Another newbie question...paying bills before filing

[alice0427]

You can look at your state's median income and some of the other state and local expense limits here:

http://www.usdoj.gov/ust/bapcpa/meanstesting.htm

Your income for the purpose of the means test is your gross (before taxes) annual income. Like you said, about $55,000. I'm sorry to say that you probably won't qualify for Chapter 7 under the new laws. The highest allowed income for a single person in ANY state is a little over $52,000 in Connecticut. There's a good possibility that you will have to file chapter 13.

You will need to take a very serious look at your finances and decide whether it would be better to try some sort of credit counseling for a few years or to spend 5 years in a Chapter 13 plan.

Regarding your student loans, you may try asking for another deferrment or forebearance. I would call and talk to your loan servicing agency and see what they can do. They can offer graduated payment plans, where the payments start low and increase gradually. Sometimes they can do a refinance at very low interest rates for a longer period of time. FYI, I was able to refinance my SL's at a little over 2% for 20 years. My payment on $20,000 is $123. Naturally, I'd love to be able to pay more, but this payment works for my family. And hey, at 2% interest...I'm not so worried about it!

Good luck!

[FoolAndHisMoney]

You can look at your state's median income and some of the other state and local expense limits here:

http://www.usdoj.gov/ust/bapcpa/meanstesting.htm

Your income for the purpose of the means test is your gross (before taxes) annual income. Like you said, about $55,000. I'm sorry to say that you probably won't qualify for Chapter 7 under the new laws. The highest allowed income for a single person in ANY state is a little over $52,000 in Connecticut. There's a good possibility that you will have to file chapter 13.

You will need to take a very serious look at your finances and decide whether it would be better to try some sort of credit counseling for a few years or to spend 5 years in a Chapter 13 plan.

Regarding your student loans, you may try asking for another deferrment or forebearance. I would call and talk to your loan servicing agency and see what they can do. They can offer graduated payment plans, where the payments start low and increase gradually. Sometimes they can do a refinance at very low interest rates for a longer period of time. FYI, I was able to refinance my SL's at a little over 2% for 20 years. My payment on $20,000 is $123. Naturally, I'd love to be able to pay more, but this payment works for my family. And hey, at 2% interest...I'm not so worried about it!

Good luck!

Sorry to disagree alice0427. The median income test is only the first part of the test. You still have a couple more tests that I mentioned earlier. If you were to conduct the means test for example:Marin County Calf., 55k with taxes, medical insurance deducted, housing, transportation, food, charity and any other allowed expenses may bring your disposable income down to $1.00 a month. It really depends on where Rona123 is earning the 55k.

This is kind of why most of us were scared of the new law. It will force only a small percentage into a chapter 13 plan. The IRS based test basically tells people that if you can't pay your unsecured debts, before filing sell your expensive car and move to a cheaper home first to save money if your car and home are over the average for your area. If these expenses are already within IRS guidelines and you still have very little disposable income then you may qualify for a chapter 7 regardless of how much over the median income you are.

[Rona123]

Thanks again all for the feedback and information. I guess where I got confused was how the means test seems to calculate income differentely than the baseline median income qualification. Yes, because my current annual salary totals 55k, I do not immediately qualify. But as the document that Foodandhismoney provided shows, the means test calculates income on the monthly average of the previous six months prior to filing. As I was until recently unemployed, my average income based on this calculation drops sharply. While I am still trying to understand the schedule for the expenses, it appears as though the combination of allowable expenses AND my excessive student loan debt qualifies me. While I can't tell exactly where my student loan debt is included on this form and had to make some educated guesses, I know it has to be considered, since it can't be part of a BK 7 or 13 plan.

As for those student loans, can the court order you to continue forbearance if it is available in the short term and then disqualify you for BK based on the fact that you are not paying on the debt?

Thanks again everyone!

[Rona123]

So I did the B22A test, and if my calculations are correct, my annualized income is just over 38k vs the state median of just over 40k. This was even assuming a January filing, so it included a full month of salary in December, but also included 2 months of very little income in July and August. I did have a little unemployment before my benefits ran out, but if I understand the form correctly, I use the 6 month average for those as well, so they don't impact my annualized income very much. Assuming I did it correctly, this shows that there is no presumption of abuse, and I don't even need to complete the remainder of the test?

Just looking for a sanity check here to make sure I did this correctly...

Thanks again all!

[FoolAndHisMoney]

That's correct! I wouldn't file under a more complicated law based on my opinions, but according to what I read the presumption doesn't arise and your failed the test and will qualify for a chapter 7. Of course you have to go to a US Trustee approved credit counciling course and must have all of your paperwork PERFECT or you will be dismissed. If you read here some people forget or lose documents such as bank statements and social security cards this won't go over well under new law. You forget anything at your 341 automatic dismissal for a bad faith filing, so good luck and keep us posted.

[Rona123]

Thanks again Fool and everyone else for your help and advice. I do HOPE that I am indeed able to make this process work.

One last question. Between the time I would file and the time of my discharge, I imagine that I would be far enough away from my period of unemployment that my average monthly income would increase over the median for my state. Do they take another look at your income at that point, or do they only care about what it is when you file?

Ron

[FoolAndHisMoney]

Thanks again Fool and everyone else for your help and advice. I do HOPE that I am indeed able to make this process work.

One last question. Between the time I would file and the time of my discharge, I imagine that I would be far enough away from my period of unemployment that my average monthly income would increase over the median for my state. Do they take another look at your income at that point, or do they only care about what it is when you file?

Ron

Not sure how deep they look since the law is very new. I did read that they do want you to tell them under oath if you anticipate a new job or an increase in pay, etc. I'm sure this is mostly if someone is unemployed and they "suddenly" get a job the day after discharge or a low income debtor suddenly gets a large pay increase and bonus right after. If this were to happen you must swear that you didn't know it would happen. I guess it would look like someone just took a bum job or a leave for months just before filing and went back right after. I guess time will best answer this question.

[bkfiler]

"If this were to happen you must swear that you didn't know it would happen."

errr, ummm foolandhismoney... hi coach


the new forms for the 431 don't show that question on it and the bk forms ask you to note it if you expect any 10% changes within the next year i think. thats all ive seen and i havnt heard them ask it yet at any meeting i went to.

[FoolAndHisMoney]

"If this were to happen you must swear that you didn't know it would happen."

errr, ummm foolandhismoney... hi coach


the new forms for the 431 don't show that question on it and the bk forms ask you to note it if you expect any 10% changes within the next year i think. thats all ive seen and i havnt heard them ask it yet at any meeting i went to.

I would swear that "yes I anticipate that gasoline, food,natural gas, health insurance, interest rates, utilities and anything I may have missed will change by at least 10% or more". My income probably won't change by 10% though.