Means Test Question

[SinkingFast]

All i hear about is "non-dischargable" debt. I'm borrowing a 15 yr old car- NOT a cent in the bank and rents due. No credit cards, no health insurance, and it looks like I still cannot get out from this- I'll meet you at the oven and we can both stick our heads in!

Misery does love comfort, SG.

Thanks so much for posting!

I feel better knowing somebody understands.

[Minnymouth]

Most "non-dischargable debts" are debts for past income taxes due, student loans, late child support, and past accident/insurance claims.

"Secured debts" are debts that are secured by property such as home/land or auto, furniture, etc.

If someone thinks they can go to college on loans, then claim bankruptcy to "clear the debt" - It's not going to happen........

Bankruptcy will cleanup credit card debt, medical bills, judgements and liens on property, etc.

Bankruptcy does not "clean up" all debts......... but most of them....

Yes many of us feel the same frustrations that you do..... a lot of us have been there, done it already.

[bkinfoseeker]

You know,......... I give!
Every time I read and find a glimmer of hope, I find out it's not real.

Just to clarify

From the Means Test:
Line 26) Other Payroll Deductions: Do not include discretionary amounts, such as non-mandatory 401(k) contributions.
From the Schedule "I" Income and "J" Expenses
Nothing specific but the Payroll Deductions do not have a place for 401(k) contributions nor does the Expense form.

I don't know if this helps: http://www.selfbankrupcy.com/archive...ssal-Help.html

I think most of the time this is because it is a relatively large 401K contribution. This, off course, was before the new law but as you can see from the language in the mean test I think the spirit is treating it like an elective.
I can't see why a modest contribution is frowned upon. Afterall, Suze Orman says to contribute up to your company matching even if you are having financial difficulties.

I am not trying to depress you just help you approach this and be successful. I am very happy when people point out things I have overlooked that could cause me trouble. I think a lot of people must file when they are making contributions so I might check with an attorney to see what may be reasonable.

[LostOne0069]

The way I've read the 401k rules, 401k LOAN payments are protected... but voluntary contributions to 401k are not.

I'm still VERY interested in hearing a lawyers explanation of that 707(b)7 section that Alh brought up... I'm REALLY hoping that Alh is correct in his interpretation of it.

[LostOne0069]

Here's an interesting hint that appears to support the position that ALH puts forward:

http://www.doney.net/bra/707.htm

I'm starting to believe that this new bankruptcy act may actually HELP the little guy... I read this and it really looks like if you are below the state median income... you get a free pass to Chapter 7 and the judge and trustee can't object unless you're committing fraud.

[sportster]

Here's an interesting hint that appears to support the position that ALH puts forward:

http://www.doney.net/bra/707.htm

I'm starting to believe that this new bankruptcy act may actually HELP the little guy... I read this and it really looks like if you are below the state median income... you get a free pass to Chapter 7 and the judge and trustee can't object unless you're committing fraud.

Excellent resource; what I gather from reading it is that if you fall under the median income, nobody can bring a motion to dismiss or convert upon you. Anyone agree? I have seen 3 cased filed under the new laws here in CT where (chapter 7) the Schedule I showed 179.00 remaining, 177.00 remaining, and 440.00 remaining, respectively. I'll report back what our lawyer says Friday. Also, I am still seeing attorneys list on the debtor's statement of intentions, for mortgages and car loans, "retain - not reaffirm". Sources have indicated this "fourth option" disappeared with the new law. But, it is clear attorneys are still using it. Too early to tell.

[alh]

The wild card in all this that hasn't been decided is that the trustee or judge can still bring a motion to dismiss or convert under 707(b) -not 707 b (2)-
for general abuse.

The question is what will be ruled as general abuse. One would think that it would have to be a pretty high standard unless it was based on something other than fraud. But the new law seems to not allow it based upon disposable income assuming you are under median. Otherwise 707 (b) 7 has no meaning and you are back having to take a median test to determine if you have to take a means test and then even if you pass the median test you still have to take a means test.

Where I got into all this was that I have just started a new job that will still have me under the median. One of the lawyers that I talked to first said on schedules I and J, I would have to list hypothetical (I havent been paid a full check yet) future income based upon my new job, but list actual expenses (based on near unemployment). In that case, it looks like I have a lot of disposable income because I was near the poverty level and couldn't afford any actual expenses.

That lawyer would have had me locked into literally a poverty level income for 3 years or more. I would be worse off than before bankruptcy.

I actually ran the IRS number for myself and with my income, the numbers they would use if they actually put me on a 13 would be about 100 per month disposable income. (using my"actual" expenses would have made the number much higher)

I am meeting with another attorney Fri who is also a trustee and in emails to him he seems to concur that they cannot force me to a 13 except in "unusual circumstances". (he is also a tax attorney, I wonder if that will help?)

