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Chapter 7 means test, how do I explain my rental income. There is a rental prop section & a secured debt section. I lose $200/mo
Anonymous3 views4 answers
Okay, so I should pass the means test pretty easily even though I am over on the median. However, I am a little confused. There is a section up top regarding Rental Income. Technically, the rent I charge is $200 less than the mortgage...so it is a loss. Plus I put out a little for home maintenance and gardeners, etc.
So, How do I answer the question. Initially, I entered my mortgage payments on secured debt payments section. However, In a weird way, if I put that my Rental operating expenses are only $150 per month, it makes it appear at first glance that I make money on the rental, which isn't true. I suppose you can't double dip.
Please advise.
Chapter 7 and Chapter 13 each have different rules for reporting rental income in my district. I suggest you retain the best bankruptcy attorney in your community to represent you, because there can be a lot of pitfalls for people with rental income in bankruptcy.
Hope this perspective helps!
On line 4 you have two choices. List rents on 4a. List all expenses on line 4b, including mortgage, then you have negative number on 4c, which you have to enter as $0.00 and you do not list the mortgage on line 42.
OR, on line 4a you list the rents, expenses minus the mortgage payment on 4b, leaving a positive number on 4c, but you list the full mortgage on line 42, which effectively is the same as allowing a negative number on line 4c in the earlier scenario.
Please note the above lines are for chapter 7 form 22a. If you are doing chapter 13 form 22c, you need to change the line 42 reference to line 47.
The means test can make or break your case - especially if you are over the mean. You should not attempt this by yourself - over the mean with rental income. Once you file, you may be stuck - and forced into chapter 13 - which would cost much more than an qualified, experienced attorney that can help you overcome the presumption of abuse.
Get some help - and get the protection you need.
I hope this helps.
Respectfully,
Steven A. Leahy
www.chicagotaxteam.com
If you are over the median income for your geographic region then the presumption of abuse will arise, if you are attempting to file a Chapter 7 Bankrtupcy. The Median Income in the Los Angeles region may be higher than many other regions in the United States, which may benefit you for the purposes of qualifying. Since you state that you are over the median income, you should consult with an experienced Bankruptcy Attorney to determine whether you actually qualify for Chapter 7 Bankruptcy and to ensure that you arrive at the correct Total Current Monthly Income for Section 707(b)(7).
Assuming you are renting income real property, then your Gross receipts and operating expenses will be listed on line 5a of form B22A. Payments for debts that is secured by in interest in property you own is listed in line 42.
There are also different provisions for debts secured by your primary residence as opposed to investment property. You should consult an experienced attorney regarding these differences and how they may relate to your particular financial situation.
