means test questions
Posted: Tue Jan 29, 2008 1:47 pm
Hi Nick, I apologise for my belated thank you to your thoughtful and detailed response. I especially appreciate your advice on the conflict of interest, which is probably unwaivable , in filing Chapter 13 cases for both spouses.
Thank you again.
Pat Said.
To: cdcbaa@yahoogroups.com
Cc: Nicholas Gebelt
Sent: Monday, January 21, 2008 3:31:05 PM
Subject: Re: [cdcbaa] means test questions
Dear Pat,
You should list social security and Medicare deductions on line 25 of Form 22A (The instructions for line 25 on the form itself state: "Enter the total [six-month] average monthly expense that you actually incur for all federal, state and local taxes, other than real estate and sales taxes, such as income taxes, self-employment taxes, social security taxes, and Medicare taxes.")
As for the debts listed in the Chapter 13 papers, on the one hand you could wait until the divorce is finalized and the debts are assigned. However, you might run into some difficulty over 11 U.S.C. 523(a)(15): a debt assigned pursuant to a divorce decree can be viewed as a debt to a spouse, and as such might not be dischargeable under 1328(b), though it is dischargeable under 1328(a).
On the other hand you could list all of the couple's debts in both sets of papers, but with the amounts disputed. Then when the proofs of claim are filed against one spouse, say the husband, oppose those you feel should be the wife's responsibility, and vice versa.
One note of extreme caution, you should carefully consider whether you can do Chapter 13s for both spouses without a serious conflict of interest. After all, when you assert that one spouse should not be liable for a given debt, you are, in effect, simultaneously asserting that the other spouse should be liable for that debt. In so doing you may be failing to effectively advocate for the spouse stuck with the debt in question.
I hope this helps.
All the best,
Nick
Nicholas Gebelt, Ph.D., J.D.
Law Offices of Nicholas Gebelt
15150 Hornell Street
Whittier, CA 90604
Phone: 562.777.9159
FAX: 562.946.1365
Web: www.goodbye2debt. com
Email: mn.gebelt@verizon. net
Confidentiality Note: This e-mail is intended only for the person or entity to which it is addressed and may contain information that is privileged, confidential, or otherwise protected from disclosure. Dissemination, distribution, or copying of this e-mail or the information herein by anyone other than the intended recipient, or an employee or agent responsible for delivering the message to the intended recipient, is prohibited. If you have received this e-mail in error, please notify us immediately at 562.777.9159 or e-mail info@goodbye2debt. com and destroy the original message and all copies.
To: cdcbaa@yahoogroups. com
Sent: Sunday, January 20, 2008 9:07 PM
Subject: Re: [cdcbaa] means test questions
Dear Nicholas, .
Thank you very much for your detailed answer. You guessed correctly. My client is well over the median income.Her employer pays a portion of her health insurance, but this is deducted from the gross income and,her federal taxable income is reduced by this amount. The means test only allows the amount the employee pays for health insurance to be deducted , not the employer portion. As for social security and medicare deductions, are these deducted as part of the taxes which the debtor pays? .
Client and her husband are separated and have filed for divorce, but want to file Ch. 7 together. They each earn about $50000, so even filing separately, they fail the means test. They have no mortgage payments and only $500 in secured debt payment, but if they file Ch. 13 separately, do I list the same debts for both of them, since the community debts have not been divided yet.?
Pat Said .
To: cdcbaa@yahoogroups. com
Sent: Thursday, January 17, 2008 4:55:42 PM
Subject: Re: [cdcbaa] means test questions
Dear Pat,
In the definition of "current monthly income" in 11 U.S.C. 101 (10A)(A) we learn that income is included in the calculation "without regard to whether such income is taxable . . ." Thus, in Form 22A we use gross income rather than taxable earnings in calculating the six-month average gross income used in the means test. I believe gross is used as the initial measurement so that all debtors begin at the same starting point. Then those debtors who have special deductions can list them later in the form.
As for benefits received under the Social Security Act, they are explicitly excluded from current monthly income pursuant to 11 U.S. C. 101 (10A)(B). It is this subsection that lists the excludable types of income.
The Best Case software creates an attachment to Form 22A that lists the gross income from each source separately for each of the six full calendar months prior to filing - in compliance with 101 (10A). In the interest of full disclosure the attachment shows both the included and excluded income. However, the excluded income is not listed in Form 22A, just in the attachment.
Finally, I suspect that you asked your questions because you're having difficulty fitting a client into Chapter 7, i.e., because the annualized gross income exceeds the relevant median income. Keep in mind that if you're having to complete all of Form 22A rather stopping at line 15, you will be able to subtract income taxes from gross income because when you enter the taxes in line 25, they will be added to the total deductions (lines 33, 47, and 49), which will eventually be subtracted from the gross income to calculate disposable income (line 50), which will then be multiplied by 60 to get the hypothetical 5-year Chapter 13 plan payout (line 51), and compared to the $6,575 cutoff (line 52).
I hope this helps.
All the best,
Nick
Nicholas Gebelt, Ph.D., J.D.
Law Offices of Nicholas Gebelt
15150 Hornell Street
Whittier, CA 90604
Phone: 562.777.9159
FAX: 562.946.1365
Web: www.goodbye2debt. com
Email: mn.gebelt@verizon. net
Confidentiality Note: This e-mail is intended only for the person or entity to which it is addressed and may contain information that is privileged, confidential, or otherwise protected from disclosure. Dissemination, distribution, or copying of this e-mail or the information herein by anyone other than the intended recipient, or an employee or agent responsible for delivering the message to the intended recipient, is prohibited. If you have received this e-mail in error, please notify us immediately at 562.777.9159 or e-mail info@goodbye2debt. com and destroy the original message and all copies.
To: consumer bk group
Sent: Thursday, January 17, 2008 3:18 PM
Subject: [cdcbaa] means test questions
1. In calculating the means test in Chapter 7, do you use gross earnings, or taxable earnings?
2. Where are social security and medicare payments deducted in the means test calculation, if at all?
Pat Said.
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