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Confused about means test/22A


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After looking at my credit report, I'm thinking about just giving up. The problem is, I don't see exactly where certain things should go.

Looking at some basic runs of the 22A form, it says I have almost $600/mo left over.

I don't see where auto insurance shows up here, that's another $200 out of pocket.

Also, what about judgements and collection accounts that you don't have payment agreements?

I have outsanding judgements for 2 utilities (~$3000), Discover card (~$3600), Foreclosure (~$100,000), 2 state tax liens (~$3500).

That's outside of any collection acccounts or other items.

I will NEVER be able to pay all of this back....but I don't see any place on here where to list this?

Does this go in 42 and just divide by 60 for each one??

That totals up $1800 a month if I were to pay that. Can I use that as a deduction to my monthly disposable income and be eligible??

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The forms have changed a bit since I used them in the summer of 2008, but it appears vehicle insurance is "baked into" the deductions allowed under lines 22A (vehicle operating costs) and 23 (ownership costs). When you total them together, they provide you with a deduction of at least $724 ($489 + $235). Seems quite generous, but that's what the Code provides- or at least that's how the courts interpreted the Code. Your insurance costs are rolled in with changing oil, tires, gasoline, etc. It appears vehicle insurance is not given its own line.

All unsecured debts are kept off the calculation as they should be. The question here isn't whether you can file bankruptcy or not. What they're asking is if you have enough cash left over every month (totally ignoring nonsecured debts) to push you into a Chapter 13 and at least require you to provide some sort of monthly payment to creditors for the next few years. If you are a consumer debtor who is not a disabled veteran and have both (1) income above the applicable state median AND (2) have more than $109.58 leftover each month after all applicable deductions and secured debts, then the presumption of abuse tag will be triggered. You then get to "plead" your case to the trustee/judge by claiming additional deductions you feel are necessary for the health and welfare of you and your dependents under line 56 that would bring the total monthly disposable under the monthly limit. The court may or may not agree. If not, your case will be converted to a Chapter 13 or dismissed. A Chapter 13 doesn't mean all those unsecured creditors of yours will be paid anything substantial. It just means you have to make payments of some kind for a period of 3-5 years- which will be chopped up and distributed to the benefit of your creditors before you are eligible for discharge.

And I can't stress enough that if you are below the applicable state median income, you don't have to sweat all of the complicated deduction sections anyway. See lines 13-15. If your income is below the threshold, you stop there and put down your pencil. :)

Edited by jq26
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Ok, I understand the insurance and stuff now.

However, I don't get your $724 figure. I have $217 in 22 (operation) and then 23a is 489. 23b is my monthly car payment, right? so that's 329 - I'm left with 160. 160+217 = not much.

What about the judgements?? They don't count in stuff I owe, or only in unsecured?

Basically, I make 60+K a year in a median of 55k. I am single, but pay child support. My only secured debt (and only debt I'm paying on) is a $329 truck payment. I assume that I make way too much for my area and since I don't have anyone else to really take care of, I can only count single exemptions.

Should I try and buy a second car??? That should drop my income nicely...

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I am between work and class and only have a second, but my gut feeling here is that you do get to deduct the secured vehicle loan. The subtraction from 23a of your secured vehicle payment in line 23b is only so that you don't get “double credit” for that cost of ownership. If your interpretation were true, then you'd be "punished" for having a larger car payment. More likely, this subtraction from 23a of your secured car payment amount is occurring so that you don't double count your ownership costs. Your vehicle is a secured debt. Your secured vehicle payment will be on line 42. That is above and beyond the line 22 and line 23 costs.

So you'd have $217 + ($489 - $329) = $377. But then on line 42, where you enter all payments on secured property, you include $329. So costs attributable to your car are $706 month.

I think the BAPCPA Committee notes I posted above are in agreement:

“The IRS issues Local Standards for transportation in two components for its internal purposes as well as for bankruptcy: one component covers vehicle operation/public transportation expense and the other ownership/lease expense. The amount of the vehicle operation/public transportation allowance depends on the number of vehicles the debtor operates, with debtors who do not operate vehicles being given a public transportation allowance. The instruction for this line item makes it clear that every debtor is thus entitled to some transportation expense allowance. No debt payment is involved in this allowance. The ownership/lease component, on the other hand, may involve debt payment. Accordingly, the forms require debtors to reduce the allowance for ownership/lease expense by the average monthly loan payment amount (principal and interest), up to the full amount of the IRS ownership/lease expense amount. This average payment is as reported on the separate line of the forms for deductions of secured debt under § 707(B)(2)(a)(iii).”

I wouldn't buy another vehicle. You'll have to explain why. Keep in mind that the means test is mechanical. But there is always, even if you pass, the trustee's subjective right to look for abusive practices. There are two tests really...

The means test is quite generous really. You make $60,000 per year as a single person. I'm surprised you’re running into means test issues. But if you are, then maybe consider a Chapter 13.

Judgments are unsecured. They don't count. You could owe $1 or $100,000,000. The amount of unsecured debt is meaningless in the determination of whether to file a Chapter 7 or if you are eligible only for a Chapter 13. It’s about how much cash you have leftover each month after you pay for your necessities + secured debt. In other words, if the court deems you have the ability to pony up at least something every month in exchange for a discharge of your debt, they'll require you to apply some of your disposable income monthly and make payments. Still not a bad gig.

I'd see an attorney and have them work through your income and expenses properly. There is plenty of circuit specific case law that has accumulated around these thorny issues. With your income, you can probably afford to have this done right. And having someone who knows your local rules and trustees may be invaluable if you are marginal on the 22A.

Edited by jq26
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I re-did one of the online calcs (I'll do it manually later) once I got home and had actual numbers. I had grossly discounted the amount of monthly taxes taken from my gross pay (I was missing more than $500 a month on my guesstimations when I didn't have my paycheck handy.

The only other thing I have to say is thank god for child support. Without that deduction, I would have failed the test by a mile.

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