How Do You Determine Household Size: Chapter 7 Means Test

By James Jennings

How do you determine your household size when calculating a Chapter 7 Means Test?

There seems to be a lot of confusion on this subject.  This is probably because there is a lot of deferring opinions on how this is determine and what  method your jurisdiction is using at the time you file.

Let’s look at some of these methods that have been used to determine household size.  There are three methods that are popular: Heads-On-Beds, Income Tax Dependent, and Economic Unit.

Heads-On-Beds Approach

The “heads-on-beds” approach follows the Census Bureau’s definition of a household which includes everyone who lives in your house. Because the heads-on-beds approach doesn’t take into account financial contributions or relationships between household members, most courts believe that it’s too broad and inaccurately inflates household size. As a result, only a minority of courts use this approach.

Income Tax Dependent Approach

When determining household size, some courts only allow debtors to count individuals they can claim as dependents on their tax return. In general, this is the most restrictive approach because it doesn’t allow debtors to claim a person who lives in their house unless they can include him or her on their tax return as a dependent.

Economic Unit Approach

Many courts use the economic unit approach when figuring out household size on the bankruptcy means test. This method essentially looks at how many people in your household act as a single economic unit. The economic unit approach generally allows debtors to count any individuals living in their home they financially support, depend on, or whose finances are closely intermingled with their own.

Also, it is important to note, the 4th Circuit Court of Appeals approved a fractional approach based on the amount of time children live with the debtor. In that case, the court divided the number of days each child lived in the debtor’s house during the year by 365 to come up with a fraction. The court then added the fractions for each of the children to calculate the debtor’s household size.

If you’re still confused don’t feel bad, there seems to be a lot of that going around. Ultimately if the Trustee objects to your household size then it will be up to the judge to determine if you qualify for a Chapter 7.  Only he or she can make the final determination.

As Dodge said in Frank Beddor’s Seeing Redd, “I think I speak for all of us when I say, ‘Huh?'”

If you have any questions regarding a specific legal matter or legal strategy you should contact an attorney for legal advice.  If you would like to get started on a family law or bankruptcy case call us today, 602-896-9020, email us at discountdivorce@msn.com, or visit our website at DiscountDivorcePro.com.

We invite you to subscribe to Discount Divorce & Bankruptcy Twitter account: @discountdivorce and Facebook page: facebook.com/discountdivorce Both of these social media sites have value information.

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Disclosing Financial Records to the Bankruptcy Court

By James Jennings,Legal Document Preparer.

When you file for bankruptcy, the court will take an active interest in your financial life. They look at your payment records and bills. Under a traditional bankruptcy proceeding, the trustee is going to want to review all of your bank account records, card accounts, credit loans, tax paperwork and various other financial components.

The Trustee is looking for any assets that can be sold to help pay down your debt in a Chapter 7 Bankruptcy. The Trustee is also looking for evidence of assets and income that are exempt under the conditions of the law. These are called exemptions.  A list of them can be found be found in a publication produced by the court.

Make sure to have your documentation organized and ready for the courts. It lets everyone involved know that you are willing to cooperate with them. Those who have a willingness to cooperate and work with the court will benefit in the long run. Being upfront and honest will get you a favorable result from the court officials most of the time.

When it comes to your tax returns, the courts normally like to see two years of returns. For everything else, you can expect to provide three months of documentation. As you file your documents with the court, it is imperative that you remember that you are under oath. If you hide information or lie to the court it maybe considered fraud which is a crime.

Most of the time, three months of records seems to be what the bankruptcy courts like to see.

The actress Angela Jolie once said in an interview back in 2003 “I’m just honest.  I like that I don’t have to worry about what I say.  I really don’t have the time or energy to pretend and I don’t want to have to live that way.”

Seems like good advice.  Being dishonesty is like swimming upstream in a storm.  It will eventually wear you out and you’ll end up drowning.

If you have any questions regarding a specific legal matter or legal strategy you should contact an attorney for legal advice.  If you would like to get started on a family law or bankruptcy case call us today, 602-896-9020, email us at discountdivorce@msn.com, or visit our website at DiscountDivorcePro.com.

We invite you to subscribe to Discount Divorce & Bankruptcy Twitter account: @discountdivorce and Facebook page: facebook.com/discountdivorce Both of these social media sites have value information.

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Let’s Talk about Wage Garnishment

By James Jennings

Creditors

Federal law places limits on how much judgment creditors can take from your paycheck. The amount that can be garnished is limited to 25% of your disposable earnings (what’s left after mandatory deductions) or the amount by which your weekly wages exceed 30 times the minimum wage, whichever is lower.

