Bankruptcy by Keyword:
"Means Test"
Related Keywords: $200 clunker allowance . Applicable commitment period . IRS standards . means test allowances . means test exclusion . median income .
Resources
- Bankruptcy Means Test Calculator for Berrien County, Georgia: Based on Official Form 22A, this calculator will give you a sense of whether you qualify for bankruptcy based on the official formula stated in federal law (11 U.S.C. 707(b)). The calculator applies local expense standards published by the U.S. government. [Go ->]
Definitions from the USDOJ
- current monthly income: The average monthly income received by the debtor over the six calendar months before commencement of the bankruptcy case, including regular contributions to household expenses from nondebtors and income from the debtor's spouse if the petition is a joint petition, but not including social security income and certain other payments made because the debtor is the victim of certain crimes. 11 U.S.C. ? 101(10A).
- means test: Section 707(b)(2) of the Bankruptcy Code applies a "means test" to determine whether an individual debtor's chapter 7 filing is presumed to be an abuse of the Bankruptcy Code requiring dismissal or conversion of the case (generally to chapter 13). Abuse is presumed if the debtor's aggregate current monthly income (see definition above) over 5 years, net of certain statutorily allowed expenses is more than (i) $10,950, or (ii) 25% of the debtor's nonpriority unsecured debt, as long as that amount is at least $6,575. The debtor may rebut a presumption of abuse only by a showing of special circumstances that justify additional expenses or adjustments of current monthly income.
Case Law Topics
Local Standards: Vehicle Ownership/Lease expense allowance -- contingent on existence of loan or lease obligation? (i.e. if owned free and clear)
The Supreme Court ruled in January 2011, that the Means Test Vehicle Ownership allowance is contingent on existence of loan or lease obligation. In other words, if you own a vehicle "free and clear" and are not making any payments, you cannot claim the ownership deduction. (Ransom v. FIA Card Services, __ U.S. ___ (S.Ct 2011 ) )
Before the Supreme Court settled the issue, lower courts were split on this question.
Note that lower court cases that deny the allowance often mention that debtors can claim a $200 extra operation deduction for vehicles over six years old with more than 75K miles (based on the IRS practice of doing the same).
Local Standards: Does Allowance include IRS's additional $200 allowance for Operating Expense for Older/High Mileage Vehicles?
At one time, (before the Supreme Court ruled on the Ransom case), the court rulings and trustees routinely agreed that even if a debtor does not have lease or loan obligation, they are still entitled to an extra $200 operating expense allowance for vehicles more than 75K miles or six years old.
This is based on the fact that the IRS follows this practice and BAPCPA uses IRS transportation spending allowances in the means test.
However, since the Ransom case, courts have almost unanimously ruled that you can no longer take the $200 "clunker allowance," based on what the Supreme Court said in that case aboutTaxes: How are income taxes treated under the means test (actual taxes or amount 'withheld'?)
This issue often comes up in the case where taxes were withheld during the six months prior to the bankruptcy, but then are going to be refunded after the bankruptcy filing.
Courts will not allow the full deduction for tax withholding if the actual tax liability for the year will result in those amounts being refunded to the debtor.
The majority of cases post-BAPCPA hold that the allowable amount of the debtor's tax liability to be deducted on Form 22A Line 25 (Form 22C Line 30) is the debtor's actual tax liability -- not the amount
withheld from the debtor's paycheck over the past six months. If there is a discrepancy, the actual amount should be used.Expenses: 401(k) loan repayment allowed in Chapter 13 but not in Chapter 7: b/c not a "mandatory payroll deduction" or "special circumstance" or " debt"
Chapter 7 Means test form is generally held not to allow deduction of 401(k) loans repayments anywhere on the form.
In a long line of cases, various debtors have tried various arguments, classifying the payments as as "secured debts" or as "necessary expenses"
In most cases, those attempts are rejected.
However, the fact that such expenses are deductible in Chapter 13, it is quite possible to have a scenario where forcing the debtor into Chapter 13 would result in no net benefit to unsecured creditors. In such cases, some judges have found it to be relevant among other special circumstances to override the presumption of abuse created by the Chapter 7 Means Test calculation on Form 22A.
Income: Martial adjustment does not include ALL of non-filing spouse's income -- just that portion that contributed to household expenses.
Form 22A, utilizing the definition in §101(10A)(B), and §707(b)(7)(A) and (B), includes the non-filing spouse's income for means testing purposes. See Official Form 22A, Lines 3-10.
However, the debtor is allowed to deduct, as a marital adjustment, the amount of the non-filing spouse's income that was not regularly contributed to the household expenses of the debtor or the debtor's dependents.
See Form 22A, Line 17.
These cases discuss how that deduction works in specific cases.
Particularly when circumstances have changed during the six-month lookback period.Expenses: "Other Necessary Expenses"
Part __ of the means test forms allows for various kinds of "Other Necessary Expenses" within specifically defined categories. These classifications are based on the IRS collection standards.
Case law in this area discusses various fact situations to determine whether they meet the criteria of an "Other necessary expense"Secured Debts: Expense allowances for collateral that is to be surrendered (see also 9A)
The means test Forms 22A (Chapter 7) and 22C (Chapter 13) allow you to deduct the full amount of secured debt payments you are currently making at the time you file your bankruptcy petition.
The question arises, what if you plan to surrender that property during the course of your bankruptcy. This issue is particularly relevant in Chapter 13 cases, where the case continues on for 3 to 5 years, and your ability to pay in the future is one of the elements the court must consider in confirming a proposed Chapter 13 plan.
In a Chapter 7 case, the issue may turn on whether the debtor has actually surrendered the property yet -- that is, if the payments are still "contractually due" at the time the means test form is filed.
This timing question can become relevant because a trustee must make the "abuse" determination (based on the means test form) within 10 days after the section 341 meeting, Meanwhile, the debtor has up to 30 days from the date of the original filing (or the date of the 341 meeting if that comes first) to state whether they intend to surrender the property, and then gets another 30 days after that to actually act on their intentions. Thus, at the time of the abuse determination, it is possible that the debts are still "contractually due."
All of this may be a moot point in many courts, however, because a judge can still find a debtor ineligible to file if the judge thinks there is an ability to pay. Some courts have allowed the deduction, under Sec. 707(b)(2), then ruled that the surrender of the property (and the removal of that debt) means that the debtor has enough funds to pay his unsecured debts and therefore will refuse to grant a discharge of those debts based on the "totality of the circumstances" Sec. 707(b)(3).Income: Does it include withdrawal of assets, disability insurance proceeds, tax credits
(Spring 2006)) OUST contends that it includes: gambling winnings, cash gifts (even if not otherwise a "regular contribution"), litigation proceeds, trust income, disability and other non-Social Security disability payments but excludes Social Security benefits (e.g., retirement, survivors, and disability), tax refunds, and loan proceeds.
Does not include income tax refundsLocal Standards: Housing and Utilities AND Mortgage/Rent Expense
Whether debtors are entitled to the full household expense allowance even if their actual expenses are less.
Local Standards: Transportation: vehicle operation expense
Two issues are tracked in the database.
1. Whether debtors are entitled to the operation expense even if their actual expenses are less,
2. Whether a single debtor can deduct more than one car.
