Income and left over money after paying debts

[Racking7]

I’ll try to make this as concise as possible but my head is spinning. I live in PA and we’ll be filing Ch 7 shortly. My husband and I are both disabled and receive SSDI which I understand is not even counted as income. In addition, we are well below the median income for our state. So both of those automatically qualify us for Chapter 7 and we do not have to do the means test - according to my attorney and threads on here I’ve read.

My question is does the trustee still look at your disposable income to determine if you need to do Chap 13? I’ve tried To find all the exemptions allowed and it looks like we might have $700 a month left over. Is that too much? Would a trustee say that amount could be used towards paying creditors? It was $400 until my attorney told me to stop paying a loan and 2 credit cards I had been holding onto.

I don’t want to file if I’m going to be forced into 13 which we cannot afford.

Thanks for any insight you can provide. Of course I forgot to ask him and now he won’t be open until Monday.

Happy New Year! I hope 2021 is much better for all

[justbroke]

My question is does the trustee still look at your disposable income to determine if you need to do Chap 13? I’ve tried To find all the exemptions allowed and it looks like we might have $700 a month left over. Is that too much? Would a trustee say that amount could be used towards paying creditors? It was $400 until my attorney told me to stop paying a loan and 2 credit cards I had been holding onto.

Technically the United States Trustee (UST) would be the person to look into your Schedule I/J disposable monthly income. As you know, SSA and (certain) VA benefit are excluded from the definition of "current monthly income" (CMI) but not from the definition of income. So that means if you have exclusively SSA or VA income, then you do not need to do the means test.

However, as you speculate, there's another area that they look at. That's Schedule I, your actually income with SSA/VA included, and your expenses on Schedule J.

Personally I have never read of an issue where someone with SSA/VA income "passed" the Means Test, but the UST found that the debtor had too much income under the Schedule I/J test.

I don't know why you'd have any disposable income left over when you account for housing, food, clothing, telecommunications, vehicles, maintenance, medical insurance, out-of-pocket medical, and an entire host of other expenses.

You did mention "exemptions" though. Exemptions are to protect property and not to protect income. So I may not have answered your questions correctly. If your attorney is okay with your Chapter 7, then you should be okay.

[Racking7]

As always, thanks for your fast response! You’re a blessing! The only deductions I counted were the ones you listed (The Federal trustee list of allowable expenses with dollar amounts). I saw online a bunch of others we could take but they didn’t have amounts and I didn’t know how valid they were ex. Pet expenses (I pay $150 a month in pet meds - which 2 would die without). I didn’t count prescriptions. If I can take more we won’t have much if any left over. My attorney is not concerned at all. All of our assets are protected. Sorry I used the wrong word.

Thank you again for your help!! ❤️ You are truly wonderful!

[Scarlett1234]

I am confused about this disposable income part too, my So has some of the disposable income left but it is also protected benefits. However, I read we should use the real expense when we list expense on schedule J, not the standard number posted online. Did you confirm with your attorney that you should not use real expense on schedule J?

[justbroke]

Scarlett1234, yes Schedule J is the real deal. The Means Test is what they call a "mechanical" test which uses values for expenses which may or may not be representative of a debtor's true expense. I put my real expenses on Schedule J and if the Trustee or UST chooses to attack the Schedule J expenses, I can explain. It's more difficult to explain exceeding values on the Means Test.

There are places on the Means Test where one would override the means test value. For example, non-rent, which is utilities and such, should not exceed the amount from the UST's tables. However, there's another box where you can put in a value which exceeds the non-rent amount. But, if you place something in that box on the Means Test, expect some questoning.

The UST publishes a guidebook for Trustees which goes through every single line of the Means Test and asserts the UST's position on each line!

Here's an example. If the debtor places an amount in box 21 (housing and utilities adjustment) the Trustee is to object. The UST writes that "this line is often used improperly by debtors to claim housing expenses in excess of the IRS standards; USTP policy is to object to that use of line 21.".

You can check out that guidebook here (It's published in the same place as the UST's Means Testing Expenses.

Source: https://www.justice.gov/ust/eo/bapcp...ne_by_line.pdf