Credit Card Debt - Include in MEANS TEST but not in SCHEDULE J - Why not????

[gman]

A mortgage is a secured debt. Credit card debt is not.

Credit card debt is sometimes secured.

Source:

http://www.suite101.com/content/the-use-of-a-judgment-lien-to-collect-a-debt-a178897

In this article you will learn that a credit card judgment lien was used to drive a debtor into foreclosure.

And you can only include the mortgage if the mortgage is current.

This post is not factual.

There is case law that says that you can include the mortgage even if you are not current and are also surrendering the property.

Source:

http://www.bankruptcyorlando.com/2009/07/can-debtors-deduct-in-means-test-mortgage-payments-owed-but-unpaid-.html

This is why I am asking for specific references from websites and not general opinions at this stage.

Thanks to those who chip in.

[dumpinmydebt]

There are many people here who ask questions as a 2nd opinion to their attorney's stance. I am only seeking other opinions, regardless if they help my cause or not.

I stated in the beginning of this thread, and will reiterate, I am interested in actual cases and/or webpage posting that support both sides of this argument.

If no one has any to offer, that's fine.

I do see many people posting opinions with no factual basis either via caselaw, personal experience, etc. That's fine as everyone is entitled to an opinion...but that's not what I was personally seeking when I started this thread.

The whole BK experience is not cut and dried. This board is littered with examples of people assuming the rules of BK in theory only to find out later that reality is different. We all learn more by posting as many "facts" as we can collect and share with other debtors.

I'd hate that someone out there has an actual fact that could save many others undue harm. As long as this is the case, I will not be deterred simply asking for information from non-attorneys as I have found any and all information to be valuable in my BK journey.

I understand why people post on here.

My point is that maybe your attorney can provide you with such cases that you seek, if you tell them that you're uncomfortable with the information they provided you. I'm going to assume they've had this experience since they advise you it is okay, which is why I assume maybe they have legal data they can give you to help ease your mind.

Anyways, I can't provide you with cases, don't have the time to look them up. But good luck to you.

By the way, people like justbroke have given great advice (backed up by bankruptcy law) and really know what they're talking about. Just don't toss it out because they can't back it up with a case! Keep in mind, they're here to help.

[justbroke]

Some credit card debt can become secured (and thus I am 99% sure it can be placed on the Means Test)

You're completely misunderstanding how Bankruptcy works and how all the 200 years of caselaw and commonlaw have settled many issues.

First, you are right, secured cards like Best Buy and Lowes and Rooms to Go have a PMSI "lien" automatically on them making them secured. However, if you put the payment amount on your Schedule J as secured payments, then you're going to need to reaffirm the debt (not really but let's play this the "right" way). The UST will easily argue that your case doesn't deserve a discharge and should be dismissed for totality of circumstances since you are trying to live beyond your means to the detriment of creditors. (Yes, that's the argument. In a bankruptcy, you must be willing to give up things.)

I have seen Schedule J's with secured debt payments for furniture and the like, but never for a pair of jeans from The Gap. Sorry. Totality of circumstances under 11 USC 707(b)(3)(B) will be in your mailbox REAL quick.

1. If any of your credit cards are STORE CARDS (Best Buy, Old Navy, etc.) then by its very nature the debt you have is actually secured. Example: Buy a flat screen TV at Best Buy, do not make the payments and Best Buy can seek to repossess your TV.

And the U.S. Trustee (UST) will file a motion to dismiss for totality of circumstances because you shouldn't be keeping the big screen TV.

Just because you can include an expense, doesn't mean that you get a discharge for including it. This goes to the heart of the argument that the Means Test allows you to list "surrendered" property, but you're not allowed to put it on Schedule J. Congress decided to allow all secured property that has contractually due payments post filing, to be included on the Means Test. The Means Test means absolutely nothing (in the real realm of determining abuse). The Means Test is strictly what the Courts have coined as a "bright line" test to determine initial eligibility. The 11 USC 707(b)(3)(A) and (b)(3)(B), and 707(a) are still viable and effective tools to have a case dismissed that is not deserving.

Since I am in Georgia and have a $25k judgment lien against me from a debt collection agency on a credit card debt they purchased - I am going to include it in my Means Test as a secured claim on line 43. I should note that the collection firm has not yet garnished my wages or taken funds from my bank account - but they legally could at any time in the future.

What does that Judgment lien, lien against? Usually it's all personal property (and real property). For personal personal property, it is almost 100% guaranteed that it impairs your Federal Exemptions under 11 USC 522(f). Also, if you don't have $25K in personal property, it is crammed down to the value of your personal property. So if you have $5K of personal property, the lien is really only $5K. That's extinguished by a Motion to Avoid Lien under 11 USC 522(f) because it impairs your statutory exemptions (and/or State constitution exemptions).

You're grasping at straws. I really don't want to argue the laws here, but you are taking one thing... the means test allowance... and trying to jump to a conclusion that you can somehow include that on Schedule J and not have a 707(b)(3) problem.

