Related Keywords: means test .
"because Congress has simultaneously directed that ERISA contributions and loan repayments be deductible from CMI in Chapter 13 cases, on the facts presented, such a conversion would yield no distribution to unsecured creditors ... the difference in treatment causes an absurdity that is directly contrary to the congressional intent, that while debtors with an ability to repay creditors should file under Chapter 13, debtors lacking that ability are to be permitted Chapter 7 relief."
-In re Siler, 426 BR 167, (Banrk.W.D.N.C. 2010)
If you fail the means test, but feel there are circumstances that make the means test an inaccurate representation of your ability to pay your creditors, you can make a claim of "special circumstances" to explain to the trustee and the judge why you feel you should be allowed to proceed with a Chapter 7 even though your means test numbers show a presumption of abuse.
Note also that the trustee has the discretion to decline to file a motion to dismiss, even if you fail the means test, and does so frequently. The key, in either case, is to disclose as much information and documentation as possible to explain why the means test presumption of abuse is wrong in a particular case, and does not accurately reflect your ability to pay. In short: Disclose, disclose, disclose.
"A debtor seeking to establish "special circumstances" under §707(b)(2)(B) must satisfy both procedural and substantive requirements. The procedural requirements
are set forth in § 707(b)(2)(B)(ii), (iii), and (iv), and they require a debtor (1) to "itemize" each additional expense or income adjustment by setting forth the nature of the suggested adjustment, its amount, and its impact on the debtor's finances and the means test calculation; (2) to provide "documentation" of the additional expense or income adjustment; (3) to provide a "detailed explanation" of the "special circumstances" that make the additional expense or income adjustment "necessary and reasonable;" and (4) to "attest under oath" to the accuracy of the information the debtor provides.
In re Pageau, 383 B.R. 221, 225 (Bankr. D.N.H. 2008) (citing Littman, 370 B.R. at 830); Haman, 366 B.R. 307, 312 (Bankr. D. Del. 2007). "
- In re Harmon, Bky. No. 10-15329 ELF, (Bankr, ED Pa., 2011)
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.
There is no mention of student loan debts in 11 U.S.C. §507(a) and therefore, there is no statutory basis for treating such debts as priority debts under the Bankruptcy Code. As a result, a monthly student loan payment is not an expense that may be deducted from income on the means test form 22A.
The key issue in these cases is whether the obligation to repay a nondischargeable student loan constitutes "special circumstances" under §707(b)(2)(B).
Cases tend to be fact based, and lead to different results, and also apply different standards in arriving at those results.