Those filing bankruptcy whose income is below the median are excused from the full-blown means test.? In fact, most individuals and families who are above median also qualify for bankruptcy, they just have to jump through more hoops to prove their entitlement.

Until November 1, 2011, the median figures for Bay Area? households based on size is as follows:

• 1 person – $48.009
• 2 people??? $62,970
• 3 people??? $68,670
• 4 people? ? $78,869

For cases filed on or after November 1, the median incomes are

• 1 person???? $47,683
• 2 people???? $61,539
• 3 people???? $66,050
• 4 people???? $74,806

The data for each state, now and next month, is found on the U.S. Trustee’s site.

If you are preparing to file, consider immediately how these changes effect you.? The bankruptcy process is easier if you are below median.? There’s a $4,000 difference for a household of four depending on where your bankruptcy case is filed on Monday, Oct.31 or Tuesday, November 1.

Then we have to ask ourselves, is this any way to run a legal system?

Image courtesy of luxpim

Other professionals should know better than to? advise people about the workings of bankruptcy.? And if they don’t know better, they should be made to pay, in? some exquisitely painful way, for the harm they inflict.

The terrified client in my office was told by her accountant that if she filed Chapter 13 to save her home, the court would not allow her to buy prescription dog food for an ailing 16 year old pet!? Further, the accountant went on to declare that in Chapter 13, the debtor could pay only for housing, food and gas:? nothing more.? No maintenance for the house, no insurance, no clothes, no medical care.

Of course, the accountant was dead wrong. Articulate but wrong.? So I explained the operation of Chapter 13, how the means test works, and the balance between the debtor’s reasonable living expenses and the claims of creditors.? And assured the client that she can provide for her treasured pet for the balance of its life.? Then I fumed.

I’m resigned in the age of the internet that new clients have encountered lots of bad information on the web.? There is no competency examination before anyone with a browser and an internet connection can opine on any subject.

But the source of this utterly distorted information holds a professional license in another field;? that license gave apparent authority to the tales of horror she told my client.? How was the client to know it was tripe, pure tripe?

It took me two hours to find and eradicate the externally caused fears in my client and the self generated terrors she’d nurtured based on bad information.

Can I count on my readership to bail me out of jail if I find the accountant providing worthless and harmful bankruptcy advice?

Image courtesy of Sandeep Thukral

Lanning rejected the idea that disposable monthly income at the foot of bankruptcy form? B-22 is binding, at least when there were certain or near certain changes in the debtor’s circumstances.? While Kagenveama did not deal with changes in the debtor’s circumstances, it held that “projected monthly income” was the mechanical result of multiplying disposable monthly income by the applicable commitment period. End of inquiry.

But the other issue addressed by the Ninth Circuit in Kagenveama was whether there was any commitment period at all if DMI was a negative number, as it was for Ms. Kagenveama.? The Ninth Circuit held that an above median income debtor with no disposable income could propose a plan that ran less than the 5 years prescribed for above median debtors.? Ms. Kagenveama’s plan ran less than the 3 year minimum.

Henderson confirms that Kagenveama’s holding on the duration of Chapter 13 plan binds in the 9th Circuit.? After examining recent Supreme Court decisions, Judge Pappas? characterized the means test as follows:

Congress chose to accept peculiarities in adopting a
bright line test to determining projected disposable income. Kagenveama?s
holding that an applicable commitment period does not apply to debtors
with no projected disposable income arguably makes the bankruptcy
system fairer to those debtors, and is consistent with BAPCPA?s
congressionally stated general purpose. If Congress did not intend the
results whereby an applicable commitment period does not apply to such
debtors, it is up to Congress, and not the courts, to change that result.

So, Chapter 13 cases in the San Francisco Bay area can propose plans of durations based on the debts to be paid and the available income, not on a rigid count of the years involved.

Image courtesy of Nathan Laurell

Come on, Madame Trustee, get over it. What is there about BAPCPA that leads you to expect that it or its misbegotten spawn of a means test treats debtors fairly or equally? And where does the Chapter 13 trustee have a mandate to challenge the filing of a case by a debtor whose spouse will not or cannot join in the filing?

The Bankruptcy Code clearly permits a married person to file without their spouse. I see no basis to deny relief to one spouse or to hedge that relief because their spouse does not file.

The single spouse filing has become more attractive for debtor?s counsel in a world of longer periods between bankruptcy filings and Chapter 13 debt limits that disqualify homeowners in sections of the country that once had a hot real estate market.

I will join in the chorus of boos about how the means test is obscure. In so many ways, it simply does not fit neatly with a myriad of real world configurations. How does it apply to the recently married, the recently widowed, the family whose composition will change when the expected baby is born? What?s the logic of including family support received in Chapter 7 but backing it out in Chapter 13?

Face it, this is simply an instance of drafter?s malpractice. The formerly explicit power of judges to determine whether expenses were reasonable or the plan non-abusive has been superseded by a judicial warrant to interpret an opaque and ill-conceived statute.

I sympathize with your difficulty in determining how to assess the appropriate elements of the marital deduction. We don?t get much help in the statute. Some expenses seem obviously deductible: support arising from a previous marriage and debts incurred pre-marriage come to mind. It?s harder to find an analytic line for debts incurred during marriage in the non-filer?s name only. Is the deciding factor who is liable or the purpose of the expenditure?

But looking at the issue of fairness from another perspective, why should a creditor who has no claim against the non-filing spouse get the benefit of all of the non-filing spouse?s income? If the creditor expected recourse against the spouse, they should have bargained for it at the inception of the debtor/creditor relationship. Is the creditor any worse off than they would have been had the marriage failed before the bankruptcy case was filed?

Join debtors? counsel in trying to make sense out of nonsense.

Image courtesy of aka kath

In the Mravik case, the debtor’s Chapter 7 means test, which does not provide for retirement savings as an allowable deduction, concluded that their case was presumed to be an abuse.? The trustee sought dismissal of the case.

No, the judge held.? We are not required to dismissed every case that is presumptively abusive, and Congress indicated its support for retirement savings by making them an allowable expense in Chapter 13.? [Someone should tell me why the expense isn't allowable in Chapter 7, but then, I know how BAPCPA was drafted and by whom.]

In the bankruptcy world before the means test, debtors were expected to pay to creditors in a Chapter 13 every penny over their budgeted expenses.? I railed at that on the grounds that 1) life isn’t like that; the unexpected does happen; and 2) the Chapter 13 experience should be building good habits for life after bankruptcy.? Spending every penny that comes in the door is not the path to financial rehabilitation.

So, I’m exceedingly pleased to see the tide turning, even a small bit, here.