At the US Department of Labor’s website you can find some examples of how much money can be taken from your check. This is a great informational resource provided by the US government.

Child Support

More of your paycheck can be taken to pay child support. Up to 50% of your disposable earnings may be garnished to pay child support if you are currently supporting a spouse or a child who isn’t the subject of the order. If you aren’t supporting a spouse or child, up to 60% of your earnings may be taken. An additional 5% may be taken if you are more than 12 weeks in arrears.

It is important to note that child support in Arizona can be modified at anytime that amount of support would change by 15% or more.  It may be worth it to contact Discount Divorce & Bankruptcy and speak with someone about modifying your child support if you feel you are over or under paying child support.

Student Loan

The U.S. Department of Education (or any agency trying to collect a student loan on its behalf) can garnish up to 15% of your pay if you are in default on a student loan. No lawsuit or court order is required for this type of garnishment; if you are in default, your wages can be garnished.

Student loans are typically not forgiven in the bankruptcy process.  These loans will follow you to the grave in many cases.

Back Taxes

If you owe money to the IRS, watch out: The agency can take a big chunk of your wages, and it doesn’t have to get a court order first. The amount you get to keep depends on how many dependents you have and your standard deduction amount. Your employer will pay you a fairly low minimum amount each week and give the rest to the IRS.

The IRS must send a wage levy notice to your employer, who is required to give you a copy. The notice includes an exemption claim form, which you should complete and return.

State and local tax agencies also have the right to take some of your wages. In many states, however, the law limits how much the taxing authority can take.

How can Discount Divorce & Bankruptcy  help?

If you find yourself in a situation where you were served with a lawsuit by one of your creditors, Discount Divorce & Bankruptcy maybe able to help you.  We have successful helped more than 5,000 people file for Chapter 7 Bankruptcy here in Arizona since 1998.

If you have any questions regarding a specific legal matter or legal strategy you should contact an attorney for legal advice.  If you would like to get started on a family law or bankruptcy case call us today, 602-896-9020, email us at discountdivorce@msn.com, or visit our website at DiscountDivorcePro.com.

We invite you to subscribe to Discount Divorce & Bankruptcy Twitter account: @discountdivorce and Facebook page: facebook.com/discountdivorce Both of these social media sites have value information.

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So You Goofed and Filed Your Bankrupcy Too Soon. Now What?

By James Jennings

It happens.  No matter how careful you are.  No matter how much you planned and researched you made a mistake or you omitted something when preparing your bankruptcy documents.  So now what?

The most common mistake I see is my clients don’t include all of their creditors.  I must Head in Handsask what seems like a hundred times when I meet with a client, “Is this everyone?  Is there anyone else you owe?  Do you want to go home and think about it some more?  Do you need more time to go through your records?”

The answer more times than not is, “No, James there are no more.  That’s everyone.”

No matter how much prodding and goading I do to get people to double check or even triple check, there are those few souls that come back after the documents have been prepared, reviewed, signed, and filed say to me, “Oh shoot, I found another creditor.  Now what do I do?”

Since you can only file a Chapter 7 Bankruptcy every eight years you really only have two options in most cases; 1) you can live with your mistake.  Meaning you are still responsible for that debt and will have to pay that creditor, or 2) You can amend your documents and add that creditor to the bankruptcy.

So let’s talk about number 2; amending your documents.  How exactly do you go about doing that?

rockstone-search-bannerThe first thing you have to do is find the necessary forms to amend your documents.  The US Bankruptcy Court for the Arizona District has a great website that has all the forms you would ever need on it.

Next you need to follow the correct procedure.  Amending bankruptcy documents in Arizona is governed by Local Rule 1009-1.

This means that after you prepare the necessary forms to reflect either updated information, or additional creditors, you will have to file them with the Court and pay the filing fee.

At the time of the this post, the filing fee in Arizona to file amended documents is $30.  A current and up to date filing fee schedule can be found on the Court’s website.

The next step according to Local Rule 1009-1(a) is you have to notify everyone this change would effect.  For example you would notify the Trustee, the United States Trustee and any new creditors you add to the case.  You also have to provide them with a copy of any amendment to the petition, schedules, or statements you modified.  This is typically done through the Court’s internal system and through the mail.

865349331-547x300This is an important step because you do not want to circumvent your creditors rights.  Also, by not notifying the creditors you harm yourself as well.

