How trustees view expenses...am I overthinking things?

[lalap123]

Thanks so much...our car payment is reasonable in my opinion (around $200), and the car wouldn't be considered luxury. So what you're saying is that if my reaffirmation agreement is denied then I would go straight to the bank and work out an agreement with them directly? Would this likely work, especially since they'll know that I filed? I have an excellent payment history with them so hopefully they wouldn't want to take the car back and try to get rid of it again.

I kind of assumed the judge would deny it and tell the bank to come and get it. Interesting...

[keepmine]

Yes, I have spoken with an atty and he sees no problem with me keeping the car but said that I can't show a negative budget. The mortgage is only in my husband's name so there shouldn't be a problem keeping it (in other words, I am the only one filing so won't need to do a reaffirmation agreement). Once we wait about four more months we will be well under the median, even including our tax refund, as long as I don't go out and get a high-paying job. We'll probably end up at least $5000 under the $78454 median.

What I am trying to do here is keep my car to avoid the hassle of having to get a new one and get another loan at who knows what interest rate. My husband would have to get the loan I suppose, and his credit rating is pretty good but with banks not loaning the way they used to I have no idea whether or not he could even get a loan?? If I stayed home and didn't have to run kids around I suppose it wouldn't be such a hassle, but I'm on the road a lot and am hoping at some point to work again so I'll need reliable transportation.

My point is, I don't agree with having to take the whole $1632 allotted to me for food, clothing, personal care, etc. if I don't actually spend it, especially if it means the difference b/t having to give up the car or keep it. Even though we are a family of five my children are still young and we only spend around $150 a week on groceries, $80 every three months for haircuts, almost nothing on clothing b/c we get my sister's hand-me-downs, and sure we could go out and purchase extravagant gifts for holidays and birthdays but don't have to. What else goes into this category anyway?

Thanks for answering all of my questions. Sorry they are so strange...

I'd get some clarication from my lawyer about the negatve budget. It may mean, you just won't be allowed to reaffirm the car and that's not a bad thing. There is some caelaw that says all a debtor need do is offer to reaffirm. If the reaffirmation is denied, they've met there burden under the bk code.
Unless you've a luxury ride with a high loan payment, I just don't see you losing the car if you stay current.

http://www.georgiabankruptcyblog.com/archives/miscellaneous-cases-arizona-bankruptcy-court-ride-through-still-available-for-secured-debts-after-failure-of-timely-filed-reaffirmation-agreement.html

[OhioFiler]

Actually, it makes perfect sense. When you fill out your paperwork at a job, you can tell them you have any number of dependents (up to 11, I believe without any documentation). So the person who wants more money in their paycheck every month but doesn't mind owing the IRS in April has a different net amount than the person making the same gross amount who wants to get a refund every April, so they claim zero dependents when they actually have three kids. The means test (as asinine as it is) starts with gross and then factors your actual taxes in--not what you have taken out every pay period. If they started with net, we'd all be claiming zero dependents and filing after we spent our refund checks!

If an employee claims 10 or more dependent exemptions the employer is required to notify the IRS quarterly. Lots of people use 9.

I'm amazed at the number of people who use the Federal Treasury as a non-interest bearing saving account by overpaying their taxes each year with the intent of getting a big refund. My goal annually is to break even or owe no more than the statutory minimum. Makes more sense to me for the government to loan me money and I pay it back interest free on April 15.

[lalap123]

Yes, I have spoken with an atty and he sees no problem with me keeping the car but said that I can't show a negative budget. The mortgage is only in my husband's name so there shouldn't be a problem keeping it (in other words, I am the only one filing so won't need to do a reaffirmation agreement). Once we wait about four more months we will be well under the median, even including our tax refund, as long as I don't go out and get a high-paying job. We'll probably end up at least $5000 under the $78454 median.

What I am trying to do here is keep my car to avoid the hassle of having to get a new one and get another loan at who knows what interest rate. My husband would have to get the loan I suppose, and his credit rating is pretty good but with banks not loaning the way they used to I have no idea whether or not he could even get a loan?? If I stayed home and didn't have to run kids around I suppose it wouldn't be such a hassle, but I'm on the road a lot and am hoping at some point to work again so I'll need reliable transportation.

My point is, I don't agree with having to take the whole $1632 allotted to me for food, clothing, personal care, etc. if I don't actually spend it, especially if it means the difference b/t having to give up the car or keep it. Even though we are a family of five my children are still young and we only spend around $150 a week on groceries, $80 every three months for haircuts, almost nothing on clothing b/c we get my sister's hand-me-downs, and sure we could go out and purchase extravagant gifts for holidays and birthdays but don't have to. What else goes into this category anyway?

Thanks for answering all of my questions. Sorry they are so strange...

[SuzieBK]

The income calculation for the Means Test is gross income. Taxes are deleted from the total before the possibility of disposable income is calculated.

Keep in mind the 2005 Congress passed the legislation that mandates using gross income. When does Congress ever pass a law that makes sense?

Actually, it makes perfect sense. When you fill out your paperwork at a job, you can tell them you have any number of dependents (up to 11, I believe without any documentation). So the person who wants more money in their paycheck every month but doesn't mind owing the IRS in April has a different net amount than the person making the same gross amount who wants to get a refund every April, so they claim zero dependents when they actually have three kids. The means test (as asinine as it is) starts with gross and then factors your actual taxes in--not what you have taken out every pay period. If they started with net, we'd all be claiming zero dependents and filing after we spent our refund checks!