People won't offer caselaw because yours will be specific to Georgia or the 11th Circuit Court of Appeals (11DCA). I'm in 11DCA, but most cases like this are either at the BAP level or within the Districts.

Now, if your question is ONLY about including it on the Means Test, then, as I wrote, you can include it on your means test. However, that does not win the battle for you. The UST will quickly pounce on your Schedule J. You example is a perfect candidate for a totality of circumstances (11 USC 707(b)(3)(B)) dismissal. I have studied 11 USC 707(b)(3) dismissals until my eyes were bleeding.

(Adding that, if this is just about whether you can put it on the Means Test, I have no issue with that. Somehow, I'm thinking that you're thinking that you can somehow get a discharge when your Schedule J will show positive disposable income. I don't know what the whole Means Test issue is about. it's a non-issue in the 11th Circuit.)

[gman]

If your attorney says you can do it, why are you looking up information to back it up? Shouldn't that be his job to defend you? Why don't you ask him to prove why you can do it?

There are many people here who ask questions as a 2nd opinion to their attorney's stance. I am only seeking other opinions, regardless if they help my cause or not.

I stated in the beginning of this thread, and will reiterate, I am interested in actual cases and/or webpage posting that support both sides of this argument.

If no one has any to offer, that's fine.

I do see many people posting opinions with no factual basis either via caselaw, personal experience, etc. That's fine as everyone is entitled to an opinion...but that's not what I was personally seeking when I started this thread.

The whole BK experience is not cut and dried. This board is littered with examples of people assuming the rules of BK in theory only to find out later that reality is different. We all learn more by posting as many "facts" as we can collect and share with other debtors.

I'd hate that someone out there has an actual fact that could save many others undue harm. As long as this is the case, I will not be deterred simply asking for information from non-attorneys as I have found any and all information to be valuable in my BK journey.

[dumpinmydebt]

You may want to consult with a couple of other lawyers, the one you have seems to be leading you down the wrong path.

I agree. It seems you are wanting advice from people with a legal background or what not, which will be best coming from an attorney. I suggest you schedule some appointments with attorney's who offer free consultations and ask your questions then. I think you may be more comfortable with what they say vs us.

The only thing we can offer on here are opinions and advice based on that.

If your attorney says you can do it, why are you looking up information to back it up? Shouldn't that be his job to defend you? Why don't you ask him to prove why you can do it?

[gman]

Maybe you can tell us your income and state so we have a better idea of where you're coming from.

Here is where I am coming from.

I live in Georgia - and our median is 55,061. My last 6 months income on Oct 1 (day I am planning to file) is going to be around $79k. Even though I do not have a mortgage payment that I can use to help pass the Means Test, I do owe substantial back taxes and this "expense" will get me very close to having a negative DMI on the Means Test.

I lost a job that paid $100k+. I have $200k+ in unsecured debt and $25k in secured credit card debt via a judgment lien against any and all property including wages. We can all argue until we are blue in the face - but this is a secured debt in the eyes of Georgia courts. I run the risk today of having my bank account raided and in the future of having wages garnished until this lien is satisfied or wiped away.

In Georgia, there is a bankruptcy case (Walker was the name of the defendant) where the debtor was surrendering his home but kept the mortgage payment on the Means Test (but not on his Schedule J.)

I have not found a single case in the US (pro or con) where someone had a judgment lien included or not included in their Means Test.

The same fact holds true for a store credit card that is secured. I have not found a single case pro or con. However, given that one can surrender a home and still include it on their Means Test, I see no reason why someone could not surrender a flat screen TV from Best Buy and still include the debt on their Means Test (but not on their Schedule J.)

[helpmeout]

To the contrary....the reason I am posting this question here is because a lawyer advised me to do this!

Your comment had to do with unsecured credit card debt.

My question has to do with secured debts (via store cards and judgment liens.)

Perhaps other can weigh in???

Those judgments and liens from credit cards will be vacated.

With a mortgage, the lien on the house won't be vacated. You won't have to pay the mortgage, but the bank can foreclose on the house.

You may want to consult with a couple of other lawyers, the one you have seems to be leading you down the wrong path.

[helpmeout]

But mortgage debt that someone is surrendering is discharged as well - and the courts have decided to allow people to include mortgage debt - even when someone is surrendering the property and therefore having the debt discharged.

The question centers around the Means Test and not Schedule J.

Hopefully someone can point to a case or personal experience in trying to include credit card debt where this has been decided one way or another.

A mortgage is a secured debt. Credit card debt is not.

And you can only include the mortgage if the mortgage is current.

[gman]

Court decision re: surrendering collateral = not able to take the deduction for said collateral. (IMHO this would include wiping out store secured debt= can not deduct it from means) http://www.google.com/url?sa=t&sourc...-IM0xlY4dclAww

Maine - Did you read the entire case you cited? I just read it in its entirety and the US Trustee lost!!!!

