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Bankruptcy and the Means Test

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Re: Bankruptcy and the Means Test

 

I have corrected that post and it should be more organized, include links and other information.  Thanks again.

Message 21 of 33
Valued Contributor

Re: Bankruptcy and the Means Test


@toddbeck wrote:

I would suggest you look into anyway possible to pass the means test.  The idea that you “should” be in a chapter 13 is a rediculous way to think about it.  

 

With that said, you do have to pass the means test.  I can tell you I recently passed the means test with a 148K income (~85K median).  No questions asked.  

 

 


I think that assuming that you should qualify for a chapter 7 no matter how much money you make or have left over after paying normal bills is a ridiculous way to look at the situation.  In addition, it is unethical.

 

 

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Message 22 of 33
Valued Contributor

Re: Bankruptcy and the Means Test


@trying2maintain wrote:

Shooting-for-800 said: fill out the means test as you understand it and post it on here and we will review it with you and give opinions.

OK, I completed the means test.  This is the one I used. I also used this document to assist me along the way. The means test after completion says that I would have $645 of disposable income left after the deductions I input which would fail me for Chapter 7 consideration.  I think I left some information out and there was some information I was unclear about so I will post below in an organized list. There are 26 images in the album I created on the means test. I will reference my questions about each section by picture and line below.  Here is what I input and the results:  Means Test Calculations


Line 9 Form 122-1, (Pic 4) - I entered the retirement funds I withdrew.  The one thing I do not know about this part is where do I put the 25% in taxes and the 10% penalty owed on them or are those not deductible?  I did not enter or account for amounts for the taxes or penalties anywhere in this assessment.


Line 10 Form 122-1, (Pic 5) - Same thing as above.  I was paid $1500 for independent contract work which will be taxable but I did not enter amounts for this taxation on payment anywhere on this assessment.


Line 3 Form 122-2, (Pic 10) - This is where my wife's deductions come into play, I believe. I put in $1,000 for student loans based on a 5 year payoff.  I put in $1,000 on credit accounts, based on a 1 year payoff.  I put in $1,000 for employment.  My wife drives a lot for work but does not get mileage, fuel, or other reimbursements.  She has to drive 80 miles round trip daily at least once a week for work with no reimbursement. There were only 3 spaces so I am not sure I can/should add anything else. ???


Line 5 Form 122-2 (Pic 11) - I think I am supposed to put 4 there since that is household size but was unsure.  Nobody else is currently living with us.


Line 16 Form 122-2 (Pic 16) - I did an average of monthly payroll tax deductions, including federal, state, FICA, SS, etc. based on paystubs.  I also included the $110 per month we pay on a total of $4500 in previous taxes owed.  I did not include taxes for retirement withdrawal or independent contract work from above though since those are not monthly.  I think I filled out everything else correctly.  We do not expect a refund at all.

 

Line 21 Form 122-2 (Pic 17) - I did an estimate on childcare.  Sometimes they stay at aftercare at their private school.  Sometimes I pay somebody else to watch them.  Sometimes my wife does.  I'm rather interested in the documentation required for this part since we pay cash most of the time.

 

Line 25 Form 122-2 (Pic 18) - I did not not input the $150 for the FSA dependent care account that is taken out ever paycheck.  Should that be included here?  If not here, anywhere?

 

Line 29 Form 122-2 (Pic 19) - Our children go to private school.  The cost for them attending private school is $6,500 annually.  My wife pays for this schooling.  I put in the maximum amount since $6,500/12 is over the maximum amount allowed.  Should this expense be negated and put under my wife's deducations though since she pays it?

 

Line 36 Form 122-2 (Pic 22) - I was unsure about this part.  I estimated $1,300 but I do not know if that is correct.

 

Lines 41 and 42 Form 122-2 (Pic 24) - The form would not let me input any information here.

It looks like if I didn't have the retirement withdrawals I would easily meet the test. I am guessing I could possibly have missed expenses on my wife's side not to mention the $2500 in taxes and $1000 on penalties I did not add for the retirement withdrawals/contract work.

Let me know what you think.

Thanks a bunch!!!


I will type my thoughts as I review your form...

 

UPPER

2.  B is for joint filing, you are not filing joint, remove her income

9.  You do not receive retirement income or pension, right?  Your withdrawl is NOT income, it was savings basically.

10.  What is University income?  Grad Assistant or something?  Exclude it if you are not going to have steady income from it.

 

LOWER

3.  $1000 Spouse's Student Loans

3.  $1000 Spouse's Credit Cards & Other Debt

3.  $500 Spouse's Personal & Other Expenses

9b.  Did you include property taxes and home owners insurance?  HOA fees?

11. Change to 1 vechicle, your wife's is already deducted

13d = 0

13e = 0

13f = 0

21. is that actually expense or standard deduction?  if actually, bump it up to 1300 or 1400 assuming the price fluctuates and could easily increase tomorrow.

