and the loan payment and can afford it, I'd try for it. But, you may need to leave it off to show higher net income on Schedule J. You may not be able to afford to fund a Chap 13 and make a 401k contribution.

If you are really in a position where you cannot qualify for a 7 and can't come up with a workable Chap 13 plan, I'd suggest finding an attorney who is willing to fight for a Chap 7 and take your case through appeals if necessary. But, first you need to consider giving up the cars and quads (it is you who has those, right?). You haven't said what the monthly payments are on the secured assets. But if your 2 cars are worth $60K, I bet you can find less expensive cars that are reliable.

ETA: I posted the above thinking I was replying to the OP (Guest123). Sorry for the confusion.

[FishersMike]

The DMI on 22C says I have DMI (after paying all secured) about $11.00 a month. I think I may be getting a little tax refund this year (which IRS will keep) because until around August of this year they made me claim 0 deductions (forced employer). I was able to get changed to two now...... also is there a website I can calculate the correct tax withholdings since I here Trustee goes by this for deductions rather than what you are actually claiming. This will help me because my State is wrong showing 9 deductions but I have not changed it yet as I cannot do online at work.

[gman]

Means Test I get it over by $11.00 a month -- with projected payment just being shy of $700.00. Yes I owe about $15000 in taxes, but that was already calculated as Priority and in that payment, along with my car and attorney's fees.

So you have a positive DMI on the Means Test of how much? Around $200? (Making sure I understand what being over by $11 means...)

Can you make sure you owe MORE back taxes in January of 2011? If you follow my idea - you will see how you can legally drive down your DMI on the Means Test.

Remember, the same thing with taxes runs in reverse. Many people here are worried about "keeping their tax refund." My suggestion - DO THE OPPOSITE!

[FishersMike]

Means Test I get it over by $11.00 a month -- with projected payment just being shy of $700.00. Yes I owe about $15000 in taxes, but that was already calculated as Priority and in that payment, along with my car and attorney's fees.

[gman]

Do you know how much over the Means Test you are right now?

Do you owe any back federal or state taxes?

[walkthaplank]

Mike, every district is a little different. In my district the trustee objected to me paying a 401k loan AND contributing to my 401k... essentially they chose the lower number and objected to that. The upside is that I can put that money back into my 401k once the loan is paid off without having a "step-payment". Keep this in mind going into your 341 and the confirmation process.

My lawyer didn't tell me there would be an issue, but when it came to the confirmation process the trustee just tossed out jargon regarding the objection and raise my payment (nearly double) and I had no idea where that number was coming from. Because I had an "appearance lawyer" at my hearing, nobody explained to me what had happened. When I spoke to my attorney afterward he told me about it. When I asked why he didn't say anything up front, I got the phone equivalent of a shrug and a "eh, we thought it would go through". Be forewarned, ask your lawyer where they foresee any objections and have them give you a worst case scenario with expenses. Had I known this going in, we could have padded in other areas to anticipate the objections and avoid them outright. Good luck!

[FishersMike]

Hi Lady,

Okay I guess I have been confused too. I thought I read here that most Trustees make your plan payment off the 22C Means Test. So okay all the money I need to make for everything secured is about $700.00 -- so I need to have the Schedule J show at least $700.00 net income == so let's say it shows $750.00 net income - that would mean that my plan payment is $750.00 regardless of the DMI or plan payment figured on the 22C? So essentially 50 a month going to unsecured?

Also 401k voluntary contributions and loans can be deducted on line 55 of 22C -- where to we list on schedule J, other expense? Or do we not list it here and make it seem as though our monthly net is higher? Thanks!!

Michael

[muzzey58]