The case you noted actually backs my argument...in that the debtor had their mortgage (a secured debt) listed on the Means Test even though they were surrendering the collateral after the bankruptcy.

The Trustee objected to this and the judge denied the Trustee's objection.

[dumpinmydebt]

From my Nolo book - Secured Debts

Store charges with a security agreement.

Almost all store purchases on credit cards are unsecured. Some stores, however (notably Sears) print on the credit card slip or other receipt that the store “retains a security interest in all hard goods (durable goods) purchased” or make customers sign security agreements when they use theirstore charge card. For example, if you buy a major appliance on credit, the store may require you to sign a security agreement in which you agree that the item purchased is collateral for your repayment. If you don’t pay back the loan, the seller can take the property. (In Vermont, a bankruptcy court has ruled that store charges are unsecured, not secured, under Vermont state law. (In re Oszajca, 199 B.R. 103 (D. Vt. 1996).)

Also, with your secured debt, your going to have to reaffirm or redeem the debt, or surrender the collateral.

If it's truly secured, then you should be able to list the payment (if you plan on keeping reaffirming or redeeming).

[catleg]

Believe me I'm as pro-debtor as they get on these forums, but there's no way you can succeed at taking a deduction for credit card debt.

Time to start thinking about another strategy, you should be able to do a ch7 without a full 6 months of downtime. Maybe you won't get a job as fast as you think anyway.

Maybe you can tell us your income and state so we have a better idea of where you're coming from.

[Maine]

Court decision re: surrendering collateral = not able to take the deduction for said collateral. (IMHO this would include wiping out store secured debt= can not deduct it from means) http://www.google.com/url?sa=t&sourc...-IM0xlY4dclAww

"The debtor's average monthly payments on account of secured debts will be calculated as the sum of the total of all the amounts scheduled as due because of a contract to secured creditors ...to maintain possession of the debtor's primary residence, motor vehicle, or other property necessary for the support of the debtor and the debtor's dependants, that serves as collateral for secured debts, all of which are divided by 60. "

http://www.bankruptcylawinformation.com/index.cfm?event=dspMeansTestDetails

My opinion again: couch, tv, stereo not necessary for the support of my family, nice amenities, but not necessities.

[gman]

Secured cards are treated no differently than unsecured cards- they all would be wiped out in bankruptcy, so none of them can go on the means test.

Do you have any source for this? If so, can you please post it? This is what I am seeking.

They want you to look for a new job so you do not have to file for bankruptcy. They want you to pay your creditors.

I could not agree more as the legislation was written by the credit card companies and backed by $100M+ of lobbying efforts.

And sadly, they do want to see people showing up at the 341 hearing saying they got a new job so they can be dismissed to pay their bills

Recent court decisions back this up. However, as in all cases, this can cut both ways. Debtors who have lost employment and/or seen decreases in income should show up at their 341 with amended Schedule I income!!!

What is good for the goose is good for the gander!

[gman]

I am sorry you don't like the answer I am giving, and are going to keep posting this question until you like what you hear. Credit cards are not secured debt in bankruptcy. If the credit card company (let's say Best Buy for example) sued you and got a judgment and then got a lien on your television, then they have to come and get your television or put in a claim just like every other non-secured creditor. They cannot get a lien against your house or car for the money owed on your television.

So, when you file bankruptcy, you list the television as an asset, and the lien and debt owed on the television as a liability. You can exempt the television under your household goods exemption. You can choose to reaffirm the television debt (but this will not be considered a necessary expense on your expense schedules). If you do not reaffirm the debt, it gets discharged, and if you have a lien on the television set, best buy has to come to your house and get it. There is no monthly expense here for your schedules.

I appreciate your post.

I posted a few links from legal websites (above) to back up my thoughts with specific references to how unsecured debts become secured in the eyes of the court. I also went on to show how in my state of Georgia: A judgment lien in Georgia attaches to any and all property you own. It can also be used to garnish your wages. As such a judgment lien is considered a secured debt since all of your property secures it.

This has to do with the Means Test - which is a picture of your CURRENT hardship....and not a picture of Schedule J which shows your situation GOING FORWARD when these debts are wiped away.

I am seeking other websites (not just personal opinions alone) with a foundation for the position. I am just not seeing that in any of your posts.

Perhaps others have input?

[Maine]

The means test is just that- a MEANS test...as in: after you pay all your living expenses do you have the means left to pay the creditors or not. Secured cards are treated no differently than unsecured cards- they all would be wiped out in bankruptcy, so none of them can go on the means test.

The reason you do not include credit card and store payments in the means test is simply that they want to see how much money you have left after you pay your day to day expenses. They are trying to prove you have money to pay back to your creditors.

The 6 month look back on the means test is difficult for the recently unemployed high income earner. They intend it to be that way to prevent people from filing sooner than they are truly insolvent. They want you to look for a new job so you do not have to file for bankruptcy. They want you to pay your creditors. And sadly, they do want to see people showing up at the 341 hearing saying they got a new job so they can be dismissed to pay their bills