I am ready to be a test case if need be. I just need to find a lawyer who will be willing to do more than transcribe numbers onto a sheet and collect my check. (and one that seems to have actually read the new law)

It all make me very nausous (sp?)

[LostOne0069]

Well, I guess it would be self evident that the judge will always be able to dismiss for things like fraud... As you stated, MY concern is living in a strangle hold budget for the next 5 years.

I've seen a lot of people on here who are really worried about what the trustee is going to take.... the "60 day club" etc. etc. I guess I'm strange in that I feel that the trustee is welcome to take anything and everything.... as long as I really do get a "fresh start" so that I can start rebuilding my life. I really don't want to wait 5 years to be able to get started.

[sportster]

I don't think its exemptions anyone has to worry about, its the expenses you list. The trustee does not want your household furnishings. They do not want your car. They want money every month if they can get it. Here in CT, there are separate trustees for chapter 7 and chapter 13. I have looked at hundreds of filings and not seen a single motion to dismiss or convert. The only motions to dismiss were for a deficiency in filing, failure to attend the 341, etc...

[LostOne0069]

I really look forward to hearing what your attorney has to say about it Friday.

[SinkingFast]

The attny we saw Monday said contributions to Hubby's 401K would be an allowable expense. I hear so many different things from attnys I don't know what to believe at this point.

The attny also said he used to take borderline 7/13's in as 7's just to see if he could get it. Not any more because he has to pay the Trustee's legal expenses if he looses.

This particular attny says the means test is nothing. After the initial weeding process, if you're under the Median, less than $166/mo, etc. Basically, it all comes down to I and J. I can't count the number of times he said that. I and J. He said a Trustee can go over your J with a fine toothed comb and squeeze your budget to get every single penny they can.

You pay more than the IRS standards for rent. Why?
You pay more for food than what we usually see in our Court for a family your size. Why?
You spend more on gasoline than we usually see in our Court. Why?

That attny went over our expenses exactly like that. He made us explain to him why we pay $1400/mo for rent when the IRS allowable is $969 for rent and utilities. He docked us down to $700/mo for food when the IRS standards allow $976. Because, that's what this Court is used to seeing for a food expense for a family of 5. On and on and on. And he told us, the Trustee's view is, "My lifestyle does not have to change. Your's does." referring to us, or any debtor/BK filer.

Part I can't figure is how that attny thinks we are gonna go Ch 7, and keep our truck. We owe taxes. Even tho there's a loan on the truck, we have enough equity to pay the IRS. Can someone tell me why the Trustee won't just sell the truck to pay the taxes?? The attny said we would file Ch 7, keep the truck, and get a payment plan with the IRS for the taxes due. The IRS would take next year's income tax refund, so the Trustee wouldn't even get that, and we'd probably be done with the IRS in less than 2 years. And still keep the truck. How???

[LostOne0069]

The attny we saw Monday said contributions to Hubby's 401K would be an allowable expense. I hear so many different things from attnys I don't know what to believe at this point.

The attny also said he used to take borderline 7/13's in as 7's just to see if he could get it. Not any more because he has to pay the Trustee's legal expenses if he looses.

This particular attny says the means test is nothing. After the initial weeding process, if you're under the Median, less than $166/mo, etc. Basically, it all comes down to I and J. I can't count the number of times he said that. I and J. He said a Trustee can go over your J with a fine toothed comb and squeeze your budget to get every single penny they can.

You pay more than the IRS standards for rent. Why?
You pay more for food than what we usually see in our Court for a family your size. Why?
You spend more on gasoline than we usually see in our Court. Why?

That attny went over our expenses exactly like that. He made us explain to him why we pay $1400/mo for rent when the IRS allowable is $969 for rent and utilities. He docked us down to $700/mo for food when the IRS standards allow $976. Because, that's what this Court is used to seeing for a food expense for a family of 5. On and on and on. And he told us, the Trustee's view is, "My lifestyle does not have to change. Your's does." referring to us, or any debtor/BK filer.

Part I can't figure is how that attny thinks we are gonna go Ch 7, and keep our truck. We owe taxes. Even tho there's a loan on the truck, we have enough equity to pay the IRS. Can someone tell me why the Trustee won't just sell the truck to pay the taxes?? The attny said we would file Ch 7, keep the truck, and get a payment plan with the IRS for the taxes due. The IRS would take next year's income tax refund, so the Trustee wouldn't even get that, and we'd probably be done with the IRS in less than 2 years. And still keep the truck. How???

As for the 401k contributions... are you sure he didn't mean the contributions already made? I'm almost certain that he didn't mean that you could keep contributing and have those new contributions count as exemptions... if you could do that then just about everyone could get a chapter 7 as you could just bump up your 401k contributions to the max allowed.

As for the means test being "nothing" well, I'm not sure I agree with him. When you talk to him again, ask him specifically what the 707(b)(7) part of the bankruptcy code means if it is not to say what we think it does.

