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socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 37960
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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I am in Chapter 11 now. Due to a recent illness i am on total

Resolved Question:

I am in Chapter 11 now. Due to a recent illness i am on total disability and will be for some time. All of my income is from disability which would be exempt in chapter 7. I am totally insolvent with a negative net worth. My current assets would be exempt under the state and federal guides with 17 year old living at home My cuurent home has about 50 k in equity but is being owner financed. The downpayment was loand to us from a family member 9 months ago. My personal Liability is a 1,100,000 deficit from a upside down morgage deficit.

Three questions:

Can I not convert to 7 and overcome the excess liability challenge which makes me fail the means test? Would the court not recognize my disability and insolvency. I am 61 aand medically disabled from prostate cancer. chapter 7 would give me a fresh start
At the house foreclosure the bank bought it for 500k . The bank's personal appraiser March 11 appraiseed at 500K. However in March 2010 the property was assessed at 2.1 million by a very reputable comercial appraiser. This left the deficitt from the foreclosure at 1.1 mill. Could my attorney argue in a converson that the bank undervalued the property and that my foreclosure deficit be less. Perhaps it would meaan the means test.

In a converson, does the same chaper 7 means test apply in you are converting from 11 . I understand 90% of 11filings are eventually converted to 7.

DR S
Submitted: 5 years ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 5 years ago.
Can I not convert to 7 and overcome the excess liability challenge which makes me fail the means test?

A: The "means test" is based upon income, not assets. If your current monthly income, averaged over the past six months and then multiplied by 12 is less than the state median for your family size, then you can convert to a Chapter 7. The best way to discover your ability to satisfy the test is to take it. See this link.


Would the court not recognize my disability and insolvency. I am 61 and medically disabled from prostate cancer. chapter 7 would give me a fresh start

A: The facts of your physical condition could be used to rebut the presumption that your Chapter 7 means test income is an abuse of the bankruptcy code. So, yes, I think this works in your favor.

At the house foreclosure the bank bought it for 500k . The bank's personal appraiser March 11 appraised at 500K. However in March 2010 the property was assessed at 2.1 million by a very reputable commercial appraiser. This left the deficit from the foreclosure at 1.1 mill. Could my attorney argue in a conversion that the bank undervalued the property and that my foreclosure deficit be less. Perhaps it would mean the means test.

A: As already mentioned, your assets are irrelevant. Income is what matters for means test purposes.

In a conversion, does the same chapter 7 means test apply in you are converting from 11 . I understand 90% of 11filings are eventually converted to 7.

A: The actual requirement is an absence of bad faith. But part of that is satisfying the means test or showing why the debtor's additional income is not an abuse of the bankruptcy code. For you, the answer is that your disability makes your maintaining past income extremely unlikely -- or that's the operative argument.

Hope this helps.

NOTICE: My goal here is to educate others about the law. I am always available to answer your follow-up questions after you click Accept – however, if you do not click Accept, the website gets paid, and I receive nothing. This is true, even if you are on a subscription plan. So please click Accept, so that I will be able to continue to provide this service for others in the future.

socrateaser and 2 other Bankruptcy Law Specialists are ready to help you
Customer: replied 5 years ago.
All of my income is from medicald disability payments. The tennessee guidelines have income from disabiliy insurance as being totally exempt. I have checked this several times with the court and several attorneys. It is very clear in the Tennessee bankruptcy exemptions. Not just ss exemptions. So I have no income. Should this not meet the means test.. However doesnt the amount of my debt 1.1 mill make me fail the means test which limits the amount of Debt fin 7?
Expert:  socrateaser replied 5 years ago.
The debt limitation is for Chapter 13. There is no debt limit for Chapter 7.

Private disability income is included in the means test calculation. Only Social Security income is excluded. Bankr. Code § 101(10A)-(10B).

Once again, I suggest that you take the means test at the link previously provided. Then, you will know whether or not you will have a problem to deal with.

Hope this helps.

NOTICE: My goal here is to educate others about the law. I am always available to answer your follow-up questions after you click Accept – however, if you do not click Accept, the website gets paid, and I receive nothing. This is true, even if you are on a subscription plan. So please click Accept, so that I will be able to continue to provide this service for others in the future.