Means Test Question

[SinkingFast]

The only thing getting a Ch 7 from the Means Test buys you is it stops Creditor objections. The Trustee and/or Judge can still object.

I don't know if actual expenses on Sched J will be held to IRS standards or not. IRS living standards came about as a guideline for the IRS to figure payments when a person owes taxes and wants to pay back via a payment plan. The IRS standards are very low and do not increase exponentially with an increase in income. The base for food for an income at $1K/mo or less may be $500, as an example. Where the base for $5K/mo or more is $1000. Those aren't real numbers, but hopefully you catch the drift. Making 5 times more money does not get you 5 times more expense allowance.

Currently, we rent a house for $1400/month plus about $300 more/month for utilities. The IRS allowable for our area for rent and utilities combined is $969 total. I know of ONE apt complex that rents 3 BR apts of decent size for $1000/month, others are $1200-$1400 for 3 and 4 BR's. That's about the going rate, $1000/mo, for small 3 BR houses too. We have 6 people in our family. We would have people tripping over people in those houses and apartments. But still, the costs to rent here are actually higher than the IRS allowable for rent and utilities combined.

I've been looking at old and new filings at PACER trying to get a feel for what we could or could not claim. People are claiming much higher expenses than the IRS Standards on new filings. Old filings were the same way. People claim what they really spend for food, gasoline, utilities, auto payments, auto maint and repairs, etc. While real numbers here were allowed under the old law, only time will tell if the numbers hold or not under the new law. The first of the new cases in our area was filed late December 05, and has only just now gotten passed the 341 meeting point.

[alh]

Hi Stacy,

I have to respectfully disagree to a point. Congress realized that someone making 20,000 per year and having $200 left over was quite different than someone making 100,000 per year and having $200 left over. The person making $20,000 can't really cut many expenses where as the person making 100,000 might have more of an ability to do so.

To address this issue they create the median income test. Bankruptcy is not designed to put you into poverty, it is designed to give you a fresh start. So they decided that if you were below the median income of your state they wouldnt' force you in to a chapter 13 because your expenses might be low because you are trying to cut back. If you are over the median it is assumed you have more financial "means" and thus more ability to deal with debt.

I keep mentioning USC 707b(7) (quoted earlier) because that it the key factor in the means test. Without taking into account that clause, you are right, everyone with over 100 in disposable income must file a chapter 13.

But 707 b (7) says you cannot be subjected to a means test if your income is below your state median.

I know of no case law on this yet but it could be that there is no case law as the people who have actaully filed under a 7 have been able to stay with a 7adn thus no complants. Or they may have been pursuaded to file a 13 and the case never came up. I have not heard of of anyone either who was pushed to a 13 based purely on disposable income of over 100 (with income under the median) and I can't imagine that of all the chapter 7 cases we would not have seen someone with that particular issue by itself.

Of course time will tell.

And of course I am always open to new thoughts

[alh]

The only thing getting a Ch 7 from the Means Test buys you is it stops Creditor objections. The Trustee and/or Judge can still object.
.

Actually if you are below the median, no one can object on the basis of means

"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...the median income of the applicable state"


If you are above the median, anyone including creditors can object.

Of course we will have to see how that plays out.

[djk]

having ~$200 left over is based on extremely low expenses that are based on not having much money and wanting to have some savings out of what my net income is. if I claimed the allowable expenses (tables) of a person in my area then my expenses would total ~$1,800 a month with a gross income of ~$1,400 a month, or ~$400 loss per month. Expenses fluctuate, currently my housing & util is below the allowable of $654, but if my apt burns down next week then IF I can find another place in this area the expenses will be greater than the allowable amount. The tables allow ~$460 in living expenses which includes $220 a month for food, since for the last 2 months I've been eating alot of canned tuna fish on a bare bones diet I only claimed what I had been actually spending on food which was ~$100 a month. Try eating on ~$100 a month, it's fun. Anyway, my point is that my having ~$200 a month left over is based on the fact that I'm not including any expenses other than just "survival" costs which is a honest snapshot of my condition at the moment. When I figure expense based on the allowable tables then it's a net loss of ~$400 a month. I don't have anything left over, I'm still in the "red".

[sportster]

I am seeing (newly) filed cases on PACER in my state that are Chapter 7, and Schedule J shows, in some cases, 180.00-600.00 left each month. Without stretching the expenses too far, I've calculated my Schedule J to leave 84.00. Hopefully I can find an attorney who agrees and will file for us.

[SinkingFast]

I went all the way thru the Means Test bef the new numbers. Simply using $200/mo for medicals was enough to get us to $115/mo "disposable income". That was without figuring in Administrative Costs for a Ch 13 plan. Basically 'cause I didn't know what to put there. I know the fee is 8.5% here, but that's 8.5% of what?? So that could take us down to below the magic $100/month right there. I don't know for sure.

Anyway, the new numbers came out and we will be BELOW the Median if we can file some time in March. Thank you cumulative income averaging! WoooHooooo!!

[djk]

both schedule I & J have a line for comments on future changes to expenses and income, I made the notation that I expected to see changes on both schedules.

[FoolAndHisMoney]

Hi Stacy,

I have to respectfully disagree to a point. Congress realized that someone making 20,000 per year and having $200 left over was quite different than someone making 100,000 per year and having $200 left over. The person making $20,000 can't really cut many expenses where as the person making 100,000 might have more of an ability to do so.

To address this issue they create the median income test. Bankruptcy is not designed to put you into poverty, it is designed to give you a fresh start. So they decided that if you were below the median income of your state they wouldnt' force you in to a chapter 13 because your expenses might be low because you are trying to cut back. If you are over the median it is assumed you have more financial "means" and thus more ability to deal with debt.