To me, your attorney sounds a lot like the one we went to... wants to do the quickest, easiest, least likely to be objected to bankruptcy he can... meaning if he can't make a "slam dunk" chapter 7 case... he won't do it. Ours looked at our income and said we'd have to do a chapter 13... before he even looked at expenses, median income etc. etc. He also charges the max allowed for the chapter 13 and "doesn't do" reaffirmations.

We're holding off on filing for a few months... when we are ready, we want to find an attorney who will work for US, not the trustee. We're using the extra time (and our tax return) to save up some cash to pay for a good attorney.

[SinkingFast]

As for the 401k contributions... are you sure he didn't mean the contributions already made? I'm almost certain that he didn't mean that you could keep contributing and have those new contributions count as exemptions... if you could do that then just about everyone could get a chapter 7 as you could just bump up your 401k contributions to the max allowed.

As for the means test being "nothing" well, I'm not sure I agree with him. When you talk to him again, ask him specifically what the 707(b)(7) part of the bankruptcy code means if it is not to say what we think it does.

To me, your attorney sounds a lot like the one we went to... wants to do the quickest, easiest, least likely to be objected to bankruptcy he can... meaning if he can't make a "slam dunk" chapter 7 case... he won't do it. Ours looked at our income and said we'd have to do a chapter 13... before he even looked at expenses, median income etc. etc. He also charges the max allowed for the chapter 13 and "doesn't do" reaffirmations.

We're holding off on filing for a few months... when we are ready, we want to find an attorney who will work for US, not the trustee. We're using the extra time (and our tax return) to save up some cash to pay for a good attorney.

The attny you described is pretty much like the first one we went to. Never did a means test. Just took Hubby's net and started deducting expenses from there. Sometimes our actual expenses. Sometimes what he thinks the Court would allow. He wanted to throw us into a Ch 13 as well.

The guy we saw Monday was totally different. We spent 2 hours in the Consultation talking about various issues. He files both 7's and 13's. Depends on his client and their financial situation. Complex doesn't bother him, but his favorite cases are the people with no savings and one asset. Their home. Those are the easy ones. He marked 7 on our paperwork, and like I said, he won't try it if he doesn't think he can make it. He made that very clear to us. He would have to pay the Trustee's legal expenses outa his own pocket if he starts a 7 and it gets tossed to a 13, and he don't wanna do that.

We were very clear that 401K contributions would start in April. Hubby's company allows employees to participate at the beginning of the next quarter after their 1 year anniversary. He still said the 401K would count as an expense.

He said it over an over again, that except for the screening process, the Means Test was meaningless. If you pass the Means Test you are eligible to try for 7. If you fail the Means Test you are gonna get a 13 for sure. How the Chapter would be decided, and payment if a 13, would come down to I and J. You could be below the Median and still wind up in Ch 13 due to disposable income left after I and J are compared. You could get all the way thru the Means Test, have less than $100 there, and still get Ch 13 when I and J are compared. You could pass the Means Test between $100 and $166 because you can't pay back 25% of you debt and still get Ch 13 when I and J are compared. That's what he said. Over and Over and Over again.

I'm not saying any of this is true. Just reporting what that particular attny told us. Every attny we've chatted with has had a different issue. Discussed THE thing they find as the most important. This particular attny's big issue was "I and J".

This attny from Monday thinks a lot of the New Law is Bull Hockey. He said it's one of the biggest legislative messes he's ever seen. He's just waiting for the law suits and opinions to start flying when the Court actually starts using and applying the New Law on a regular basis.

His thoughts. Not mine.

[sportster]

With all due respect for that attorney, he should reference 707(b)7. You cannot get converted to a 7 unless you are above the median income. It says it there in plain english. If you filed for 7 because you were under the median income, and a trustee filed a motion to convert, based on the plain language contained in 707(b)7, it would seem pretty simple to strike that motion.

[FoolAndHisMoney]

Excellent resource; what I gather from reading it is that if you fall under the median income, nobody can bring a motion to dismiss or convert upon you. Anyone agree? I have seen 3 cased filed under the new laws here in CT where (chapter 7) the Schedule I showed 179.00 remaining, 177.00 remaining, and 440.00 remaining, respectively. I'll report back what our lawyer says Friday. Also, I am still seeing attorneys list on the debtor's statement of intentions, for mortgages and car loans, "retain - not reaffirm". Sources have indicated this "fourth option" disappeared with the new law. But, it is clear attorneys are still using it. Too early to tell.

I don't agree. It's possible for the US Trustee and Judge to try to convert you but not likely. Being under the median is just a safe haven so that the creditors won't try to have your case converted. They mostly target high earners I imagine.

It is strange. I too have seen debtors with remaining balances like that file for chapter 7 weeks ago. I don't get it. Their means test has them negative, but the schedules have some at $200 remaining. What's the deal? Maybe they figure they will chance a 7 and worst case if the US Trustee catches it they will convert. Who knows?