Does the Amount of Debt Have Any Bearing on Whether or Not You Can File CH. 7?

[sisterfunkhaus]

We will be very slightly over the median income. I have not taken the means test yet. But, I am curious, does the amount of debt you have determine if you can file. For example, if someone had close to $200,000 in unsecured debt and had over $100 left per month on the means test, but less than say $200, would they still make you file a 13 even though you would only be paying back a very minscule amount(less than 5%)? I was looking at some forms in the NOLO ch. 7 book and saw a form where a question was asked about how much the debtor owed and whether the estimated payment over 5years was less than 25% (I think.)

I know I ask a lot of questions, I just want to know my way around the laws before going to a lawyer to file.

[anonymuse]

There's the law, and the application of the law. Many trustees are ignoring what percentage of debt can be paid back and are pushing anyone with $100 of disposable income into a Ch 13 payback plan. However, the law does indicate the ability to payback 25%.

Check out page 189 of Nolo:

If You Fail the Means Test
If the information you provide on this form shows
that you can pay more than 25% of the debts you
listed in Schedule F over a five-year period, your
Chapter 7 filing will be presumed to be abusive,
and the U.S. Trustee will ask the court to either
dismiss your Chapter 7 filing or, with your consent,
convert your case to a Chapter 13 case. If this
happens to you, we highly recommend that you
obtain the services of an attorney to help you stay
in Chapter 7, unless you are willing to sign up for
a five-year repayment plan. If you do, you can
use most of the bankruptcy papers filed in your
Chapter 7 case in your Chapter 13 case.

[FoolAndHisMoney]

We will be very slightly over the median income. I have not taken the means test yet. But, I am curious, does the amount of debt you have determine if you can file. For example, if someone had close to $200,000 in unsecured debt and had over $100 left per month on the means test, but less than say $200, would they still make you file a 13 even though you would only be paying back a very minscule amount(less than 5%)? I was looking at some forms in the NOLO ch. 7 book and saw a form where a question was asked about how much the debtor owed and whether the estimated payment over 5years was less than 25% (I think.)

I know I ask a lot of questions, I just want to know my way around the laws before going to a lawyer to file.

The proportion of debts to assets and income may raise a flag to the US Trustee. If you are slightly over the median and owe 200k on consumer debts they may ask for additional paperwork. If you made six figures at the time it was incurred and are now making a much lower income due to circumstances beyond your control then that should be fine. Medical and business debts that high are ok too. If they are all credit cards and loans be prepared to explain where it all went.

[aa06a47]

We will be very slightly over the median income. I have not taken the means test yet. But, I am curious, does the amount of debt you have determine if you can file. For example, if someone had close to $200,000 in unsecured debt and had over $100 left per month on the means test, but less than say $200, would they still make you file a 13 even though you would only be paying back a very minscule amount(less than 5%)? I was looking at some forms in the NOLO ch. 7 book and saw a form where a question was asked about how much the debtor owed and whether the estimated payment over 5years was less than 25% (I think.)

I know I ask a lot of questions, I just want to know my way around the laws before going to a lawyer to file.

The 25% only applies if your between 100-166/month in disposible income. The law pretty much says if you can pay back 10K, your in a 13, no matter what the percent payback is. If you can pay back less at 10K, let's say you can pay 9k back but your debt is 90K, then that is less than 25%, so you can file chapter 7.

[Faith]

$100 left in disposable income.

"For example, if someone had close to $200,000 in unsecured debt and had over $100 left per month on the means test, but less than say $200, would they still make you file a 13 even though you would only be paying back a very minscule amount(less than 5%)?"

If you have $100 left in disposable income, I would go back and look at my budget. Make sure you include all appropriate expenses. My lawyer ran our means test several times and asked us some appropriate questions. We ended up with our means test showing (I believe accurately) no disposable income. Frankly, this reflects the true state of our budge. I haven't smelled a whiff of disposable income in over five years.

[aa06a47]

[I] I haven't smelled a whiff of disposable income in over five years.

The trustee has a better nose than we have, I know what you mean... I haven't smelled any disposable income in a very long time either, but somehow my trustee smelled some out of me!!

[Faith]

The trustee has a better nose than we have, I know what you mean... I haven't smelled any disposable income in a very long time either, but somehow my trustee smelled some out of me!!

True. We flew through the 341 hearing and got a whatever you call it (report?) of no assets from the trustee. But a bankruptcy analyst has asked for a small yellow-book sized stack of documents (bank statements, tax records, answers to a raft of questions, etc.) I'm sure he's laying his disposable income detecting probocis against our budget as I write these words. And I confess that I quiver in fear as the days slowly tick by while awaiting a challenge to our bankruptcy.

Nevertheless, I suspect it is better to really examine your budget before you submit your schedules to ensure that it is realistic. In no sense do I advocate lying or cheating. But I do I say be fair to yourself when you lay out those numbers. If the trustee then elects to carve huge chunks out of your budget and call it disposable income, you won't have to revise your numbers after the fact.

[sisterfunkhaus]

The proportion of debts to assets and income may raise a flag to the US Trustee. If you are slightly over the median and owe 200k on consumer debts they may ask for additional paperwork. If you made six figures at the time it was incurred and are now making a much lower income due to circumstances beyond your control then that should be fine. Medical and business debts that high are ok too. If they are all credit cards and loans be prepared to explain where it all went.

We owe $80,000 in student loan debt. I have a $16,000 medical loan, a $10,000 debt consolidation loan, and the rest is stuff that's been brewing over the past 12 years that we've married. We lived off credit cards in college. I used cc to pay for $300 a month for meds for Lupus and depression that my ins. doesn't cover ( we have horrible insurance.) Some is overdrafting a little here and there. It all just added up so quickly. We live in a modest home. No granite counter tops here. Nothing fancy. No jewelry. As of June, we had about $50,000 in OPEN credit available in addition to our close to $100,000 in cc/medical debt. All of our cards just kept upping our limits because our credit was so good. We had a pretty decent income at one time when we were both teaching, but I quit to do daycare and be at home with my child. Some of the charges came from living expenses from moving down in pay with my job. We intended on paying it all back. I am about to start work on my master's degree and am going back to work in about 3 years when I am done. I thought we could manage our minimum payments until then, but our house of cards came tumbling down when I lost close to $800 a month in income and my student loans came due. NOw I'm scared. I had no idea the US trustee might get involved. We are just normal people who have charged too much and managed our money poorly over the last 12 years.

Does anyone know what the US trustee might do to us? Can they deny our bankruptcy? On what grounds? Will having a lawyer help? We are going to use a lawyer, I just want to know everything going in. I am just that way.