BANKRUPTCY CASE LAW:

MEANS TEST - STATEMENT OF CURRENT MONTHLY INCOME, B22


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Link to the US Trustee’s position on legal issues arising under Chapter 7 means test: http://www.justice.gov/ust/eo/bapcpa/docs/ch7_line_by_line.pdf   Dated 4/23/2010.

 Link to their position regarding Chapter 13 means test: http://www.justice.gov/ust/eo/bapcpa/docs/chapter13_analysis.pdf - Dated April 20, 2010

Link to free means test: http://freechapter7meanstest.com/

Good article explaining the interplay of Lanning (the means test is not to be inflexibly applied, but factual circumstances are legally relevant, such as change in income), and Ransom (ownership of vehicle: monthly payment and operation of vehicle: gas, maintenance, etc.  Debtor cannot deduct ownership unless making secured payments). Lastly, surrendered property - can debt be deducted on means test - no as clarified in Lanning and Ransom.  http://www.justice.gov/ust/eo/public_affairs/articles/docs/2011/abi_201104.pdf

HOUSEHOLD SIZE: UNRELATED PERSONS LIVING ON SAME PREMISES CONSTITUTE A HOUSEHOLD OF 2

The debtor, who shared a rental house with an unrelated person who had a separate bedroom and garage space and a separate lease with the owner, had a household size of two. Because Code § 101(39A)(A) defines “median family income” as “the median family income both calculated and reported by the Bureau of the Census,” it is only fair to use the Census Bureau's definition of household: “all of the people, related and unrelated, who occupy a housing unit.” See In re Ellringer, 370 B.R. 905 (Bankr. D. Minn. 2007). Generally, a single-family home shared by unrelated persons was a single housing unit whose occupants comprised a single household, and the residence shared by the debtor and her roommate was no exception. The relationship among residents was not a consideration in the Census Bureau's definition, and nothing in the Bankruptcy Code compelled unique treatment for households comprised of unrelated members.  In re Bostwick, 406 B.R. 867 (Bankr. D. Minn., June 23, 2009)  (case no. 4:08-bk-46026) (Bankruptcy Judge Robert J. Kressel)

Continuing contributions to college child: It is 707b2(a)(II) which is line 40 of the Form 22C ... (II) In addition, the debtor’s monthly expenses may include, if applicable, the continuation of actual expenses paid by the debtor that are reasonable and necessary for care and support of an elderly, chronically ill, or disabled household member or member of the debtor’s immediate family (including parents, grandparents, siblings, children, and grandchildren of the debtor, the dependents of the debtor, and the spouse of the debtor in a joint case who is not a dependent) and who is unable to pay for such reasonable and necessary expenses.



In re Quigley, No. 09-2102  Helen Morris vs Susan Quigley 09-2102  (Fourth Circuit, 03/07/2012)  In chapter 13 bankruptcy proceedings in which the proposed plan deducted the amount of payments on two all-terrain vehicles (ATVs) as expenses, when the debtor would not actually be making any of those payments once the plan was implemented, the district court's order affirming the bankruptcy court's decision overruling the trustee's objection is reversed, as projected disposable income under 11 USC section 1325(b)(1)(B) should reflect changes that have occurred or that will occur and that are known as of the date of plan confirmation. Read more...

Vandenbosch, 9:10-bk-06427-ALP  District Court, Florida 10/11/11 - "Refusal to confirm the amended plan because of the failure to include social security benefits as projected disposable income was therefore an error of law. Reversed and remanded back to Bankruptcy Court" 

Hamilton v. Lanning, No. 08–998  (US Sup Ct 6/7/10, 10th Circuit) In an objection by a Chapter 13 bankruptcy trustee to confirmation of debtor's plan because the proposed payment amount was less than the full amount of the claims against debtor, and because she had not committed all of her “projected disposable income” to repaying creditors, the Tenth Circuit's affirmance of the bankruptcy court's rejection of the objection is affirmed where, when a bankruptcy court calculates a debtor’s projected disposable income, the court may account for changes in the debtor’s income or expenses that are known or virtually certain at the time of confirmation. Read more...

In re Smith  aka American Express Bank vs Smith, WW-08-0311, No. 07-43853 (9th Circuit BAP, Washington 10/5/09) In preparing a means test may the debtor not deduct secured debts on collateral they intend on surrendering. This would reduce the return to the unsecured creditors of the debtor's projected disposable income as set forth in 1325(b).  The Smith court distinguished the result from Kagenveama, 541 F.3d 868 (9th Cir. 2008) (the court refused to look at post-petition change in expenses due to scrape off of secured debts in chapter 13).

In re Rudler, No. 08-9007 U.S. 1st Circuit Court of Appeals, August 05, 2009
 Bankruptcy Appellate Panel judgment is affirmed where, in calculating monthly income under the means test for identifying an abusive Chapter 7 petition, the plain language of 11 U.S.C. sec. 707(b)(2) allows debtors to deduct payments due on a secured debt notwithstanding the debtor's intention to surrender the collateral.     Read In re Rudler, No. 08-9007

In re Pennington, 348 B.R. 647 (Bkrtcy.D.Del. 2006)  MARY F. WALRATH, Bankruptcy Judge  COURT COULD DISMISS CHAPTER 13 FOR "ABUSE" NOTWITHSTANDING THE DEBTOR'S INCOME WAS BELOW THE STATE MEDIAN

THRESHOLD FOR "ABUSE" WHERE THE MEANS TEST PER SE DOES NOT APPLY IS 25% OF UNSECURED DEBT.  § 707(b)(1)

Debtor's income was below the state median but actual disposable income at the time of the hearing to dismiss or convert was sufficient to pay 42% of the unsecured debt over a 3-year plan. The court noted that the surplus income was more than enough to pay more than 25% of the unsecured debt, which was the "threshold were abuse is presumed under the means test", even though the means test is not applicable.
 

In re: SCOTT LEE EGEBJERG, 08-55301 (9TH Cir. Ct App, CA – CV 07-06850-PA)
We consider whether a debtor’s repayment of a 401(k) loan constitutes a “monthly payment on account of secured debts” or an “[o]ther [n]ecessary [e]xpense” that can be deducted from a debtor’s monthly income for purposes of calculating the debtor’s disposable monthly income under § 707(b)(2). Because we conclude it is not, the debtor’s filing in this case was presumptively abusive under the “means test” of § 707(b)(2). We therefore affirm the bankruptcy court’s dismissal of his Chapter 7 petition.

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