Is this an insider payment?

[scarn]

Hi all,

I am attempting to file a chapter 7 pro se. My wife and I pass the means test no problem, but we pay rent to my in-laws. If that rent payment is taken out of the schedule j calculations than we show positive income of $1400/mo - which I am sure will lead to a conversion to 13 which I can't have because I can't actually pay anything. Does anyone have any experience with this? On my statement of financial affairs I am assuming I would need to point this payment out as to an "insider", correct? Any help is appreciated.

[DeadManCrawling]

DO you have an actual lease, in the normal sense, signed and dated, with all the usual clauses?

[BobMango]

Do you have a lease or rental agreement on property they own that you are renting, or are you just living with them and paying rent?

I don't think it matters who you pay your rent to if it's a legitimate rental agreement at fair market value on the property. If so it should not be considered an insider payment. If not, then you might have an issue.

[justbroke]

Does anyone have any experience with this? On my statement of financial affairs I am assuming I would need to point this payment out as to an "insider", correct? Any help is appreciated.

This is not an insider payment. Especially since it's for rent. So long as you have a lease, and can demonstrate (if questioned) that you pay this, I see no issues.

I would say, though, that it reads as though your rent is pretty high. You should check the IRS allowances for rent in your State/County!

[music12]

it's not an insider payment even if you don't have a (written) lease, unless the rent is far above fair market value. i didn't have a lease and the trustee didn't blink. and no, this does not go on your statement of financial affairs under insider payments. insider payments are for when you have a debt to an insider and you pay it back. current rent is not a debt.

[AngelinaCatHub]

it's not an insider payment even if you don't have a (written) lease, unless the rent is far above fair market value. i didn't have a lease and the trustee didn't blink. and no, this does not go on your statement of financial affairs under insider payments. insider payments are for when you have a debt to an insider and you pay it back. current rent is not a debt.

I agree, but let me enhance this: The rent could be too high to swedge the numbers or too low as a parental favor. That could then become a problem as insider payment via substantial discount.

It would be advisable to get a consensus of what the average rent in that area it. As long as there is a paper trail of the payment of rent and that it did in deed go for rent, a lease is not required. It would be nice if the Op had one, but not necessary.

It becomes abuse if too high, or too low. Being paid to a family member is not relevant if it is fair market value in that location. 'Hub

[backtoschool]

I would agree with 'hub that if the rent is higher than market rate, the extra will be considered either an insider payment or will be questioned as an legitimate expense. The OP should only assume that market rate rent as defined by the IRS for their area will be acceptable to the trustee.

[AngelinaCatHub]

I would agree with 'hub that if the rent is higher than market rate, the extra will be considered either an insider payment or will be questioned as an legitimate expense. The OP should only assume that market rate rent as defined by the IRS for their area will be acceptable to the trustee.

Oh yes, I didn't think of that. 'Hub

[scarn]

Thanks for all the answers. I don't have a lease but there is a paper trail of payments. The rent is actually $400 less than the allowed amount for my county and family size, so I think I'm good there - unless that may be read as too low and as a gift from the parents. What a line to walk! I'm beginning to think I should get an attorney who knows this court, just to be on the safe side...

[StartingOver08]

Excellent idea....you hire an attorney not only for their expertise but because they know how your specific district works and the Trustees in the district.

[justbroke]

Thanks for all the answers. I don't have a lease but there is a paper trail of payments. The rent is actually $400 less than the allowed amount for my county and family size, so I think I'm good there - unless that may be read as too low and as a gift from the parents. What a line to walk! I'm beginning to think I should get an attorney who knows this court, just to be on the safe side...

Brilliant! I'm happy that your rent is below market, because I was concerned with that (in my earlier post). I don't think you need to worry about "gifts". The attorney you hire will help you through the process!

[rrj]

hmm nobdy asked me who my landlord was ?

my parents own the house i live in. i pay rent but probley not the going rent
but, my husband fixes minor stuff when one of the houses needs work
leaky faucet, or tile floors. I pay 400.00 a month. I think the going rate for this size house around her would be about 600 or 650 a month
(but they would run when they got there first ele bill) lol
400 rent
300 or 350 ele in winter (dang wall heaters

[justbroke]

I haven't heard of any Trustee asking who your landlord is. That may only come up if your mentioned it (on your petition), or your landlord showed up at the 341 Meeting. Your landlord is irrelevant, unless, maybe if you're paying well over market rent or are paying more than 35% of your gross income.