22.  You have no medical costs besides insurance?  At least put $100 or $200 for insurance deductables, prescriptions, for future events.

33d.  is that for you or your wife (only put yours there)  if your wife's, remove it and add to UPPER 3 section. 

 

 

Save what you had and put these numbers in, recalculate everything, and see where you are at now...

 

 

 

 

 

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Message 23 of 33

Re: Bankruptcy and the Means Test



I will type my thoughts as I review your form...

 

UPPER

2.  B is for joint filing, you are not filing joint, remove her income

9.  You do not receive retirement income or pension, right?  Your withdrawl is NOT income, it was savings basically.

10.  What is University income?  Grad Assistant or something?  Exclude it if you are not going to have steady income from it.

 

LOWER

3.  $1000 Spouse's Student Loans

3.  $1000 Spouse's Credit Cards & Other Debt

3.  $500 Spouse's Personal & Other Expenses

9b.  Did you include property taxes and home owners insurance?  HOA fees?

11. Change to 1 vechicle, your wife's is already deducted

13d = 0

13e = 0

13f = 0

21. is that actually expense or standard deduction?  if actually, bump it up to 1300 or 1400 assuming the price fluctuates and could easily increase tomorrow.

22.  You have no medical costs besides insurance?  At least put $100 or $200 for insurance deductables, prescriptions, for future events.

33d.  is that for you or your wife (only put yours there)  if your wife's, remove it and add to UPPER 3 section. 

 

 

Save what you had and put these numbers in, recalculate everything, and see where you are at now...

 

 

 

 

 


I have some questions regarding your commentary but I will refill out the form and see what the new figures say.

 

UPPER:

  • Column B:  You say remove her income because she is not filing but the form says to include it even if she is not filing.  See here.
  • Line 9: Correct, I do not receive retirement income but wouldn't the withdrawal still count?  I mean, is taxed as income and penalized as well.
  • Line 10: That is the $1,500 I got for contract work.  I will not receive it consistently, or probably at all again.  Reviewing my file, wouldn't they see that deposited in my account and wouldn't it raise question if it were not included in my means test?  Same with the retirement withdrawal?

LOWER

  • Line 3: So deduct $500 from the wife's expenses overall?
  • 9b:  The mortgage includes taxes and insurance via escrow.
  • 11:  Where would my wife's be deducted already?  Her expenses?
  • 21:  That was the actual expense average over the last 6 months for after school childcare.  Should I still increase it?
  • 22:  I actually do have medical expenses but they are covered by HSA.
  • 33d:  Those are payments that I make for loans that are collateralized by my retirement savings.

Were my other areas good besides these?

 

 

Message 24 of 33
Valued Contributor

Re: Bankruptcy and the Means Test


@trying2maintain wrote:


I will type my thoughts as I review your form...

 

UPPER

2.  B is for joint filing, you are not filing joint, remove her income

9.  You do not receive retirement income or pension, right?  Your withdrawl is NOT income, it was savings basically.

10.  What is University income?  Grad Assistant or something?  Exclude it if you are not going to have steady income from it.

 

LOWER

3.  $1000 Spouse's Student Loans

3.  $1000 Spouse's Credit Cards & Other Debt

3.  $500 Spouse's Personal & Other Expenses

9b.  Did you include property taxes and home owners insurance?  HOA fees?

11. Change to 1 vechicle, your wife's is already deducted

13d = 0

13e = 0

13f = 0

21. is that actually expense or standard deduction?  if actually, bump it up to 1300 or 1400 assuming the price fluctuates and could easily increase tomorrow.

22.  You have no medical costs besides insurance?  At least put $100 or $200 for insurance deductables, prescriptions, for future events.

33d.  is that for you or your wife (only put yours there)  if your wife's, remove it and add to UPPER 3 section. 

 

 

Save what you had and put these numbers in, recalculate everything, and see where you are at now...

 

 

 

 

 


I have some questions regarding your commentary but I will refill out the form and see what the new figures say.

 

UPPER:

  • Column B:  You say remove her income because she is not filing but the form says to include it even if she is not filing.  See here.     See #4  additional household income.  She is not a debtor.  Regardless, math should be the same.
  • Line 9: Correct, I do not receive retirement income but wouldn't the withdrawal still count?  I mean, is taxed as income and penalized as well.  NO!  This is a test regarding your expected FUTURE income.  You will not receive that money again.  Not any different than selling something you owned to help pay bills.  This is a MEANS test, not a past transaction inquiry.
  • Line 10: That is the $1,500 I got for contract work.  I will not receive it consistently, or probably at all again.  Reviewing my file, wouldn't they see that deposited in my account and wouldn't it raise question if it were not included in my means test?  Same with the retirement withdrawal?  Let them question it.  It is not normal income.  Of course, ask the attorney.  Worst case, file 6 months after the date of that check.

