Over on Means

[BD33]

This really is me just wanting some opinons on the means test. When I run the means test calculator I am $2600 over median income for a 1 person household.
When I fill out the Current Expenditures, I am negative $505.00 a month.
No asset. Low debt about $14,500, but high expenses, rent,food and vehicle expense. Also have a rental home I own in another state with a business partner in default since May 06', the judgement was granted to the mortgage company on 6-24-08 for foreclosure. Both lawyers said I should be fine. But they did not run a means test. I ran mine own several times on legalconsumer.
Should I have any problems filing?

Thank you,

[Help!]

Hold up... both lawyers said you should be fine filing 7? Your means test shows a disposable income of $2600 per month? If you have disposable income on the means test and negative disposable income on Schedules I and J, that is usually a result of an income decrease. If this is the case, it may make more sense to wait until the means test more accurately reflects your current financial situation. Whatever the case may be, if you have that much disposable income on your means test you are definitely going to have problems.

[BD33]

It shows $768.00per month over. Median for year is a $2,540 difference. Sorry did not clarify that. Unfortunatley and Fortunatley My income has went up over the past six months, but my expenses have outgrown my income. With that stupid means test, they go by "Gross" which you never see and these ridiculous low IRS numbers from the 50's. On the Schedules it actully shows" Real Income and Real Expenses" So One shows over and one shows under, very confused on what to do?

[Help!]

The key is whether those expenses are "reasonable and necessary". For example, if the IRS Standards (in my opinion, total poverty!) for housing and utilities are $1600/month for your area but you actually spend $2400/month, the UST can adjust your means test housing expense to $1600/month. If you contribute $300/month to a 401K, the UST can eliminate that expense because it isn't an involuntary contribution - it's one you choose to make. If you spend $670/month on transportation and the IRS Standard is $342/month, the UST can disallow the amount over the IRS Standard unless you can document why there is no "reasonable alternative" to the higher transportation cost.

The biggest issue is that based on the means test, over 5 years you would have a total of $46,080 available to pay your creditors. There is more than enough to pay off your debt and your petition would give the appearance that you are a 13 and not a 7.

I agree on the means test - what a total piece of crap! You are getting the short end of the means test stick because your debt is low. If only you would quit your job for six months and run up another $190K in unsecured debt...

[BD33]

Will the home being foreclosed on help me at all?
Besides having no money left over at the end of the month, I am wanting to protect myself from the mortgage company wanting the leftover balance.

[Help!]

Now I see why you want to file Ch. 7. You do not currently have a deficiency judgment against you but you are anticipating one after the property is auctioned, correct?

If you file Ch. 7 showing the disposable income you've described on the means test I think you will be on the fast track for a dismissal/conversion. If you convert to Ch. 13 you will be protected from any deficiency judgment, but you will have to make payments for 5 years on your unsecured debt (the 3 year plans are only for those below median). It at least beats having your wages garnished, in my opinion.

There is no harm in trying for a Ch. 7. Unless there's evidence of fraud, the worst that can happen is that a motion to dismiss or convert to 13 gets filed (and you object to the motion to dismiss with a motion to convert to 13). Don't let the attorneys tell you a Ch. 7 is a slam dunk. Show them your means test numbers and ask them questions. Lawyers like to pat us on the head and tell us not to worry, but they'll get paid regardless of the outcome... keep that in mind.

[liz417]

The key is whether those expenses are "reasonable and necessary". For example, if the IRS Standards (in my opinion, total poverty!) for housing and utilities are $1600/month for your area but you actually spend $2400/month, the UST can adjust your means test housing expense to $1600/month. If you contribute $300/month to a 401K, the UST can eliminate that expense because it isn't an involuntary contribution - it's one you choose to make. If you spend $670/month on transportation and the IRS Standard is $342/month, the UST can disallow the amount over the IRS Standard unless you can document why there is no "reasonable alternative" to the higher transportation cost.

The biggest issue is that based on the means test, over 5 years you would have a total of $46,080 available to pay your creditors. There is more than enough to pay off your debt and your petition would give the appearance that you are a 13 and not a 7.

I agree on the means test - what a total piece of crap! You are getting the short end of the means test stick because your debt is low. If only you would quit your job for six months and run up another $190K in unsecured debt...

Hi Help,

Question: Does the trustee often "disallow" an over the IRS standard expense? I am nervous because we are over the 'allowed' expense because my hubby commutes over 120 miles per day. I know every trustee/case is different, but what is your opinion?

