Means test and annoying rental income!

[Tom_Mi]

I'm filing due to an apt building purchase that went wrong...leaving me 100k upside down and way behind on mortgage pmts.

My salary puts me 1000/yr under the median. Yay! ...almost.

My management company (they run the buildings for me) finally got them rented and I'm starting to receive checks from them. The checks DON'T cover the mortgages and would never catch up.

My atty says the rents count against me on means (even though the income will go AWAY after surrender..)

and my atty says (investment property) Mortgage pmts can't be DEDUCTED from the rental income (even though the property will go AWAY after surrender..)

So here's my question: When does it become income? My atty says "after costs".

• Can I make it "not" be income if I instruct the Management company to simply make the checks out to the mortgage companies directly and avoid it as income?
• Can I instruct the management company to start doing LOTS of maintenance? New Decks? New Siding? Landscaping?....to the extent that it consumes the rents?
• Can I relinquish ownership faster than foreclosure/short sale -- to get the rents out of my hands?

I'm not trying to hide an asset...in fact I don't WANT this money. I especially don't want it to count against me for means.

What do I do?

[outofluck07]

Same problem - And attorneys are not familiar with it!

If you read the article at this site, it seems that mortgage payments can be deducted from the "income" obtained from a rental property in the income section of the means test a necessary operating expense. I would hope this is the case. If you don't pay the mortgage, the property would go away, and you wouldn't receive the rental income, so how is it not a necessary operating expense? The attorney I consulted is checking into this. His initial suggestion (which I will do in the meantime) is to contact the bank that hold the mortgage and let them know that you will surrender the property in your bankruptcy, and that the units are rented, so you would like to set up "receivership" so that tenants can make ppayments directly to the bank. If you never see the money, it is not your income. I plan on holding off for a few months after sertting this up so my 6 mo. average is much lower due to not having to include the rental income, unless the attorney tells me that he has confirmed that the mortgage payment may be deducted as a necessary "operating expense". I've been losing sleep over this - I hope it comes out ok for us both!

http://www.************************/...13-bankruptcy/

[Tom_Mi]

I read that article too! If I put mortgage payments into the "necessary expenses" column, then I pass the online means test with flying colors. When I started this process I was told that "it's a business loss, so CH7 should be easier for you". If that was Bush's plan, this catch-22 flies in the face of any such sentiment.

As an alternative to "receivership", could the management company simply create a side "account" to sort of escrow the funds?

The tenants write the checks to XYZ property management, not me. I'd think if they don't write me a check It doesn't become income.

[outofluck07]

Thats what I was told. If you aren't depositing it into your personal accounts, you shouldn't have to include it as income. I'll be calling my bank today to set up them taking the rent from my tenants.

It stinks that I'll have to wait for that many months though.

[Tom_Mi]

Thats what I was told. If you aren't depositing it into your personal accounts, you shouldn't have to include it as income. I'll be calling my bank today to set up them taking the rent from my tenants.

It stinks that I'll have to wait for that many months though.

Agree on having to wait. Our plan was to file this week. I'll still collect all my data for the atty..and just start saving (exemptable) cash ahead of filing.

Let me know how things go for you. Looks like we're the only 2 people in the US talking about it!