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Maverick, Attorney
Category: Bankruptcy Law
Satisfied Customers: 6392
Experience:  20 years of professional experience
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I was told by my lawyer that the trustee would object to a

Customer Question

I was told by my lawyer that the trustee would object to a home that I bought on land contract because it was worth $300k. My lawyer told me to keep my housing costs under $2000/month and I did. The lawyer said if I used the same monthly payment to rent, it would not be an issue. I put $10k down. I was told that the Judge and trustee would not think it was fair for me to be able to buy this house because it might be nicer than theirs. I was also told I could not include my childs school tuition in the means test for the same reasons(fairness). I gave up a much more expensive house and car. I had a significant drop in income. She said the court would not tell me to move out of the new house but they would make the repayment plan very high to punish me. I was told I do not look like a repentant debtor. I have no problem repaying my debts under 13, I just want the repayment plan based on what the means test actually allows. Nothing more and nothing less.
Submitted: 8 years ago.
Category: Bankruptcy Law
Expert:  Maverick replied 8 years ago.
Can you please state what question you would like for us to assist you with. Also please let us know what state you reside in and if you have already filed a BK or are you trying to decide if you should.
Customer: replied 8 years ago.
Is the information I am getting from my lawyer correct? It seems that the means test is a suggestion and the trustee and judge get to decide on what they feel is right. I live in Indiana.
Expert:  Maverick replied 8 years ago.

The means test is a test by which the court determines if you are eligible to file a chapter 7 BK. Since there was a lot of abuse of people filing the chapeter 7, now the court employs the means test to see if you can even qualify for the chapter 7. In laymen's terms, the means test will likely prevent people who live an above average lifestyle from filing a chapter 7 and force them to pay creditors back by adopting a chapter 13 plan which will in turn force them to live a more ordinary life style until the chapter 13 plan is completed.


To apply the means test, the courts will look at the debtor's average income for the 6 months prior to filing and compare it to the median income for that state. For example, the median annual income for a single wage-earner in California is $42,012. If the income is below the median, then Chapter 7 remains open as an option. If the income exceeds the median, the remaining parts of the means test will be applied.


This is where it gets a little bit trickier. The next step in the calculation takes income less living expenses (excluding payments on the debts included in the bankruptcy), and multiplies that figure times 60. This represents the amount of income available over a 5-year period for repayment of the debt obligations.

If the income available for debt repayment over that 5-year period is $10,000 or more, then Chapter 13 will be required. In other words, anyone earning above the state median, and with at least $166.67 per month of available income, will automatically be denied Chapter 7.


So for example, if the court determines that you have $200 per month income above living expenses, $200 times 60 is $12,000. Since $12,000 is above $10,000, you're stuck with Chapter 13.



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Customer: replied 8 years ago.
Has it been your experience that the trustee wiill object and not allow the full standards on the means test? How much discretion does the trustee and judge have in determining your repayment? I thought the means test calculations determined it.
Expert:  Maverick replied 8 years ago.
No the means test is only a preliminary inquiry as to whether you can get a chapter 7 discharge or whehter you have to do a debt repayment plan under chapter 13. Your repayment plan has to be approved by the judge, the trusteem and most importantly the creditors. Mainly, what they are looking for after the 2005 changes in the BK laws is to see that the creditors aren't getting pennies on the dollar while you are living a lavish life style. The 2005 laws were enacted to prevent bankrutcy abuse.

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