Means Test Question

[sportster]

Even if you can exit the means test at the first stop, as in being under the median income, what happens if you show income left each month (whether true or not) on the schedules? Are they trying to convert people to 13 based on that as well?

[bkfiler]

some here thing they will not. i sure think they will

but if thats the case then why have a means test.

it is one of my unanswered questions you ask.

go click the link in my signature on:

[x] new bk law: means testing, median income, chap 7 or 13, presumptive abuse

[StaciMM]

The means test is to make it harder for a high income filer to do a ch. 7. It is not meant to have any impact on lower income filers.

Old Law, New Law treat it the same way. If you have income to repay your creditors something, then you are NOT likely to get a ch. 7.

[Rona123]

My understanding is that passing the means test allows only the court or trustee to make any objections to your case, and that creditors are forbidden from doing so, thereby giving low-income filers one less hurdle to overcome. I guess that means that "high-income" (those above the state median) filers are still open season for creditors who want to dispute their case. Can anyone else confirm this?

My question is what happens in my case, where I was below the state median on my means test, but above it once my schedule I was completed. bkfiler makes a good point. If I'm not protected, then what's the point of the means test in the first place? I guess I'll find out in a few weeks...

[sportster]

My understanding is that passing the means test allows only the court or trustee to make any objections to your case, and that creditors are forbidden from doing so, thereby giving low-income filers one less hurdle to overcome. I guess that means that "high-income" (those above the state median) filers are still open season for creditors who want to dispute their case. Can anyone else confirm this?

My question is what happens in my case, where I was below the state median on my means test, but above it once my schedule I was completed. bkfiler makes a good point. If I'm not protected, then what's the point of the means test in the first place? I guess I'll find out in a few weeks...

How much disposable income did you have left on you schedules?

[LostOne0069]

This same question still baffles me... I mean, why have the median income rule that determines if you have to take the means test.... if you still have to pass the means test regardless of the outcome to get a Chapter 7????

The information out there on this new rule is very thin. Most of them just say, "if you're below the median income, you can file Chapter 7" And that's it! They don't say anything about having to do anything else to get a chapter 7.

Some of them go as far as to imply that the median income/means test is intended to give a solid gude on what is "abusive" to a chapter 7 because it was very arbitrary before in that it was up to the judge what THEY considered abusive and this was different depending on what kind of mood the judge was in.

[bkfiler]

im betting you that if you are under the median then you still have to show you dont have disposable income over $100 and that if you are over it then you can only use the IRS tables as a way of limiting your expenses.

but that too doesnt make much sense bacause you could have just made everyone use those tables.

maybe i should bet the other way. there is a catch here that im missing.

[sportster]

So can you or can't you use the IRS tables on the schedules? I thought the actual expenses went on the schedules.

[bkfiler]

if you are asking me, i never said you can use anything else then your actual expenses.

[SinkingFast]

im betting you that if you are under the median then you still have to show you dont have disposable income over $100 and that if you are over it then you can only use the IRS tables as a way of limiting your expenses.

That's my understanding, BKF.

If you are under the Median, you stop the Means Test at Line 15 and "Presumption does not arise". As I understand it, you still have to qualify in actual expenses to income on Schedules I and J to get a Ch 7. So you could pass the Means Test on income alone, and fail to get Ch 7 based on your actual disposable income. The $100/$166/mo, $6000/$10000 totals in payments, and 25% of debt owed qualifications will still apply regardless.

Failing the Means Test, with disposable income greater than $166/mo, automatically sends you to Ch 13 unless the Trustee grants some sort of "hardship" exemption in your particular case.

That's my understanding from everything I've read.

[StaciMM]

Your real #'s go on the schedules. The IRS standards are used to determine if your real #'s are reasonable.

This is not based on anyone real-but to show what I mean:


$3000 take home pay
-$800 rent
-$300 car
-$150 util
-$100 insurance
-$500 groceries
-$100 household items, personal care
-$150 vehicle fuel & maintenance
-$140 clothing, dry cleaning
-$ 50 cell *
-$200 cable *
-$ 35 internet *
-$ 75 misc. entertainment, subscriptions *
-$100 student loan
-$300 after school care/day care

Ending is $0 after everything is paid. If this were a family of 3 w/ a $4000/mo gross income-the expenses would fit into the IRS standards (pretty much maxing out most of them) except for the $360 in "Misc" which only allows $166. But then, if you don't have enough income to pay your debts, why do you need $200/mo for cable? Cutting that to more of a basic package, say down to $50 or so, frees up $150/mo for a ch. 13 payment. (And its possible they would set the payment at $194, the total overage in that category-forcing the filer to tighten other areas of their budget also.)

One thing-with attorneys bearing more responsibilty these days, they should go over everything in detail and discuss all possibilities, what to expect, etc. The attorney should be able to surmise whether or not they think you can do a ch. 7, and if they advise you that its unlikely, you have the choice to NOT file.

[alh]

I think this applies

USC 707 (7)
A) No judge, United States trustee (or bankruptcy administrator, if any), trustee, or other party in interest may file a motion under paragraph (2) if the current monthly income of the debtor, including a veteran (as that term is defined in section 101 of title 38), and the debtor's spouse combined, as of the date of the order for relief when multiplied by 12, is equal to or less than--

(i) in the case of a debtor in a household of 1 person, the median family income of the applicable State for 1 earner;

(ii) in the case of a debtor in a household of 2, 3, or 4 individuals, the highest median family income of the applicable State for a family of the same number or fewer individuals; or

(iii) in the case of a debtor in a household exceeding 4 individuals, the highest median family income of the applicable State for a family of 4 or fewer individuals, plus $525 [$525 (added by BAPCPA 10-17-05)] per month for each individual in excess of 4.


Paragraph 2 that this refers to is the whole section on the means test comparing income to expenses. It basically says that no one has standing to file a motion to dismiss a chapter 7 on the basis on income/expenses if you are below the state median. The judge or the trustee can bring a motion based on abuse (you lied for example) but USC 707 (7) seems to explicitly state that this cannot be based on a means test.

This section is quite a bit further down in the code so it often gets missed, but it is where I believe the law provides the pass to chapter 7 if your income is below the state median.

PS I am not an attorney, but this was based on research and conversations with attorneys.

See also

http://www.abiworld.org/pdfs/s256/mainpoints11.pdf

pages 14-16

[djk]

it's important to look at actual cases of chapter 7 since the new law took effect. input from people who have recently been discharged. I qualified for chapter 7 under the means test and at the time of filing my petition I was unemployed and thus no income, therefore nothing left over. Since then I gotten employment. Income is present as well as an increase in expenses.

[StaciMM]

If being below the median were a 'free pass' to file ch. 7, then everyone under their state's minimums would run up their credit cards, wait 6-9 months, and file regardless of their ability to pay.

I'm curious to hear 'real' scenarios also-as this is new and still being figured out-but I cant imagine that bankruptcy regulations would no longer require the person to be 'bankrupt' as in unable to pay, in order to file.

[alh]

Yes, its all very frustrating, (I am in the middle of it now) I am merely pointing out a section of the law that gets overlooked with a cursory reading. I don't really know that chapter 7 is a free pass, and even with 707 (b)(7) you can still be converted to a 13 for other abuse, (for example you just decided to run up your credit cards and not pay and had no significant change in circumstances such as an unemployment) It would be interesting as cases are filed that try to move a debtor from a 7 to a 13 based on disposable income, what the motion actually said was the abuse.