A Couple Means Test Questions

[DirkDiggler]

Using the Nolo Means Test Calculator, I had a couple questions I was hoping someone might be able to clarify for me.

First is section/line 42....for my mortgage payment, do I use just my 1st mortgage payment amount? Or do I also include my 2nd? If I don't include my 2nd, where do I put that amount?

Also regarding vehicle operating expenses, I drive alot for work so our gas bill has been exceeding $600 a month, plus insurance costs of $110 monthly and 12 month average registration fees of $60, and thats not counting maintenance, for a total of over $770 a month, and according to the means test I'm allowed $472??? Can I use the $770 if I have receipts?? Gas prices are HIGH right now!

Thanks for any help

[debee]

Yes, both payments go on line 42. Yes, you can list car expenses to the extent they exceed the standard. Just be prepared to document. Have you seen the UST's position paper on filling out the Means Test? It might help you with some things. It's a little outdated in terms of case law and circuit splits so don't trust those references, but the rest is still useful. You can see it here.

[DirkDiggler]

Thanks for the help, without the 2nd mortgage payment amount, we failed the means test by $245, with our 2nd included, we pass with a negative $144 DMI...and that's with using the $472 for vehicle operating expenses

[debee]

You're going to want to make sure you get your filing as ironclad as you can. If you and your wife don't have term life insurance, it's a good time to get some. Also, check your home and car insurance policies and raise coverage and lower deductibles.

Also, it would be better to be current with your mortgage payments at time of filing (1st & 2nd) but if you're not then making a payment or two before filing is a good idea. The trustee/UST may object to a housing expense if you're 'surrendering' the property.

Once you get through the Means Test hurdle, it'll be time to tackle Schedule I/J.

[ValleYum]

Basic earthquake policies are about $200-300 per year. We put this on Line 56 of the means test and our Trustee allowed in here in Washington state. YMMV. We had our earthquake insurance through Geoverra and purchased it from a Farmer's agent here locally as USAA did not sell it anymore.

AFLAC (disability) policies are also able to be used on the means test on Line 34b.

Our lawyer included our dental insurance and vision insurance premiums by adding them to the healthcare premium amount he listed on Line 34a.

As debee said, don't concentrate so fully on the means test that you don't have a solid Schedule I & J. It's so easy to forget that when you are worried about not 'passing'.

Good luck!

[DirkDiggler]

You're going to want to make sure you get your filing as ironclad as you can. If you and your wife don't have term life insurance, it's a good time to get some. Also, check your home and car insurance policies and raise coverage and lower deductibles.

Also, it would be better to be current with your mortgage payments at time of filing (1st & 2nd) but if you're not then making a payment or two before filing is a good idea. The trustee/UST may object to a housing expense if you're 'surrendering' the property.

Once you get through the Means Test hurdle, it'll be time to tackle Schedule I/J.

We have never been late on our 1st or 2nd and plan on dealing with what to do with the house after we get through the BK (might stay, may try a short-sale or just let it go FC in a few years)....will they require us to re-affirm our mortgages to use the payment figures on the means test?

I'm going to increase coverage and lower deductibles on our car insurance, but our homeowners is paid through escrow, should I change it or would that be a bigger headache to deal with? We already have term life insurance and don't plan on adding any more anytime soon though.

Excuse my "newbie-ism" but what is the Schedule I/J? Is that part of the means test? Thank you for all your help, you have been really helpful in both of my threads

AFLAC (disability) policies are also able to be used on the means test on Line 34b.

Good luck!

Thanks I have been considering AFLAC, but it isn't offered by either of our employers, can it be purchased through their website or local agent?

[IamOld]

We have never been late on our 1st or 2nd and plan on dealing with what to do with the house after we get through the BK (might stay, may try a short-sale or just let it go FC in a few years)....will they require us to re-affirm our mortgages to use the payment figures on the means test?

I'm going to increase coverage and lower deductibles on our car insurance, but our homeowners is paid through escrow, should I change it or would that be a bigger headache to deal with? We already have term life insurance and don't plan on adding any more anytime soon though.

Excuse my "newbie-ism" but what is the Schedule I/J? Is that part of the means test? Thank you for all your help, you have been really helpful in both of my threads



Thanks I have been considering AFLAC, but it isn't offered by either of our employers, can it be purchased through their website or local agent?