Thanks!

[Lajazz947]

The key is whether those expenses are "reasonable and necessary". For example, if the IRS Standards (in my opinion, total poverty!) for housing and utilities are $1600/month for your area but you actually spend $2400/month, the UST can adjust your means test housing expense to $1600/month. If you contribute $300/month to a 401K, the UST can eliminate that expense because it isn't an involuntary contribution - it's one you choose to make. If you spend $670/month on transportation and the IRS Standard is $342/month, the UST can disallow the amount over the IRS Standard unless you can document why there is no "reasonable alternative" to the higher transportation cost.

The biggest issue is that based on the means test, over 5 years you would have a total of $46,080 available to pay your creditors. There is more than enough to pay off your debt and your petition would give the appearance that you are a 13 and not a 7.

I agree on the means test - what a total piece of crap! You are getting the short end of the means test stick because your debt is low. If only you would quit your job for six months and run up another $190K in unsecured debt...

How can they adjust a housing allowance if my mortgage is well over the allowable standard?

Am I missing something?

[Help!]

Hi Help,

Question: Does the trustee often "disallow" an over the IRS standard expense? I am nervous because we are over the 'allowed' expense because my hubby commutes over 120 miles per day. I know every trustee/case is different, but what is your opinion?

Thanks!

The UST often questions these things, but you have an opportunity to document to them why your expense is in excess of the IRS standard. I saw a case where a judge ruled in favor of the debtor when the UST tried to reduce transportation costs and the debtor successfully demonstrated that they had no reasonable alternative to the costs to commute to work. Of all the expenses to have questioned, this would be the easiest to defend.

[Help!]

How can they adjust a housing allowance if my mortgage is well over the allowable standard?

Am I missing something?

The expenses have to be viewed as "reasonable and necessary" when the IRS Standard is exceeded. This leaves a lot of room for interpretation, but I saw a case where the UST filed a motion to dismiss because the debtors had a mortgage payment that was viewed as extravagant (I don't remember what the exact # was, but it didn't seem excessive to me). The court sided with the UST and found that if the debtor surrendered the house they'd be able to repay at least part of their debt.

[Lajazz947]

The expenses have to be viewed as "reasonable and necessary" when the IRS Standard is exceeded. This leaves a lot of room for interpretation, but I saw a case where the UST filed a motion to dismiss because the debtors had a mortgage payment that was viewed as extravagant (I don't remember what the exact # was, but it didn't seem excessive to me). The court sided with the UST and found that if the debtor surrendered the house they'd be able to repay at least part of their debt.

Interesting. So the UST can force me to sell my house? What if there is very little equity in it and I want to keep it?

Is this just for chapter 7 or does it apply to 13 as well?

Now I am really nervous.

[lrprn]

BD33 and others - the only way to know where you truly fall on the Means Test and Schedules is for an experienced bankruptcy lawyer who is very familiar with how your local court and trustees customarily deal with differences between what the Means Test required IRS figures and your real figures are to fill in your forms.

Expenses are most often the decision-makers whether you show disposable income or not. You don't just get to add in what your real expenses are. Those expenses have to at least match or be lower than the typical levels in your neighborhood. Any time you are over the required IRS figures or want to claim more than the norm in your area, you are likely to be asked to justify those expenses. And often they have to be justified with real bills and receipts, proof of online payments, etc.

Until an experienced bk lawyer runs your figures through the Means Test and Schedules, you are just making an educated guess. Running your own forms is a good way to get familiar with what's going to be asked, but what seems obvious to us is not at all obvious when you begin adding in court customs and case law decisions - something that the vast majority of us know nothing about. That's what you pay a lawyer for - not to fill out your forms - you are paying them for their knowledge and experience that can be used in your favor when you file.

[Lajazz947]

I ran the tests and used the IRS figures for everything. I just have a high mortgage payment.

Using their figures and accurate taxes I fall under the presumption of abuse.

I read where I am allowed to take the full amount of the mortgage and they can't mess with that is this correct?

[Lajazz947]

just bumping up.

[laurannm]

It's pretty rare for the UST to not allow your actual mortgage expense, but it is probably yet another aspect that varies between districts. I have seen cases in our district in which the debtors had mortgage payments well over $4k on the means test (and well-above the IRS standards for their family size) and it was not adjusted by the UST