LOWER

  • Line 3: So deduct $500 from the wife's expenses overall? 

    Actually change to:

    3.  $1000 Spouse's Student Loans

    3.  $1000 Spouse's Credit Cards & Other Debt

    3.  $1000 Spouse's Car, Job, & Other Expenses

    For now.  Hopefully, you will be able to reduce those amounts before filing since your other areas will be more impactful on your income.
  • 9b:  The mortgage includes taxes and insurance via escrow.
  • 11:  Where would my wife's be deducted already?  Her expenses?  YES.  UPPER 3 area.
  • 21:  That was the actual expense average over the last 6 months for after school childcare.  Should I still increase it?  I would, maybe 10% due to price increases or other factors.  Any chance you expect it to cost more in the future?  
  • 22:  I actually do have medical expenses but they are covered by HSA.  I would still include $100 for unforseen expenses.  That is only $25 per person.
  • 33d:  Those are payments that I make for loans that are collateralized by my retirement savings.  OK.

Were my other areas good besides these?  I think so.

 

Keep in mind that this is just a worksheet.  A decent attorney will tell you what can be raised or has to be reduced before you file.  Do not lie about anything.  Anything that can be explained honestly will be fine even if it is incorrect.  "I put our expected child care for next year based on being a tad more than last years..."

 

See what that adds up to...

 

 


 

Rebuild started in 2014  -  $100k total unsecured credit in 2017  -  $250k+ total unsecured credit in 2019.

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Message 25 of 33
Valued Contributor

Re: Bankruptcy and the Means Test

Put wifes income in Upper 2 not 4, should not matter.

Basically you are putting in all income then deducting her stuff and your stuff to see what is left.

 

Those numbers should get you way below $0 left and then you can trim down your wifes exemptions to be completely unquestionable.

Rebuild started in 2014  -  $100k total unsecured credit in 2017  -  $250k+ total unsecured credit in 2019.

  DON'T WORK FOR CREDIT CARDS ... MAKE CREDIT CARDS WORK FOR YOU!

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Message 26 of 33
Valued Contributor

Re: Bankruptcy and the Means Test

Does your wife pay anything for health insurance?

Your $142 covers all 4 of you?

Rebuild started in 2014  -  $100k total unsecured credit in 2017  -  $250k+ total unsecured credit in 2019.

  DON'T WORK FOR CREDIT CARDS ... MAKE CREDIT CARDS WORK FOR YOU!

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Message 27 of 33
Highlighted

Re: Bankruptcy and the Means Test


@Shooting-For-800 wrote:

Does your wife pay anything for health insurance?

Your $142 covers all 4 of you?


She has no payment for health insurance.  The $142 per month covers the family.  I redid the means test and made the following changes:

 

  1. Took out the retirement and contract income.
  2. Reduced my wife's deductions from $3,000 to $2,700
  3. Took out her vehicle information and only claimed 1 vehicle.
  4. Increased chilcard to $1,400 per month.
  5. Increased my HSA to $50 per month because $25 is per pay period.
  6. Removed minimum payment for Chapter 13 on Line 36 because I am not sure what that is.

The result is I passed the means test but it appears barely or maybe I am reading it wrong?

Message 28 of 33
Valued Contributor

Re: Bankruptcy and the Means Test

Better.

That should a good start.

You might also reduce wife's deductions by $500 and then go back to 2nd car deduction.

Decent attorney can help you tweak it.

If you do have to do a Chapter 13, you should not have to pay too much.

 

WAIT - DID YOU INCLUDE YOUR STUDENT LOANS?  

 

Those loans are required to be paid back and not discharged.  That should be $1000 per month itself.

 

 

Rebuild started in 2014  -  $100k total unsecured credit in 2017  -  $250k+ total unsecured credit in 2019.

  DON'T WORK FOR CREDIT CARDS ... MAKE CREDIT CARDS WORK FOR YOU!

       10% Rotating - Discover                             5%-20% - Amazon & Lowes                       6% Groceries - Amex Preferred (DW)
       5% Gas & Sporting - Ducks Unl                 4% Dining & Entertain - Savor                   3% Travel & Hotels - Propel & Uber
       2% Everything Else - Venture                    1% Cancer Charity - Fifth Third                 0% Financing Promos - QuickSilver




    
Message 29 of 33

Re: Bankruptcy and the Means Test


@Shooting-For-800 wrote:

Better.

That should a good start.

You might also reduce wife's deductions by $500 and then go back to 2nd car deduction.

Decent attorney can help you tweak it.

If you do have to do a Chapter 13, you should not have to pay too much.

 

WAIT - DID YOU INCLUDE YOUR STUDENT LOANS?  

 

Those loans are required to be paid back and not discharged.  That should be $1000 per month itself.

 

 


I did not include my student loans.  Where would I put them on the form?  The recent estimated payment per month on those that I received was $1,800.

Message 30 of 33