Bankruptcy by Keyword:
secured debt .
Case Law Topics
Biggest exception to the means test of all is that if debts are primarily non-consumer, 707(b)(2) (the means test) does not apply.
(Note: this exclusion from the Chapter 7 Means Test form 22A does not apply to Chapter 13 version; form 22C).
But what is "consumer debt?" Student loans? Mortgages? Taxes? Personal injury liability? Cases have discussed these issues as have the US Trustee.
The US Trustee's position on these the non-consumer debt exclusion:
* "Primarily" means that no means test requited if less than 50% of total scheduled debt was incurred for personal, household or family purposes.
* Purpose of debt is judged at the time the debt was incurred.
* Home mortgages are typically consumer debt.
* Most tax debts are not typically consumer debt.
Practical issues to consider:
* Sometimes a business lease or other executory contract that's locked in for several years can push a debtor's overall total into a primarily non-consumer debt case.
* Conversely, when a large mortgage debt outweighs a debt owed by a failed business, a bankruptcy that appears non-consumer can to be a business bankruptcy may cross the line to be about "primarily consumer debts."
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.
(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 refunds