Mean Test and Collecting Unemployment Benefits

[debee]

the attorneys that won't file an over-the-median income chapter 7 are what i like to call chapter 13 bankruptcy attorneys.

lol!

[justbroke]

justbroke -

I just took the means test (and believe I accurately inserted the necessary information) and it says I qualify for either a 7 or 13. Now I'm really confused. Why did the attorney solely focus on just the median income? <sigh>

(I have been traveling today, so apologize for the late reply!)

Because there are MANY attorneys that will immediately just look at your income, and say "no you don't qualify for a Chapter 7 because you are over the median". That is absolutely a misleading and false statement. Being over the median just means that you have to complete the Means Test to test your expenses based on the IRS Standards. Being under the median allows you to use actual expenses (for the most part).

The attorneys that won't file an over-the-median income Chapter 7 are what I like to call Chapter 13 Bankruptcy Attorneys.

[IOEveryone]

Thank you, everyone, for your research, feedback and support! I will be spending my afternoon researching the eligibility of my UI benefits and taking the Means Test (maybe several times to ensure I'm getting the most out of it!).

Also, just because I wasn't clear earlier, the approximate $256 is the monthly overage of our (wife and I) combined monthly income compared to our county's median. This figure represents a 6 month average of my UI and wife's current salary. The six months actully matures at the end of February. I want to fit under all necessary hurdles before I land another job which may catapult me over a Ch. 7 option (even that seems to be up for discussion based on the great advice provided by justbroke). Typically (if that can even be applied during our current economic crisis) my compensation breaks into the low six figures. I'm almost fearful of recieving an offer until I've filed and an attorney tells me it's ok to continue my career!

[tobee43]

depending on where you are and it changes state by state...district by district and at times (where we happen to live) county by county as to whether your unemployment insurance is exempt under the social security act....

interesting enough...it was exempt as income under the ss act and of course my question was how couldn't it be...it's only temporary income...what happens if we are pulled into a chapter 13 because of our DMI which includes the unemployment insurance and then we deplete our benefits...what then????? do we have to go back to court? can we go from a 13 to a 7???

lucky for us, one atty told us it was in fact counted and the other insisted it wasn't. (we went with that one) EI was was listed on i schedule and then our atty listed it under "other" and then subtracted it!! LOL!! i was scared to death...but it worked our DMI without it was approx -3k...or about minus ...so actually in our case it most likely would not have made a difference.

[Dee]

IO-

As others have said, being over the median absolutely DOES NOT disqualify you from a Ch 7. My annual salary is over the median in our state by about $18k, but we still qualified for a Ch.7 because we had negative DMI on our Schedule J. One of the reasons for that is that Unemployment Compensation, which my husband was getting, does not count as income is our state.

Just because your attorney is highly recommended, has great credentials, and specializes in bk does not mean he will have the right answers or do what's in YOUR best interest. I educated myself (mainly on this forum) and have had to stand my ground several times to tell our attorney that he was incorrect about something. He initially told us we would have to do a Ch 13 because we were over the median, but I stood firm and said "No Way!". He also tried to count the UC on both the Means Test and our Schedule I. I had already researched Florida rulings and knew that wasn't correct. Don't assume his answers or advice are correct or in your best interest - verify!

If the $256 is actually positive DMI on Schedule J and not the amount over median, then there are plenty of ways to get that number down. Do you get a tax refund each year? Then increase your withholding. Did you add all over-the-counter medical needs? Our over-the-counter allergy meds alone knocked $20 off our DMI. Gas prices are going up - did you factor that in? Do you have life insurance? If not, you should and now would be a great time to get some. Before you know it, your DMI is under the threshold!

[ameliabedilia]

When something is exempt, I think it just means it can't be considered an asset in a BK and therefore can't be taken and used to pay off creditors. But many states still use the amounts of the received benefits in the means test when calculating income. Hope that helps.

That's what I thought about being an exemption, but did you see the spot for ui benefits on the means test for his district? It looks to me like he doesn't have to add them to the totals.

Also- agree 100% about knowing your stuff before hiring an attorney. I did so much research I ended up feeling more comfortable filing myself. I had too many questions about weird things just like ui benefits that I could never get a firm answer on that I just did it myself.

[Peeps]

When something is exempt, I think it just means it can't be considered an asset in a BK and therefore can't be taken and used to pay off creditors. But many states still use the amounts of the received benefits in the means test when calculating income. Hope that helps.

[ameliabedilia]

Okay- line 9 on this form for your district states you do not have to include ui benefits in your calculations. You list them, but they do not get added to the totals. Would this apply to you?

http://www.wawb.uscourts.gov/read_file.php?file=2884&id=0

[Peeps]

IO~

I think you may have some wiggleroom somewhere between your step 2 and 3. Justbroke already mentioned it...

Just because you're above the median income does not mean you're out of the ballpark for a Ch 7. The means test allows you to show your income and your expenses. If your disposable monthly income (DMI) after those expenses is under $182.50, you can still qualify for the 7. You've noted that you're $256 "over," but it's not clear if you're over the median income or over the DMI.

If you're $256 over the median, then you've got a pretty good chance at showing expenses that put you under the DMI cutoff on the means test. Then you'd be in Ch. 7 territory.

If you're $256 over DMI on the means test, then dang you're close enough to go back and scrutinize those numbers to see if there's anything you've missed. Got extra medical expenses? Utility bills? Insurance costs? Vehicle costs? Again, if you land under the $182, then you're still poised to do a Ch 7. If you can get your numbers to the $182, just be aware that a trustee is going to scrutinize them a bit to make sure he/she can't still kick you into a 13. But that's an issue for another day.

There are still a lot of variables around exemptions, assets, and your ultimate financial goals that might influence your choice between a 13 and a 7. But from what you've said so far it appears that you might not have to rule a Ch 7 out quite yet.

Sometimes the options all blur together when you first hear them. There really is a lot to understand. But it does get better. Hang in there and just know you've come to the right place to be a sponge & soak things up.

Oh and BTW... allow me to just put in a little plug for getting really smart with this stuff so you know enough to understand if your attorney is exploring all the options available to you. It probably wouldn't hurt to do a few consultations with different attorneys just to get more perspective.

[ameliabedilia]

I am confused for you! I just googled a bunch of things and everything is saying that unemployment is exempt in Washington state. Does that just mean unemployment benefits that you've accumulated in a bank account? It's been a while since I filed, so some of the terms are foggy to me...

[IOEveryone]

justbroke -

I just took the means test (and believe I accurately inserted the necessary information) and it says I qualify for either a 7 or 13. Now I'm really confused. Why did the attorney solely focus on just the median income? <sigh>

[IOEveryone]

ameliabedilia -

According to the conversation with an attorney today, it appears my Washington State UI benefits are counted. I'll need to research the Internet to see if I can find anything supporting or contradicting that.

With regards to where I will file, it will be Washington State.

[ameliabedilia]

Are you filing in Washington State? Or will you be using the exemptions from your previous state?

[ameliabedilia]

Wait a minute- I just remembered that we were collecting unemployment we had a choice of counting it or not, due to it being considered social security benefits. You aren't in a state that allows that are you?

[IOEveryone]

I've been informed that household income is calculated at gross, not net. I'm not sure that approach will assist (but I like the way you're thinking!!!!).