How Do I Deduct My Non-Filing Spouse’s Expenses on the Bankruptcy Means Test?

HOW EXACTLY DO WE DEDUCT ‘MARITAL ADJUSTMENTS’?
In re Dugan, Case No. 07-40899
August, 2008, Judge Karlin
Chapter 13 Trustee objections to debtor’s attempts to include a marital adjustment on Lines 13
and 19 for a non-filing spouse and a deduction for transportation expenses. Court
allowed, in theory, the marital deduction, but found it had not been supported with any
detail. Debtor was given time to provide documentation. Digest by Jan Hamilton Trustee.

Chapter 13 Bankruptcy Payments

Chapter 13 bankruptcy debtors are responsible for making their plan payments to the trustee.   No excuses.

This is true even if your payments are supposed to be deducted from your paycheck.  If no deduction is taken out of your check or if your employer does not remit the money to the trustee, you are still responsible for the payment.

Watch your pay stubs to make sure the payments are being deducted.  If not, make the payment yourself and call your attorney to troubleshoot.  Your case will be dismissed if payments are not made and you will lose the benefits of chapter 13 bankruptcy.

You can check whether the trustee has received payments by setting up an account with the National Data Center.

Neither Topeka nor Kansas City, Kansas, chapter 13 bankruptcy trustees accept cash nor any kind of electronic bank transfer (ACH transactions).  You can set up bill payer service at your bank and arrange for your bank to send the trustee a check if you don’t have employer pay. The Topeka trustee has an electronic payment service provided by a third party.

What Happens to Divorce Debts in Bankruptcy?

Debts in the nature of support of child or former spouse are not discharged in either chapter 7 or 13 bankruptcy.

What about property settlement debts?  If the divorce decree contains a hold harmless obligation that makes one spouse indemnify the other spouse, then the hold harmess oglibation is a separate debt to the spouse and is not dischargeable in chapter 7 bankruptcy 523(a)(5) or 523(a)(15).

The hold harmless obligations can be discharged in chapter 13 bankruptcy as long as the debt to the former spouse not a Domestic Support Obligation (DSO).  This is possible because property settlement debts under 523(a)(15) are not excepted from discharge in chapter 13 cases.  See Schuett v. Finkey, 2008 Bankr. Lexis 1555 (Bankr. D. Neb. May 21, 2008).

Cram Down Value Used for Means Test in Wichita Bankruptcies

A DEBTOR MUST USE THE STRIPPED/CRAMMED DOWN AMOUNT FOR
PURPOSES OF CURRENT MONTHLY INCOME (CMI) ON LINE 47 OF B22C
In re Hoss, Case No. 08-10365
In re Arroyo, Case No. 07-12779
August 2008, Judge Nugent
In above median income (AMI) cases, debtors sought to deduct contract payments, rather than the stripped off/crammed down amounts. The Court sustained the Chapter 13 Trustee’s objection to confirmation. This is a good analysis of the status of the law, as of the date of the issuance of the opinion. Judge Nugent applied the reasoning of Lanning, but on the expense side, rather than the income side, of the equation. He also disagreed with Judge Karlin’s decision in Allen, which would have reached an opposite result.

U.S. Supreme Court Takes Topeka Bankruptcy Case

A Topeka, Kansas, consumer bankruptcy case is pending in the U.S. Supreme Court. It involves the Topeka chapter 13 trustee objecting to Stephanie Lanning’s bankruptcy plan.

Lanning had taken a buyout and left her job at Payless Shoesource.  She was working at Joann’s Fabrics for less money when her bankruptcy was filed.

When Lanning took the bankruptcy means test, the Payless buyout caused her income average to be higher than her current income and higher than the median for a single person in Kansas.  She would have been required to make a bankruptcy payment she could not afford to make with her lower income. [Read more…]

What Is Required to Confirm My Chapter 13 Bankruptcy Plan?