So this plays into Local Rule 1009-1(b).  Which states in part:

If an amendment to the schedules adds one or more creditors, the debtor shall file with the amendment a supplemental master mailing list that lists the names and addresses of those creditors added by the amendment.  …”

This means you have to file a Supplemental Master Mailing List that has the additional creditors added to it.  (The Master Mailing List is used by the Court to make labels for envelops containing a notice from the Court informing your creditors that you filed for bankruptcy.)

The requirements for the Master Mailing List for Arizona can be found on the Court’s website.

The notification to your creditors does two things:

  1. The notice of the bankruptcy sent by the court clerk tells your creditor where to file a proof of claim and the deadline for doing so; and
  2. That the creditor must cease any collection action, including telephone calls, billing or law suits that might be pending against the debtor.  The  automatic stay protects the debtor and his property from all forms of collection during the bankruptcy.

We are all guilty of errors or omissions in life.  After all, we are human.  Follow the court’s rules and procedures when making your modifications and everything will work out.

In most cases if you have any questions about the process the clerk of the court will be happy to assist you in finding the answers.

If you have any questions regarding a specific legal matter or legal strategy you should contact an attorney for legal advice.  If you would like to get started on a family law or bankruptcy case call us today, 602-896-9020, email us at discountdivorce@msn.com, or visit our website at DiscountDivorcePro.com.

We invite you to subscribe to Discount Divorce & Bankruptcy Twitter account: @discountdivorce and Facebook page: facebook.com/discountdivorce Both of these social media sites have value information.

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Traffic Tickets and Chapter 7Bankruptcy

By James Jennings

speeding-ticket1Some of my bankruptcy clients have a lead foot when it comes to driving.  I get.  Sometimes you have to get somewhere in a hurry and sometimes when you roll the dice you come up short and you blow by a cop doing 100 MPH.  This leads to a really expensive fine and a hefty insurance premium hike.  Now some people have the notion that they can just blow off paying their fines and go and file bankruptcy.  So will this tactic work?  Can I get out of paying my fines by filing for bankruptcy?

Although a Chapter 7 discharge has the power to eliminate most debts, traffic fines are not included. The U.S. Bankruptcy Code classifies traffic fines in Chapter 7 bankruptcy as non-dischargeable in Section 523(a)(7). Typically, any fine or penalty you owe to a governmental unit is non-dischargeable under this section. Even if the rest of your debts are discharged in Chapter 7, you will have to find a way to pay your traffic tickets.

WeWorkHardMoreover, regardless of the type of bankruptcy you file, if your traffic fine is the result of a criminal violation, you can never discharge it in bankruptcy. Criminal traffic offenses include hit-and-run, driving while under the influence, reckless driving or eluding the police. In a broader sense, a criminal traffic offense is one that could result in jail time.

If you have any questions regarding a specific legal matter or legal strategy you should contact an attorney for legal advice.  If you would like to get started on a family law or bankruptcy case call us today, 602-896-9020, email us at discountdivorce@msn.com, or visit our website at DiscountDivorcePro.com.

We invite you to subscribe to Discount Divorce & Bankruptcy Twitter account: @discountdivorce and Facebook page: facebook.com/discountdivorce Both of these social media sites have value information.

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How Do I Value My Property for Bankruptcy?

By James Jennings

865349331-547x300It seems like with almost every client when I ask them how much something is worth they just stare at me and shrug their shoulders.  It is important for you to determine an accurate value for your property.  Why? Because when preparing a Chapter 7 Bankruptcy the Court wants you to disclose all of your assets and their value.  This in turn helps the Trustee that is appointed by the Court (who more or less represents the interests of the creditors in your case) determine if you have anything of value so that they can liquidate it and pay the people you owe – well at least in part anyway.

It is important to note that most if not all your personal property may be exempt from being taken away by the Court.  This all depends on the value of the property, the laws in your state.  Arizona statues concerning exemptions can be found in a publication provided by the US Bankruptcy Court for the District of Arizona.

So how does a person figure out the value of their personal property?  Well I guess that would depend in part on what type of personal property we a talking about.

The bankruptcy laws require that you value your personal property at retail replacement value. This is the price a retail merchant would charge for property of that kind considering the age and condition of the property at the time the value is determined. It is not the cost of replacing your items with new items. The value should represent the amount you would have to pay, on the date you file for bankruptcy, to replace each item with a used item of similar age and in similar condition.

large_carsssIn regards to motor vehicles, like cars, trucks, SUVs and the like, most people I know go to Kelly Blue Book’s website.  There are also other trade publications or you can have your vehicle appraised by a professional.