Nothing is worth being harassed by debt collectors. I have been in an active chapter 13 for 4 years now. I have about a year left and will be glad to be out of it. The laws were changed in 2005. There wasn't any means tests. If you were broke then you qualified for chapter 7, no questions asked. Lobbyists stole the right for the average citizen who is middle class to file chapter 7. The big banks have created this economic downfall. They paid big bucks to lobbyists to push for the bankruptcy reform of 2005. Even before that though there were tight restrictions on what you could keep in bankruptcy. Letting the quads go will be a small price to pay for peace of mind.
While you are in a chapter 7 the time to discharge is usually within a much shorter time frame. You file and basically are discharged within a certain period of around 6 months. After that you start completely fresh. Your credit profile is clean except that a bankruptcy is listed. Any credit problems after you file are a strong possibility in a 13. You barely have enough money to pay bills. If you have emergencies such as my husband and I have encountered then you're in trouble. In February, my husband fell and broke his rib. In June I dropped a heavy object on my foot and broke my foot. Just two months later I had surgery on my arm. We have health insurance but have alot of deductibles. Try explaining to hospital creditors that you can't pay $2000 in one lump sum. One creditor said for me not to pay my car, my rent nor bills just to pay the deductibles. I am paying what I can. You don't want to be in this predicament. I'm sorry that you may lose your home. But thankfully you are employed. Someday, you will be back on your feet and you'll be able to enjoy the fruits of your labor. This will be over before you know it. It's been 4 years and it just seems like yesterday. I wish you the very best and good luck.

[johnjan2009]

all, Sorry but just trying to chime in since I don't have enough posts yet to do my own :- Anyway, can you file chapter7 and still keep your home(1st mortgage is current), 2-cars(1 paid off and 1 financed) and discharge all other unsecured debts like credit cards including 2nd loan/heloc? Home is underwater by $250k. Just trying to get consensus prior me start hunting BK atty and will really appreciate it. BTW, DMI showed negative which mean qualified for chapter7?

[LadyInTheRed]

See I don't see how letting the secured items which are cars go, all that will do is turn up more DMI, correct. It is the same for either a ch.7 or ch.13

I think this is where the discussion in that other thread got confused. I was thinking of DMI as being the "net monthly income" on line 20.c of Schedule J. I think others were too. But, as you know, DMI is what is on the means test. Whatever is on Sched J, Line 20.c. (your actual current income less your actual currrent expenses) is going to be your plan payment, unless you can pay 100% of your debt with less. Ideally, you would enter your income and expenses on schedule I and J and, presto! You have your plan payment. But, if you fill out Schedule I and J and come up with $500 on line 20.c., but you have to pay at least $1,300 a month to cover secured debt being paid in the plan, priority debt, trustee fees, attorney fees and any non exempt assets you may be keeping, you need to adjust your expenses on Schedule J to show $1300 of net income. Schedule J should not include secured debt that will be paid in the plan. So, if your plan payment has to be at least $1,300, if you abandon some of the secured assets, your minimim plan payment will go down and the amount of net income you need to show will go down too.

For example, if you owed $36,000 on one of your cars and you gave up that car, your minimum plan payment would be reduced by $600 ($36,000/60) to $700, so your schedule J net income only needs to be $700. It may also increase your DMI on your means test, but you can deduct your 401k loan from the DMI on your means test, so hopefully there is a net advantage.

Does that make sense?

[Guest123]

Oh, I must have misunderstood you. I though that the overtime was the reason you didn't qualify for a ch.7. So, you'd have to file 13 even without the overtime? That sucks.

You've said a few times that you can't afford the secured payments without your overtime, so I assumed (you know what they say about people who assume, lol) that you wouldn't be able to continue to make those payments if you didn't have the overtime 2x a year any longer.

No I tried the means test with and without the overtime and either way doesn't look good. The only way to file a ch.13 without the overtime is to let go of the cars (secured debt) and then we would have a higher DMI that would most likely have to be paid into the plan and be stuck with some unreliable junkers. And with our job that wouldn't work.

Thanks again for the replies.

[Guest123]

Letting the secured items go won't help you qualify for a 7, but it may help lower your Chap 13 payment. If I understand you correctly, the $1300 payment is above your $500 DMI, because the payment includes payments on the secured debt. If you give up secured assets, your payment will go down. Also, if you are keeping non-exempt assets, that may also be making your payment higher than it otherwise would be.

The bankruptcy code does not require that all secured debt be paid during the plan. Do the loans extend beyond 5 years from your filing date? I believe you should be able to keep paying on the debt after the Chap 13. I think that debt just wouldn't be discharged. I'm not 100% positive about how that all works, especially if a trustee requires the secured debt be paid within the plan.

See I don't see how letting the secured items which are cars go, all that will do is turn up more DMI, correct. It is the same for either a ch.7 or ch.13
Correct the plan payment includes secured debt.

I need to ask my attorney about if the cars need to be paid off within the plan as I think both loans will barely extend alittle longer then 5years.....good question.

Thanks