Borderline 13 want to be a 7...

[km2654]

I am a borderline 13 on the means test. I'm a couple thousand over the median income and will have a few hundred dollars of disposable income without all the bills. All of my debt is unsecured. Can anyone suggest things I can do or things to look for in my budget to move me into a 7?
Thanks

[justbroke]

Nope. Only an attorney can make suggestions, such as incurring debt like purchasing a new car using a loan...

Bottom line is that you don't want to do anything fraudulent. An attorney can recommend and have you incur "secured" debt on the eve of Bankruptcy. Generally, though, this is because your old car just won't make it, or that you need a car and obtaining one after filing will be more difficult.

If your credit is already shot, there's not much you could do. Remember, by incurring the debt, you just piled on more debt.

Why are you trying to avoid a Chapter 13 anyhow?

[km2654]

I don't want more debt. What I need are ideas of allowable expenses that I may already be spending money on but not including. I have not kept track of where my money goes, but I am starting now.

The two suggestions the attorney made were changing my exemptions so they take more taxes. I have it high now because I need the money to live on. And buying renters insurance. Once I stop paying my bills I will be able to afford it. He said once I retain him we can get deeper into it.

I would rather do a 7 because I would just like it to be done with it.

[justbroke]

I don't want more debt. What I need are ideas of allowable expenses that I may already be spending money on but not including. I have not kept track of where my money goes, but I am starting now.

This is for your attorney to help you with. I can't make up expenses for an over-the-median income filer.

The two suggestions the attorney made were changing my exemptions so they take more taxes.

This will NOT work. Trustees are keen to this "over-withholding" tactic that many people try. You might get away with it, but they only need look at prior tax returns and if you received refunds. I wouldn't do this at all and shame on your attorney for suggesting it.

I have it high now because I need the money to live on. And buying renters insurance. Once I stop paying my bills I will be able to afford it. He said once I retain him we can get deeper into it.

Uh huh.

I would rather do a 7 because I would just like it to be done with it.

It's not up to you. Filing a Chapter 7 (post the BAPCPA revolution of 2005) is based on your inability to pay some dividend to unsecured creditors over a 5 year period. if you have enough disposable monthly income to pay about $10,500 over 5 years (about $182.50/month), or are able to pay at least 25% back... then you do not quality for a Chapter 7.

Since you are over-the-median income, you can't "create" expenses. You must use the IRS allowances. If you were under-the-median, then creative expenses can help (and attorneys can find them, like haircuts, newspapers, etc). However with you being over-the-median income, your Means Test (form B22A) is going to be weighed heavily.

I would consult with a few more attorneys.

[poorold]

it seems a person in your financial situation would benefit by having short and long term disability insurance in case something were to happen and you were out of work for a while.

[km2654]

The attorney and I went to the IRS website and went thru the withholding calculator. With the deductions I have now I will owe about $271, but I just received a raise that will be retroactive to April. So if I don't change them now I will end up owing more.

We just went over my basic expenses. I have started going thru my last years statements to see where all my money goes. From what he said I understood it to be that I could still possibly qualify for a 7 depending on expenses. I guess I was wrong.

I don't want to do anything fraudulent or hire an attorney that would advise me to.

justbroke, I see that you did a 13. Are you left with enough money after you pay the court for emergencies? What happens if you need to repair your car or your dog gets sick? Do you have to ask to spend the money?

Thanks for all your input.

[HHM]

Ultimately, this is something you will need an attorney before, if you are BOTH over median and showing Disposible Income, there is only so much you can do.

As was pointed out, you don't really get to choose between chapter 13 and chapter 7. Thus, you need to reorient your thinking, if you "CANT" file chapter 7, then what are your alternatives, file chapter 13, do nothing, etc. 9 times out of 10, chapter 13 is the better option when you CAN'T file chapter 7.

Generally, you can eat up some DMI with term life insurance, uping your auto insurance coverage, etc.

[justbroke]

The attorney and I went to the IRS website and went thru the withholding calculator.

Big mistake. Any attorney going directly to the IRS website... is one Bankruptcy Attorney I'd run, not walk, away from. Trying to hide money by purposely overwitholding and then using that as your actual tax amount on your Bankruptcy petition... is fraud, if you ask me.

With the deductions I have now I will owe about $271, but I just received a raise that will be retroactive to April. So if I don't change them now I will end up owing more.

I don't understand what you mean by this statement.

We just went over my basic expenses. I have started going thru my last years statements to see where all my money goes. From what he said I understood it to be that I could still possibly qualify for a 7 depending on expenses. I guess I was wrong.