AFLAC sells only through employers - if you have an ins broker, there are co's that sell individual disability policies, but they can be pricey. Check with a GOOD local insurance broker - if you have one for car/house/life ins, start with them!!!

[debee]

....will they require us to re-affirm our mortgages to use the payment figures on the means test?

No, you won't have to reaffirm. What sometimes happens is a person will use their actual mortgage expense (in cases where it is higher than the standard for their area) in order to pass the Means Test even though they haven't paid the mortgage in several months and intend on surrendering the property. Then the UST may file an objection saying that since the person isn't paying the big mortgage, they can't claim the expense. The UST will then reduce that expense down to the standard amount and see if it frees up enough DMI to fund a chapter 13. If it does the debtor won't be able to get the chapter 7 discharge. You don't need to reaffirm your mortgage in order to claim the expense. You can be behind and still claim it. You just need to be planning to 'stay and pay'. It's ok if you change your mind down the road and walk.

... should I change it or would that be a bigger headache to deal with?

Personal decision. Once you have had a chance to familiarize yourself with your schedules I/J, you will have a better sense of whether or not you need to come up with more allowed expenses in order to qualify for a chapter 7.

... but what is the Schedule I/J? Is that part of the means test?

Schedule I is your income and Schedule J are your expenses. In order to get a Chapter 7 discharge, your income less expenses can't result in enough disposable monthly income to fund a chapter 13. How much that is depends on your debt. If, after subtracting your allowed expenses from your income, you have $117 left over, that may be enough to warrant a motion to dismiss your chapter 7. (Anything between $117 and $195 is enough to fund a chapter 13 if it pays 25% of your non-priority unsecured debt. Anything over $195.42 is enough, period.)

If you pass the Means Test you are allowed to file, but then you have to get over the next hurdle which is schedule I/J. You can download the schedules here. The forms are B6I and B6J.

They don't come with instructions. You don't use the standard amounts on Schedule J. You would use your actual expenses. Fixed expenses like your mortgage, car payment, etc as they are, and averages for figures that vary (utilities, etc) and you can stretch your household/grocery budget to the standard. There are other areas where you can stretch as well. Going over the standard is likely to invite inquiry and depending on the reason, the category, your income and dmi, it could also invite a Motion to Dismiss your chapter 7.

If you print Schedule J, then print a completed Means Test off Nolo here and then the US Trustee's Position Paper on the Means Test here, then you can get the standards for your county off the NOLO Means Test, the categories for those standards as set by the UST from their position paper, and you can use that info to make sure you don't go over standard on schedule J - unless you can document the overage and its both reasonable and necessary. High medical is one thing, super cable package is another.

Schedule J doesn't arrange the categories in the same way the Means Test does. Items 4,5 and 6 on Schedule J all come from one standard amount, so you will want them to sum up to no more than the standard in order to avoid objection.

If you run through schedule I and J and find you have too much DMI, then you have to start looking around for allowable expenses, research your own spending history for forgotten expenses, search the forum, post, etc. before giving up and presuming you must file a chapter 13.

Welcome to the forum, Dirk.

eta: Never mind the reference to circuit splits and case law on the UST's Position Paper. It's outdated.

eta, again: Also, some expenses that are not allowed on schedule J are allowed in a chapter 13. You can't count a 401K loan as a qualifying expense in a chapter 7, but you can in a chapter 13. Sometimes an expense like that can keep a person out of a 13. Also, if you have car loans now, but the cars will be paid off in a year, you can get an objection based on the fact that once the car is paid off, you will be able to redirect the payment amount into a 13. So it can be worthwhile to look at your loan terms as well.

[DirkDiggler]

They don't come with instructions. You don't use the standard amounts on Schedule J. You would use your actual expenses. Fixed expenses like your mortgage, car payment, etc as they are, and averages for figures that vary (utilities, etc) and you can stretch your household/grocery budget to the standard. There are other areas where you can stretch as well. Going over the standard is likely to invite inquiry and depending on the reason, the category, your income and dmi, it could also invite a Motion to Dismiss your chapter 7.