If you want to figure out what your furniture, household goods, clothing or other similar items you could try to visit various thrift stores, such as Goodwill, or local flea markets, or garage sales to see what comparable goods are selling for. Keep a record of the dates and locations you visit to support your valuation. You can also check online sales or auction sites. Wherever you find your values, make sure to list the age and condition of the property to give the trustee a better idea of what you are valuing.

For jewelry, furs, and collectibles will almost always need an appraisal. Make clear to the appraiser that you are looking for a current sale value appraisal and not an appraisal for insurance. The valuations may be different. Pawn shops may give you the lowest appraisal value but they have a general reputation for undervaluing property and may not be the best source. A reputable dealer in estate property may be the best source for appraisals on these items.

If you have any questions regarding a specific legal matter or legal strategy you should contact an attorney for legal advice.  If you would like to get started on a family law or bankruptcy case call us today, 602-896-9020, email us at discountdivorce@msn.com, or visit our website at DiscountDivorcePro.com.

We invite you to subscribe to Discount Divorce & Bankruptcy Twitter account: @discountdivorce and Facebook page: facebook.com/discountdivorce Both of these social media sites have value information.

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Do I Qualify to File for Bankruptcy?

The bankruptcy “mlibertyeans test” determines whether your income is low enough for you to file Chapter 7 bankruptcy. It’s a formula designed to keep filers with higher incomes from filing for Chapter 7 bankruptcy. High income filers who fail the means test may use Chapter 13 bankruptcy to repay a portion of their debts, but may not use Chapter 7 bankruptcy to wipe out their debts altogether.

However, having to take the Chapter 7 means test doesn’t mean that you must be penniless in order to use Chapter 7 bankruptcy. You can earn significant monthly income and still qualify for Chapter 7 bankruptcy if you have a lot of expenses, such as high mortgage and car loan payments, taxes, and other expenses. Read on to determine if you can pass the means test and file for Chapter 7 bankruptcy.

How Does the Chapter 7 Means Test Work?

The means test was designed to limit the use of Chapter 7 bankruptcy to those who truly can’t pay their debts. It does this by deducting specific monthly expenses from your “current monthly income” (your average income over the six calendar months before you file for bankruptcy) to arrive at your monthly “disposable income.” The higher your disposable income, the more likely you won’t be allowed to use Chapter 7 bankruptcy.

Only bankruptcy filers with primarily consumer debts, not business debts, need to take the means test. To take the means test, you must first determine whether your income is more or less than the median income in your state. If you earn more than the median, you must figure out whether you would have enough left over, after subtracting certain expenses, to repay some of your debt.

Is Your Income More Than the Median?

The first step is simple: If your current monthly income is less than the median income for a household of your size in your state, you pass. Period. You’re done. You do not need to complete the rest of the means test. You can file for Chapter 7.

Do You Have Enough Disposable Income to Repay Some Debts?

For those whose household income exceeds the state median, the means test computations get significantly more complex. You must determine whether you have enough income left over (called “disposable income”), after paying your “allowed” monthly expenses, to pay off at least a portion of your unsecured debts (such as credit card bills). If your disposable income adds up to more than a certain amount, you fail the means test and cannot file for Chapter 7 bankruptcy.

Median income levels vary by state and household size, and each county and metropolitan region has different allowed amounts for categories of expenses: basic necessities, housing, and transportation.

If you’re looking for an easy way to determine your eligibility under the Chapter 7 means test, visit legalconsumer.com and use its online bankruptcy means test calculator.

Once you enter your zip code, the calculator uses the applicable income and expense standards for your state, county, and region to determine your eligibility.

You’ll have to supply some income and expense information, but the calculator will save you the trouble of looking up income and expense figures for your area and doing the math.

If You Pass the Chapter 7 Means Test

Just because you qualify under the means test does not necessarily mean you should file for Chapter 7 bankruptcy — merely that you can. Any decision to file for Chapter 7 bankruptcy should be made only after considering alternatives.

If You Don’t Pass the Chapter 7 Means Test

If you don’t pass the means test, you are limited to using Chapter 13 bankruptcy, which requires you to make monthly payments over a three- to five-year period according to a strict budget monitored by the court. Most people who file for bankruptcy prefer Chapter 7, which requires no repayment. However, Chapter 13 bankruptcy is still the best way to handle specific types of problems, like curing a default on a mortgage.

But before you settle on Chapter 13 bankruptcy, be sure to talk to a lawyer. With expert legal advice, you may find that you are able to pass the means test after all.