Keywords: means test . Chapter 13 . conversion .
Means Test > Not required for cases converting from Chapter 13? Chapter 7: Is Ch 7 Means Test Applicable to conversions from failed Chapter 13?13 Cases , IssueID 25 |
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Ch 7 Means Test |
Ch 13 Means Test |
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Topic Description:The new law can pose a catch 22 for debtors if the means test forces them into Chapter 13 although their actual disposable income is inadequate to fund a Chapter 13 plan. Some courts have held that this Catch 22 is avoided by ruling that the Chapter 7 means test is not applicable to cases "Filed under" chapter 13 and then converted to Chapter 7 Lines of Cases:
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After considering the very well-reasoned arguments on both sides of this issue, the Court is ultimately persuaded by the decision of Judge Burns in In re Fox, 370 B.R. 639 (D. N.J. 2007), where, after a thorough examination of the question, the bankruptcy court found that the means test does not apply to converted debtors. In so ruling, the Court respectfully disagrees with his learned colleague from Rhode Island, whose decision in In re Perfetto articulates the arguments in favor of applying the means test to converted debtors. See generally 361 B.R. 27 (D. R.I. 2007).
Means test required on conversion from Chapter 13.
"When the basis for an attack on an individual's status as a Chapter 7 debtor is the ability to pay unsecured creditors in a hypothetical Chapter 13 case, it only makes sense that the analysis involve a realistic estimation of what the debtor would be required to pay in such a case under current law."
"[I]f the Bankruptcy Code excludes certain retirement funds and loan repayments from a Chapter 13 debtor's 'disposable income', thereby protecting those funds from payment to unsecured creditors, the court can see no logical basis for including those funds in 'disposable income' when conducting a hypothetical Chapter 12 analysis unde Section 707(b)(3)."
Debtor filed for Chapter 13 relief, then won $100,000 in the state lottery four days after filing. Her case was converted to Chapter 7 at the Trustee's request, but the court refused Trustee's request to deny debtor's discharge. The court found that the lottery winnings were excluded from the bankruptcy estate because the Trustee (not the debtor) had requested the conversion to a Chapter 7, and thus Section 348 said the property was measured as of the date of the (original Chapter 13) petition.
Means test required on conversion from Chapter 13.
Debtor need not file 22A upon conversion
After considering the very well-reasoned arguments on both sides of this issue, the Court is ultimately persuaded by the decision of Judge Burns in In re Fox, 370 B.R. 639 (D. N.J. 2007), where, after a thorough examination of the question, the bankruptcy court found that the means test does not apply to converted debtors. In so ruling, the Court respectfully disagrees with his learned colleague from Rhode Island, whose decision in In re Perfetto articulates the arguments in favor of applying the means test to converted debtors. See generally 361 B.R. 27 (D. R.I. 2007).
"When the basis for an attack on an individual's status as a Chapter 7 debtor is the ability to pay unsecured creditors in a hypothetical Chapter 13 case, it only makes sense that the analysis involve a realistic estimation of what the debtor would be required to pay in such a case under current law."
"[I]f the Bankruptcy Code excludes certain retirement funds and loan repayments from a Chapter 13 debtor's 'disposable income', thereby protecting those funds from payment to unsecured creditors, the court can see no logical basis for including those funds in 'disposable income' when conducting a hypothetical Chapter 12 analysis unde Section 707(b)(3)."
Debtor filed for Chapter 13 relief, then won $100,000 in the state lottery four days after filing. Her case was converted to Chapter 7 at the Trustee's request, but the court refused Trustee's request to deny debtor's discharge. The court found that the lottery winnings were excluded from the bankruptcy estate because the Trustee (not the debtor) had requested the conversion to a Chapter 7, and thus Section 348 said the property was measured as of the date of the (original Chapter 13) petition.
Means test required on conversion from Chapter 13.
Debtor need not file 22A upon conversion
Means test required on conversion from Chapter 13.
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