I think I'm starting to understand a bit better.....in the means test the standard is used, but after actually filing, my actual expenses would be used, so if there are areas where I don't have expenses as high as the standard, I can't just use the standard amount, I would have to use the actual amount, which would be lower and could end up causing a positive DMI. Am I getting it right?

While we are going to be filing through an attorney that we picked out, I want to be on top of things and not just leave everything up to them. If a T is not crossed, I want to catch it and hopefully avoid any issues or problems.

I do have one other quick question....my employer is my families business. I have no ownership in the company and am an hourly, W-2'd employee but my last name is part of the company name, will that cause any issues or hiccups? I hope not! Thanks again for your help!

[debee]

Sounds like you are approaching this in a way to have a successful filing. If I were you I would know long before filing whether or not you have dmi on schedule I/J. Once you file, it's too late to remedy.

I can't imagine you having any problems being on the payroll (but not an owner) of a relative's business. The tt might inquire, but I don't see it as an issue for your bk.

[DirkDiggler]

Have a quick question regarding traffic fines....its not a regular occurance, but both my wife and I (within the last 2 months) recieved about $900 in traffic tickets, thankfully we're eligible for traffic school so the points stay off our driving record, but is the fines eligible for anywhere on our means test and/or Schedule J form? Just a thought BTW I'm not looking to discharge them (I'm not even sure you can) just wanting to use the amounts towards my DMI if possible LOL

[debee]

Can't discharge them. I would only consider including them if you were on some kind of court-sanctioned longterm (60 month) payment plan. Normally, they have to be paid by a certain date or you end up with trouble, right? Suspended license, warrant, etc. So not an ongoing expense. If you include them (in the absence of a court arrangement) I'm thinking they would be easy for the trustee to knock down.

I could be wrong. I haven't read anything on the issue of fines as expenses. I base my answer on reading I've done where other types of expenses were met with objection. If noone else speaks up, you could start a new thread and see what other members say.

Stay off the pedal, man.

[DirkDiggler]

Can't discharge them. I would only consider including them if you were on some kind of court-sanctioned longterm (60 month) payment plan. Normally, they have to be paid by a certain date or you end up with trouble, right? Suspended license, warrant, etc. So not an ongoing expense. If you include them (in the absence of a court arrangement) I'm thinking they would be easy for the trustee to knock down.

I could be wrong. I haven't read anything on the issue of fines as expenses. I base my answer on reading I've done where other types of expenses were met with objection. If noone else speaks up, you could start a new thread and see what other members say.

Stay off the pedal, man.

Haha, wife's was speeding, was only 7 MPH over the limit, but hey, its budget deficit time, so the traffic cops really aren't giving out warnings these days Mine was for passing on a double yellow, slow moving (10 MPH tractor) on a 55 MPH road but again, no reasoning with the revenue generators, but thats a topic for another forum LOL

It was just a thought, there won't be any payment plans, they'll be paid, just was wondering Thanks again!

[debee]

Haha, wife's was speeding, was only 7 MPH over the limit, but hey, its budget deficit time, so the traffic cops really aren't giving out warnings these days Mine was for passing on a double yellow, slow moving (10 MPH tractor) on a 55 MPH road but again, no reasoning with the revenue generators, but thats a topic for another forum LOL

They got my hub for speeding up as he was entering the freeway because he accelerated too soon. Not long after that he got hit by a parked car.

It was worth every penny just to call out as he was leaving in the morning, "Try not to get ticketed or hit anything on your way to work!"

[LadyInTheRed]

My husband headed to the eastern Sierra about a month ago to camp with his brothers. Didn't occur to him that the passes would still be closed for the winter. His brother were coming from SoCal, so it wasn't an issue for them. So, his 6 hour trip turned to a 12 hour trip. In a small town in Nevada (he never intended to leave California), he was pulled over for going 5 miles over the speed limit. The cop ran his driver's license to make sure there were no warrants then told him he wasn't giving him a ticket because living in Oakland was punishment enough. I'm so glad Oakland has such a bad rep. Paying a traffic fine would have been a real burden right now!

Anyway, I agree with Debee. You aren't going to be able to include traffic tickets as an expense when calculating your DMI. Gotta watch that speed or take the fine out of another area of your budget.