If your income is above the state median and you file under Chapter 13, you may be able to claim additional expenses, beyond those allowed by the means test, based on special circumstances, circumstances which may in some instances, include your need for a new car. If you are filing under Chapter 7, your non-dischargeable obligation as a co-signer on your child’s student loans may qualify as a special circumstance of a kind sufficient to rebut the presumption that your Chapter 7 case is subject to being dismissed as abuse, where your child was afflicted with a medical condition that prevented him or her from repaying the student loans, and you had no reasonable alternative but to pay the monthly student loan expense. If you are located in the Tampa area and considering bankruptcy, a Tampa bankruptcy attorney can review your circumstances and explain the deductions you can claim and the best bankruptcy chapter for you. However if the monthly payments that you are obligated to make on your non-dischargeable student loan will not constitute a special circumstance where you incurred the student loan debt in the ordinary course of acquiring her education, and not as part of retraining necessitated by any permanent injury, disability, or plant closing or when the loan could be paid as long term debt through a Chapter 13 plan. If you and your spouse are both working and have to eat outside of your home while at work will not generally amount to a special circumstance warranting an additional food expense of $400 per month for purpose of rebutting the presumption of abuse. A Tampa bankruptcy attorney can review your case for special circumstances.
401(k) and Retirement Plans
Mere fact that you have an obligation to reimburse a 401(k) Plan for a pre-petition loan is not enough to establish special circumstances rebutting presumption of abuse, but the circumstances that led to you taking an advance from the plan could demonstrate special circumstance. A Tampa bankruptcy attorney can review your circumstances and advise you on your eligibility rebutting the presumption of abuse. The fact that you retirement loan repayments would be deductible from your disposable income in a Chapter 13 case, and thus would not be required to be included in you plan payments, does not establish special circumstances rebutting the presumption of abuse arising under the means test in your Chapter 7 case.
Your obligation to repay a loan from a 401(k) employee retirement plan is not a special circumstance per se, on which you can always rely on to rebut statutory presumption that Chapter 7 petition is abusive. Rather to determine whether such an obligation qualifies as a special circumstance, the bankruptcy court will engage in a fact-specific inquiry. Your obligation to repay 401(k) loan is a special circumstance if:
- You incurred the loan more than one year prior to the petition date, and
- You used loan proceeds to pay credit card debt and to reduce unsecured debt that would otherwise be paid in a Chapter 13 case, and
- You could not stop making payments unless you quit your job or paid off the loans in full.
If you are an above-median-income Chapter 13 debtor and you fail to demonstrate any special circumstances to additional deductions for food, clothing and personal care expenses above and that specified in the IRS guidelines, based on the fact that your job required you to be away from home for extended periods of time and resulted in an increase in such expenses, you must explain why your extended absences from home required the additional deductions and that you had no reasonable alternative, or that such additional expenses were necessary for you to produce income or for you health and welfare.
What qualifies as special circumstances for additional deductions or to rebut the presumption of abuse requires interpretation of complex bankruptcy laws. A Tampa bankruptcy attorney can review the facts of your case and demonstrate to the bankruptcy court that your circumstances qualify as a special circumstance. Do not take any chances. If you fail to explain rebut the abuse presumption, your petition can be dismissed.
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