Ms. Hector, a realtor with income subject to fluctuation dependent on sales, filed Chapter 7, but did not include her Domestic Partner in her household size nor any income contribution, as their finances and expenses were neither commingled nor shared. Ms. Hector did not assist her Domestic Partner with housing expenses, but did pay all for all groceries and cleaning supplies for both. As such, Ms. Hector claimed deductions for housing and utility expenses on the Means Test. The Bankruptcy Administrator sought to dismiss the case, arguing that those were inapplicable and left sufficient disposable income to pay unsecured creditors.… Read More
The Court examined the three options for determining household size for Means Test calculations. Rejecting both the Census Bureau “heads on beds” approach and the IRS dependency test, the Court instead found that an analysis of “economic unit” was appropriate.
“Head on Beds” could be inaccurate “[i]f the debtor’s household includes an individual who purchases these items from his own separate income, and contributes nothing to the debtor’s household for these items, then the deduction will include an unwarranted extra amount that wouldotherwise be part of the debtor’s disposable income.” Similarly, the IRS dependency test fails as it may not “to take into account some individuals who may receive support from the debtor, or provide support to the debtor, which leads to skewed calculations of the debtor’s disposable income.” The “economic unit” test, however, is flexible enough to adjust to the “unique, novel, or unexpected living arrangement involved” in many bankruptcy cases.… Read More