Tag: Means Test

Bankr. E.D.N.C.: In re Hector- Accounting for Income, Expenses and Household Size under 11 U.S.C. § 707(b) with Domestic Partner

Summary:

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

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4th Circuit: In re Jackson – Debtor is Entitled to the Full Means Test Deduction under National or Local Standard

Summary:

The Bankruptcy Administrator moved to dismiss the Debtors case arguing that on the Means Test they were limited to deduction of the lesser of either the actual mortgage and vehicle expenses or the amounts under the applicable National or Local standard. In affirming denial of this motion by the the bankruptcy court, the Court of Appeals held that based on the plan language of 11 U.S.C. § 707(b)(2)(A)(ii)(I) “[t]he debtor’s monthly expenses shall be the debtor’s applicable monthly expense amounts specified under the National Standards and Local Standards.” 11 U.S.C. § 707(b)(2)(A)(ii)(I) (emphases supplied). In addition to the unambiguous application of the statutory language, the Court held that a contrary result would create the absurd result of “punishing frugal debtors”, by encouraging them to incur secured debts up to the amounts under the standards.… Read More

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4th Circuit: In re Pliler- Applicable Commitment Period is a Temporal Requirement

Summary:

At issue in this case was first whether the Applicable Commitment period, as defined by 11 U.S.C. § 1325(b)(4), was a temporal requirement, i.e. 3 years for below median income debtors or 5 years for those with income above median, or was not applicable if the Debtors had no disposable income under § 1325(b)(1). Agreeing with now all of the Circuit Courts that have answered this question, the 4th Circuit held that the Applicable Commitment Period is, in fact temporal. This conclusion was based first on the language of the Bankruptcy Code, with the Court of Appeals, citing Tennyson from the 11th Circuit, that:

that “‘applicable’ and ‘commitment’ are modifiers of the noun, the core substance of the term, ‘period’.… Read More

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4th Circuit: In re Quigley- No Means Test Deduction in Chapter 13 for Surrendered Property

Summary:

The Debtor’s Chapter 13 plan proposed the surrender of an ATV, but she nonetheless took a deduction, pursuant to 11 U.S.C. § 707(b)(2)(A)(iii), for the payments due on this secured obligation. Finding that the Supreme Court’s reasoning in Hamilton v. Lanning, 130 S. Ct. 2464 (2010), allows a bankruptcy court to “ account for changes in the debtor’s income or expenses that are known or virtually certain at the time of confirmation.” Id. at 2478 (Emphasis added), the 4th Circuit disallowed the deduction from the Debtor’s “projected disposable income” under 11 U.S.C. § 1325(b).

Commentary:

The result of this is that Debtors with borderline “projected disposable income” should not surrender property as they end up paying the same amount, whether they keep the property or not.… Read More

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E.D.N.C.: In re Gregory- Marital Adjustment under § 707(b)

Summary:

The Debtor excluded from her CMI her non-filing husband’s monthly payments of $166.00 for his student loans and $1,628.00 related to  their former residence, including renovation costs..  This resulted in a negative disposable monthly income.  The Bankruptcy Administrator argued that since the non-filing spouse was spending money on expenses and renovations of joint property, such payments were benefitting the Debtor and should be included in CMI.

First the Bankruptcy Court and then, on appeal, the District Court agreed with the Debtor, finding that 11 U.S.C. § 101(10A)(B) included within the Debtor’s CMI “any amount paid by any entity other than the debtor … on a regular basis for the household expenses of the debtor or the debtor’s dependents….”  The District Court examined the term “household expenses” by looking to  the definition used by the 4th Circuit for the similar term “household goods” in In re McGreevy, 955 F.2d 957, 961-962 (1992), as “those items of person property that are typically found in or around the home and used by the debtor or his dependents to support and facilitate day-to-day living within the home, including maintenance and upkeep of the home itself.”  Even if the non-filing husband were to stop paying  these debts, “it would not affect the day-to-day functioning of the debtor’s household.”

The Bankruptcy Administrator also objected under the “totality of the circumstances” test of 11 U.S.C.… Read More

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4th Circuit: McDow v. Dudley- Denial of Motion to Dismiss Pursuant to 11 U.S.C. § 707(b) is an Appealable Final Order

Summary:

The Debtors filed a Chapter 13 bankruptcy in 2008.  Following a Motion to convert or dismiss the case filed by the Chapter 13 Trustee, the Debtors voluntarily converted to Chapter 7.  The U.S. Trustee sought dismissal of the case pursuant to 11 U.S.C. § 707(b) asserting that the Debtors had over $2,000.00 of disposable monthly income.  The Debtors asserted that § 707(b) was applicable only in a “case filed by an individual debtor under this chapter” and since their bankruptcy was filed under Chapter 13 it did not apply.  The Bankruptcy Court agreed with the Debtors and denied the motion to dismiss under  § 707(b).… Read More

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H.R. 2192: National Guard and Reservist Debt Relief Extension Act of 2011

Summary:

In a striking example of bi-partisan support,  the House of Representative passed the H.R.  2192 by a vote of 407-1.  This bill would renew the National  Guard and Reservist Debt Relief Act   (“NGARDRA”) for an additional 4 years.

First enacted in 2008, NGARDRA relieves National Guard and Reserve service members of many of the onerous provisions of the Bankruptcy Act, by providing that if such a service member found him or herself in the unfortunate position of needing to file bankruptcy in the 18-months after returning from active duty, the means testing requirements of the bankruptcy laws,  which normal look back at a person’s income over the previous six months,  would not apply. … Read More

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Bankr. MDNC: In re Morrison- Household Size determined using “Economic Unit” Approach

Summary:

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

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