With a Threshold debt payment amount < 25% Can I automatically Pass the Means Test

[HHM]

You are completely misunderstanding the 25% rule. The law does not say you must be able to pay back at least 25% in order to be converted to a chapter 13. The law is, IF you can pay back 25% or more, then your case is presumed an abuse, but the corollary that if you cannot pay back 25% is NOT the case.

The bottom line is; if you can pay back $166 per month ($10,000) in 60 months, the court under code section 707(b) presumes your chapter 7 is an abuse and will file a motion to dismiss.

[debtinohio]

I feel for you. I had a semi-high income, 500k+ per year, until a devastating back injury a few years ago.

One of the hardest things, for me anyway, was adjusting to this new reality. Your situation is very different, but similar in other respects. A repositioning of priorities is certainly beneficial, deciding what things (material, psychological, family, emotional) are most important, and rearranging your life and finances to handle the circumstance, whether that be Ch7 or Ch13.

I've had a few years to consider it from all angles and also spent the time researching the intricacies of BK law. In the end, I (and my family) are better off for making a few sacrifices that pay off very big in other ways.

I wish you the best of luck, whatever road you choose. This can be a life-changing experience. Whether it is a good or bad result is largely dependent on you.

Best,

-dmc

Thanks so much!

[debtinohio]

I think most of your expenses are legitimate. I'd find me a good attorney and go for it.

I'm at least pushing him for it, I don't have $500 music lessons, BMW 7 Series, country club memberships, etc. and with the BASICS and my court ordered child support payments it gets me in the range so why not look at it. I have basic cable and an $18 netflix subscription listed as "entertainment" the $120 for a tutor is documented as needed by the school and the ONLY activity for my kids is a $120/month cheer lesson for one of them and she's been in that for 3 years. No other outrageous stuff, the cars are above the IRS guideline payments but even if they only allowed the $489/car I'm still right there negative once everyone is in and WAY under the 25% threshold.

Now, do I want to go through the ringer with the UST audit? That is tough, it is A LOT of stress on my family so I may just choose not to bother and just do the 13.

$2400 house (-20,000 equity)
$1150 cars (yes, this is over the guidelines by $250)
$500 utils (gas, water, electric, $75 cable, sewer, garbage,phone) ( I have detailed records to back this up they are all on a budget plan and have been for 3 years)
$1650 food/clothes/personal ( I have detailed records to back this up)
$415 gas ( I have detailed records to back this up)
$140 car insurance ( I have detailed records to back this up)

6 month average take home pay is $6568 -above expenses = around $300 and I did not add anything else in there. No way $500 in utilities is high for our house in frigid O-H-I-O

[klandsb]

debtinohio.... There is another member Liz417 who was over median and got a chapter 7.. I believe if I am thinking clearly she went to 6 lawyers before she found one to do a chapter 7.... Read her post if u get a chance and maybe even send her a private message... She might give you some insight...

[DeadManCrawling]

I feel for you. I had a semi-high income, 500k+ per year, until a devastating back injury a few years ago.

One of the hardest things, for me anyway, was adjusting to this new reality. Your situation is very different, but similar in other respects. A repositioning of priorities is certainly beneficial, deciding what things (material, psychological, family, emotional) are most important, and rearranging your life and finances to handle the circumstance, whether that be Ch7 or Ch13.

I've had a few years to consider it from all angles and also spent the time researching the intricacies of BK law. In the end, I (and my family) are better off for making a few sacrifices that pay off very big in other ways.

I wish you the best of luck, whatever road you choose. This can be a life-changing experience. Whether it is a good or bad result is largely dependent on you.

Best,

-dmc

[debtinohio]

Ok. So now on your other post you make it sound like its a Chaper 13 and your attorney will have the paperwork back to you on Friday !!!!

Yes, it's his first attempt at my means test which he will get back to me on Friday, at which time he said he would let me know his thoughts on the 7.

I'm guessing a lot of people teeter on the edge of Chapters and have these same questions.

The other post is specific to the Trustee in my area, it will most likely end up as a 13 but if I did not at least inquire about a 7 I'd wonder the next 5 years.

[OhioFiler]

I think most of your expenses are legitimate. I'd find me a good attorney and go for it.

[klandsb]

Ok. So now on your other post you make it sound like its a Chaper 13 and your attorney will have the paperwork back to you on Friday !!!!

[debtinohio]

Thanks everyone - it's been a long road and I'm just exploring ALL options. The 215K debt came from a 3 year divorce/custody battle with an unlimited funds opponent (In the end I did get my kids 70% of the time, but I do pay her a significant amount monthly now - hence the lower take home pay), $50,000 in a failed business (on business cards) and the rest bad decisions in regards to real estate investments.

Ironically the last couple years worth of credit card statements I'm fine with, since I used one set of cards for all household expenses (AMEX) I was able to pull categorized reports and receipts for almost all questionable expenses anyway.

[debtinohio]

iron clad" to avoid being dismissed or converted.

This is great information - thanks :-)

[UpsideDownMI]

I understand I'd have some trouble with expenses, I'm just wondering if the 25% limit is ever used?

iron clad" to avoid being dismissed or converted.

[backtoschool]

Your case will probably be looked at closely by the US trustee. Expenses that most likely won't be allowed are:

The tutor
Entertainment
cable over basic
expensive cell phone plan
car payments over $489
utilities over the average for your area (450 is high)
Kids activities beyond very basic amounts
Eating out
Student loans in many states. (some allow them some absolutely do not allow them)
Music lessons
excessive 401k contributions

The US trustee only has to find around $175-190 dollars a month in these discretionary expenses to kick you into a chapter 13.

[klandsb]

debtinohio: I feel your pain. None of us really wants to be under the trustees thumbs for the next 5 yrs but it's made for people with stable income which appears to the case with you & me included. Did u look at state guidelines ?? And also the IRS guidelines ??
Bankruptcy is a BIG decision and cant be taken lightly. You have to be in it for the long haul or its just not gonna work. A quick fix for some of us just isnt in the cards but at least we are employed which alot of people cant say.. I count my lucky stars for that everyday..Just research on this site and you will find some good threads about a ton of different things and read the STICKIES...They are very informative...

[shabam]

You are making a mistake assuming that you will simply cite the IRS limit if audited or in a 2004 deposition. If the UST asks to review your case, they will possibly ask for one or two years worth of bank and credit cards statements. You will also have to present actual receipts to explain everything listed. The IRS limits are just that, limits. You still need receipts and bank statements to verify these amounts.

To make matters worse, you may also need to explain where the $215,000 worth of unsecured debt went. Any debt over $100K is a red flag and almost guarantees an audit. There are two major red flags here. Which translates to audit.

How about your exemptions? Are you under those totals? Did you make any large transactions on your credit cards within the last year?

[debtinohio]

Some trouble is an understatement.

I have never heard of the 25%

Not really -- how much do you think is left once you take out the $2400 for house, $1650 IRS limit for food/personal for 5 in my zip 2 car payments (IRS limit amounts) IRS limit utils ? That's $5500 alone