I keep mentioning USC 707b(7) (quoted earlier) because that it the key factor in the means test. Without taking into account that clause, you are right, everyone with over 100 in disposable income must file a chapter 13.

But 707 b (7) says you cannot be subjected to a means test if your income is below your state median.

I know of no case law on this yet but it could be that there is no case law as the people who have actaully filed under a 7 have been able to stay with a 7adn thus no complants. Or they may have been pursuaded to file a 13 and the case never came up. I have not heard of of anyone either who was pushed to a 13 based purely on disposable income of over 100 (with income under the median) and I can't imagine that of all the chapter 7 cases we would not have seen someone with that particular issue by itself.

Of course time will tell.

And of course I am always open to new thoughts

Not everyone. The trouble here is if the plan will be feasable to the creditors and chapter 13 trustee. That's why they also created the confusing calculation that if you have less then 167 per month or less then 10k over 5 years this isn't really worth it. Between the lawyer fees which may come out of the plan, trustee adminitrative fees the creditors and court may not want a chapter 13 since they may get a penny on the dollar. A debtor with 150k that can afford $9000 over 5 years less the above administrative fees just doesn't pay to do all this. Yet a debtor that owes 25k can make a meaningful distribution so as alway the system seems to reward the high end debtor.


I have a feeling that if any creditors dispute a 7 under 707b it would probably be for these types of cases where a debtor has $160 left over. The creditor may want something no matter how small. It remains to be seen just what they dispute.

[sportster]

I went all the way thru the Means Test bef the new numbers. Simply using $200/mo for medicals was enough to get us to $115/mo "disposable income". That was without figuring in Administrative Costs for a Ch 13 plan. Basically 'cause I didn't know what to put there. I know the fee is 8.5% here, but that's 8.5% of what?? So that could take us down to below the magic $100/month right there. I don't know for sure.

Anyway, the new numbers came out and we will be BELOW the Median if we can file some time in March. Thank you cumulative income averaging! WoooHooooo!!

But what do you have left on your Schedule J? I am thinking there will continue to be some leniency here - even if you have some funds remaining, that should not throw you into 13 if you are below median income on the means test. Only time will tell, and hopefully I can find out soon. Anyone going pro se under the new laws?

[SinkingFast]

We have an anticipated income decrease coming in the near future. Hubby will be eligible to contribute to the company 401K plan beginning the first of April. Don't know how much dif a 5% deduction will make, but retirement savings are protected, even encouraged by the new BK Law, so we plan to join if the attnys think it's OK. Plus Hubby will get company match as well. So that's extra incentive.

[sportster]

We have an anticipated income decrease coming in the near future. Hubby will be eligible to contribute to the company 401K plan beginning the first of April. Don't know how much dif a 5% deduction will make, but retirement savings are protected, even encouraged by the new BK Law, so we plan to join if the attnys think it's OK. Plus Hubby will get company match as well. So that's extra incentive.

If you are married, and not going to file jointly (as in my case), the income from both spouses is counted anyway, so with his 401(k) deduction, it will help regardless which one of you (or both) files.

[SinkingFast]

We are married filing jointly. So that's some help. Just don't know how much right now.

Our Sched I to Sched J is way upside down. I took BKFiler's advise and went thru and added up every think I could think of. Down to paper and ink cartridges for the printer and batteries for the remote. It will be interesting to see what the attnys lop off here and there when it comes down to it.

Another Consult tomorrow afternoon. Have my bag packed. Pay stubs, Insurance, taxes, bills, bank statements for last 4 months, you name it. This should be interesting.

We owe in excess of $8K in taxes for 05. I wonder if the attny will want us to sell our truck, or keep the truck for an IRS lien against it?? That would be ideal in that we would get Ch 7 for sure, and we'd get to keep the truck. If we sell, we loose expenses associated with ownership. Monthly payment, gas, insurance. Blech! We could be right back where we started.

I'm also curious to see what his advice will be regarding how to dispose of our house. It's outa state. We can't sell it. So we've decided to let it go back to the lender. Wonder how we'll handle that.

[bkinfoseeker]

We have an anticipated income decrease coming in the near future. Hubby will be eligible to contribute to the company 401K plan beginning the first of April. Don't know how much dif a 5% deduction will make, but retirement savings are protected, even encouraged by the new BK Law, so we plan to join if the attnys think it's OK. Plus Hubby will get company match as well. So that's extra incentive.

I am not sure what you mean when you say 401K contibutions on encouraged. Sure assets in a 401K are protected now. However, someone else on here said they were told to pay back all their 401K contributions from the past 6 months. The means test and schedule "I" still say it is elective so tou can't include them in the figures. Supposedly you can donate to charity under the means test (would this be treated as an elective on the J?). I agree (and so do the financial experts) that contributing to a 401K is a top priority, even when having financial trouble, but I suspect that a Trustee would have a problem with it being considered an expense.

[SinkingFast]

You know,......... I give!

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

We have nothing left. It's all gone. We've sold stuff. We've cashed out retirements. We've spent our savings. We've lost our house. Most likely, we are gonna loose the one reliable vehicle we have to pay taxes.

Yet, when I've looked at other peoples' filings on PACER, they have retirements, IRA's, 401K's, even educational accts, thousands, and hundreds of thousands of dollars in BK untouchable savings. And we have nothing.

Our clothes. Our crappy old furniture. Junk. That's what we have.

And we just can't seem to find relief anywhere.

I'm tired of this "stuff". It doesn't matter what I learn. They are gonna do with us what they want anyway. Just shoot me now and be done with it.

[StylinGirl]

You're not alone!

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!