Expert: Mark J. Markus- California Bankruptcy Attorney - 9/9/2008

Question
I recently received a motion to dimiss my chapter 7 case in the mail.  I am NOT represented by an attorney and I will be preparing my own response.  

In short, I checked the "presumption arises" box in my means test form.  The motion states that I will have monthly disposable income exceeding $2K per month that can be applied to my debts, which are mostly consumer.  What the means test does not take into account though, are those debts that are not dischargeable (in my case, student loans).  The $2000 per month they claim I have available will be almost completely used by student loan payments.

In re Castle, 362 B.R. 846, the court ruled that special circumstances that may rebut the presumption would include those that are beyond the debtor's control.  In my case, regardless if I file a Chapter 13 or Chapter 7, my student loans are not dischargeable and this is beyond my control.  What are the chances the court would allow my student loans obligations to rebut the presumption and allow my debts to be discharged under a Chapter 7?  Given the facts presented, are there any other cases that take into account debts such as student loans that I can cite in my response which might aid my case?

I'll also be included a request for conversion to a chapter 13 if the motion is granted.

Answer
Absolutely not.  Unsecured debts, whether dischargeable or not, are not part of the means test analysis.  Moreover, they are usually not even part of the Schedule "I" and "J" budget analysis.  If your budget is showing the ability to fund a Chapter 13 plan, you would need to do a Chapter 13 which would pay your unsecured creditors, including the student loans, a pro rata portion of the monthly payment.  At the end of the plan term (probably 60 months) if you still owe money on your student loan, you will need to continue payments.  Interest will continue to accrue on the student loan during the Chapter 13 case.

I highly recommend you hire an attorney in your area to assist in opposing the motion to dismiss and/or in the Chapter 13 case.