Personally, if I were you, I'd go over to LegalConsumer.COM and check out their FREE on-line Means Test. That way you can know the real deal, rather than "guessing" by "going directly to the IRS website" to try to lower your disposable income by increasing withholdings.

A Chapter 7 is all about expenses, or, lack of income, or, most of the times, both!

justbroke, I see that you did a 13. Are you left with enough money after you pay the court for emergencies? What happens if you need to repair your car or your dog gets sick? Do you have to ask to spend the money?

No. A Chapter 13 is not about emergency money. Having a competent attorney prepare your plan, will save you heartache. The chief reason(s) a Chapter 13 fails his plan are either their failed to maintain or are incapable of living on a budget or their plan was not adequately prepared (pro se or poor attorney). You do not ask for money to spend... you have to SAVE money by living on your budget... actually living well within your budget and saving all excess funds!

As for me personally, yes, I would be able to survive if my wife didn't smoke the way she does and cigarettes here have doubled in price, yet her smoking seems to have doubled as well. LOL. That alone would save me $400/month (approximately). The cigarettes are not in my budget as they are not an expense I can put on the Means Test, as I am completely over the median income. (They wouldn't allow it anyway, because it's not my expense, and I filed alone.)

My allowable budget is about $4K a month. That includes food, clothing, car operating expenses, cell phones, utilities, medical insurance, etc. My medical insurance for the family is almost $600/month. My electric bill alone averages over $650/month so... you can see the picture.

My $4K allowance does not include payments on my secured and priority debt. That number is in my signature line. There's also another $1.5K or so that's for property insurance (homeowner's) and property taxes (primary residence).

[justbroke]

Generally, you can eat up some DMI with term life insurance, uping your auto insurance coverage, etc.

Poster is over the median, so upping auto insurance coverage won't work. However, the Term Life insurance may be advisable, if s/he has dependents.

[HakunaMatata]

This will NOT work. Trustees are keen to this "over-withholding" tactic that many people try. You might get away with it, but they only need look at prior tax returns and if you received refunds. I wouldn't do this at all and shame on your attorney for suggesting it.

What about people in situations where their tax deductions are legitimately too high? I've been contemplating changing my deductions based on advice of my CPA (this was completely unrelated to filing BK...single homeowner claiming 3 on Federal). I broke even last year (was very close to owing); although, I won't be a homeowner in the future (which will have an impact). I don't need to change this immediately and I wouldn't do this to affect my DMI. I simply don't want to be bankrupt AND owe the government money! I'm in the beginning stages of BK and I don't want to make a critical mistake. Let me guess...continue saving for the BK attorney and the Feds?!

(If I've hijacked, I apologize. I didn't feel starting a new thread was necessarily warranted. Plus, this may or may not be applicable to the OP).

[km2654]

My deductions are legitimately too high. Based on my gross and what has been withheld so far this year I will owe $271 at the end of the year, but in Sept I am getting a raise that will be retroactive to April. So I will end up owing more than the $271. Thats why the attorney said I should change my deductions.

Thanks for everyones insights. I had a complete misunderstanding on how the means test worked. I have a lot more questions to add to my list for my next
attorney consultation.

[whipster1]

Several things you can do for legitimate expenses, most easily insurance...lt and st disability and Aflac-style indemnity, plus some nice term insurance should eat about 200+ of that up quick-like.

[justbroke]

What about people in situations where their tax deductions are legitimately too high?

Most Trustees will factor this. In the background, most Trustees use their own spreadsheet form of the Means Test (Form B22A combined with Schedule J), that will allow them to calculate over/under withholding. (BTW, they do calculate under-withholding too, so they are not trying to penalize you.)

I simply don't want to be bankrupt AND owe the government money! I'm in the beginning stages of BK and I don't want to make a critical mistake. Let me guess...continue saving for the BK attorney and the Feds?!

I agree, and the Trustees do look for underwithholding.

[hamburgervol]

I agree, I was told term life insurance was one of the best options.

[HakunaMatata]

Most Trustees will factor this. In the background, most Trustees use their own spreadsheet form of the Means Test (Form B22A combined with Schedule J), that will allow them to calculate over/under withholding. (BTW, they do calculate under-withholding too, so they are not trying to penalize you.)

JB-

You're wonderful! Thank you! I'll further discuss this with my attorney and CPA. I feel more comfortable leaving all untouched especially if over/under-withholding are taken into consideration by Trustees (who knows...this may further support my poor financial decisions status! ). Changing my deductions immediately won't have a huge impact on my finances. I suspect this can be delayed.