Expert: Terry Leeders - 11/12/2008

Question
QUESTION: I live in maryland. My attorney says me and my wife pass the medium income test for the past 6 months for ch. 7, but because we would have income left over every month after filing we don't qualify for ch. 7. In essence, we must pass both the 6 month medium income test plus the monthly income/expenses test and that test must say we have zero income. I'm confused, please explain.

ANSWER: Your attorney is right.
You must not have disposable monthly income left after you pay your monthly expenses.

The 6 month budget test allows a debtor to take the full amount allowed for some expenses, regardless if you actually spend those amounts, so at times debtors may pass one test, but not the other.

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QUESTION: So at the time of filing and about 5 months afterwards my disposable income must be zero to qualify for ch. 7. However after my case is closed in about 5 months I can make as much as I want without fear they will reopen my case?

Answer
The court looks at all income from all sources for the 6 month window before filing.  Now, if there is an unique situation, the trustee can object based on the totality of the circumstances (rare)
For example,let's say you make a million dollars a year, every year, but only get it in 1 check 8 months before filing.  The trustee may object for that.