[BKINAZ]

Thanks and yep...congress is a tad out of touch.

[lrprn]

Okay...I have heard gross at times and I think I recall some saying to use your net, is it for sure gross? Why? If you make $6,000 (gross) a month and only take home $4,000 how does it make sense to use gross? (thanks)

The income calculation for the Means Test is gross income. Taxes are deleted from the total before the possibility of disposable income is calculated.

Keep in mind the 2005 Congress passed the legislation that mandates using gross income. When does Congress ever pass a law that makes sense?

[BKINAZ]

For your income, you use the last 6 months gross-not the full year.

Okay...I have heard gross at times and I think I recall some saying to use your net, is it for sure gross? Why? If you make $6,000 (gross) a month and only take home $4,000 how does it make sense to use gross? (thanks)

[keepmine]

I have no idea what you're trying to do here. Many districts use the IRS tables as a default. You use the amount in the table unless you have some reason to increase that particular expenditure.
For your income, you use the last 6 months gross-not the full year.

Have you actually spoken with an attorney about reaffirming the house and car?

[lrprn]

Someone mentioned having to take the full amount listed for expenses in the food, miscellaneous, personal hygiene category. Why is this?

If you are close to the median for your state and family size, then you need every dollar of every legitimate expense you can get to be sure you can file Ch 7.

If we spend less than our allotted amount we should be able to state this I would think.

Trustees are looking for reasonable expenses that match your neighborhoods typical expenses. It's when the expenses are over your neighborhood's averages that your trustee will ask for some verification of the overages. Trustees don't give out rewards for being *under* the average expenses.

[lalap123]

Okay. So taking 12 months and averaging it out...what if I was making around $80K for quite a bit of last year and living over my means...do I use these figures to get an average? In my opinion it will be skewed b/c I am no longer bringing home a large part of our household income.

If the trustee is interested in our expenses, the only thing in writing that we'll be able to provide will be paper bills for things like utilities, car payments, insurance, etc. For those other expenses that change monthly he'd most likely just take our word for it, right? Especially if we are underestimating instead of overestimating to get out of being pushed into a ch 13.

Someone mentioned having to take the full amount listed for expenses in the food, miscellaneous, personal hygiene category. Why is this? If we spend less than our allotted amount we should be able to state this I would think.

This has been an interesting discussion...I was under the impression that the trustee was only protecting the creditors' best interests and could care less whether or not a person is able to continue to make payments on things that are not included in the BK.

[keepmine]

Cutting expenses and economizing is fine-we all do that. But, that just takes you so far. At some point, you have to realistically look at your expenses and income. If a mortgage payment is more than 35% of your takehome you probably have something you can't afford.
To each there on but I just would not jeopardize my fresh start to hang on to a house that ate up so much of my check that I couldn't establish any sort of savings or, had to live a spartan existence just to make the mortgage payment.

With expenses like auto insurance, or ISP {pay semi annually} my lawyer took the annual total and divided by 12 to get a monthly dollar number. Try that with as many of your expenses as possible. Some things like food you may be stuck with the IRS standards for your district. With utilities, you can use the actual number. Add the last 12 months and divide by 12 to get a monthly number.
Ask your lawyer how trustees feel about prepayments. We've had a few posts here where some trustees tool issue with it if you didn't have a history of prepaying.

[lalap123]

Yes, I agree (momof3b1g). We have a very reasonable house payment for our area, plus we have a little equity. Why would we want to move (and how could we with a recent BK on our file)? Maybe it's because we have three kids and the hassle plus the upheaval of moving, potentially into a new school district, is too overwhelming.

In my opinion, I would rather cut things out of our budget when we are down to absolutely no extra money and with no access to credit cards. The reason we were able to afford all of this extra stuff was either a) we were putting it on credit cards or b) this most recent example of getting a rather large tax refund. Thus we are back to my original question - how to use up all of this extra money on things that we could normally do without if we had to (the ability to make house repairs or afford cable are secondary to me being able to make my house or car payment) but yet let the trustee know that our budget does not HAVE to include these things. Mortgage and car notes are always the first to come out every month and of course you prioritize the rest. Which makes me think of something else...could we just pre-pay our house and car notes for two or three months out?

I should also add that I am looking for work and hopefully will be bringing more money in soon. I'm not looking extremely hard right now b/c I need to stay well under the median for the next few months...

[OhioFiler]

I wanted pop in and ask why everyone says this? I get the point but unless you have a very high house payment where are you going to go for what you pay now? On top of having a bk under your belt.
Most of the time your budget is off(in our case anyway) you have to budget every little thing. We use alot of our taxes for things we put in the budget and its hard to figure out how much to budget for yearly expenses. if you didn't have an official budget before.

You have plenty of historical budget information available. Look at you checking account detail and your credit card statements. Most of your outflows are listed in those documents. We can see all of our expenditures going back quite a while as we rarely used cash for anything and even that showed up as ATM withdrawls.

[momof3b1g]

you need to rethink hanging onto the house. You don't want to emerge from bk and still live paycheck to paycheck.

I wanted pop in and ask why everyone says this? I get the point but unless you have a very high house payment where are you going to go for what you pay now? On top of having a bk under your belt.
Most of the time your budget is off(in our case anyway) you have to budget every little thing. We use alot of our taxes for things we put in the budget and its hard to figure out how much to budget for yearly expenses. if you didn't have an official budget before.