11 U.S.C. § 1325. Confirmation of plan

(a) Except as provided in subsection (b), the court shall confirm a plan if—

(1) The plan complies with the provisions of this chapter and with the other applicable provisions of this title;
(2) any fee, charge, or amount required under chapter 123 of title 28, or by the plan, to be paid before confirmation, has been paid;
(3) the plan has been proposed in good faith and not by any means forbidden by law;
(4) the value, as of the effective date of the plan, of property to be distributed under the plan on account of each allowed unsecured claim is not less than the amount that would be paid on such claim if the estate of the debtor were liquidated under chapter 7 of this title on such date;
(5) with respect to each allowed secured claim provided for by the plan— [Read more…]

What is Bankruptcy Conversion?

Conversion: Cases under the Code may be converted from one chapter to another chapter; for example, a Chapter 7 case may be converted to a case under Chapter 13 if the debtor is eligible for Chapter 13. Even though the chapter of the Code which governs it changes, it remains the same case as originally filed.

What is a Contingent Debt?

Contingent: Used to describe debts that are not fixed in right at the time, but are dependent on some other event happening to fix the liability.

Timeshare Debt Allowed on Means Test, Adult Child Disallowed

MORE LINE BY LINES OF B22C
In re Hays, Case No 07-41285
April, 2008, Judge Karlin

13 Trustee objections to debtor’s attempts to claim living expenses for non-dependent debtors as well as for secured debt on a timeshare. Court followed Law and disallowed adult child expenses. The Court allowed the debt on the timeshare to be deducted. The decision is very thorough and is a recommended read.

Digest by:  Jan Hamilton, Trustee

What Is Confirmation in Bankruptcy?

Confirmation: The court order which makes the terms of the plan for repayment of debts in a Chapter 11, 12 or 13 binding. The terms of the confirmed plan replace the prepetition rights of the debtor and creditor.

Nonworking Adult Son Not Counted in Household

B22C CASE, LINE BY LINE…
In re Law, Case No. 07-40863
April 2008, Judge Karlin

Court sustained 13 Trustee’s objection to confirmation as debtor included: adult son in household size, tax levy on Line 33 and duplicated it on Line 49 and unencumbered vehicle on line 28. The decision is a good analysis of the status of B22C case law as of the date of the decision.

Digest by:  Jan Hamilton, Trustee

Deduct Full Secured Debt on Bankruptcy Means Test

OK FOR CHAPTER 13 DEBTORS TO TAKE B22C DEDUCTION FOR FULL PAYMENT
RATHER THAN CRAM DOWN AMOUNT
In re Allen, Case No. 07-41327
February 2008, Judge Karlin

Objected to confirmation on the basis that Debtor’s means test calculations erroneously included the full amount of the pre-petition car payments rather than the reduced or  crammed-down amounts. In analyzing 1325(b)(1), the Court found that 707(b)(2)(A)(iii) applies and that Debtors need not only list the amounts they will actually pay through the plan. There is a split of authority on this important issue. This case was not appealed so no appellate decision is in the immediate future for the 10th Circuit.  See the Hoss and Arroyo decision by Judge Nugent for the opposite result.

Digest by:  Jan Hamilton, Trustee

Don’t Be Fooled by False Letter that Says Your Bankruptcy is Dismissed – Your Stay Still in Effect

A Florida debt adjuster sent letters to Chapter 13 bankruptcy debtors in Kansas falsely telling them that their bankruptcy cases were dismissed and to call right away “to discuss the terms of your dismissal.”  What a scam!

These letters from First American Debt Solutions are absolutely FALSE! The bankruptcy cases are NOT DISMISSED! These letters are outrageous!  They frighten vulnerable consumer debtors and cause panic.  Debtors are tricked into thinking they are no longer protected by the bankruptcy stay against collection.

If you receive one of these outrageous letters, call your bankruptcy attorney right away.  She can assure you the letter is false, your case is active and you are still protected by the automatic stay.  She will want the letter and mailer to save as evidence against this company.  This fraudulent activity have been reported to the Chapter 13 Bankruptcy Trustee, the U.S. Trustee and the Office of the Kansas Bank Commissioner.

Here is part of  one letter two clients got this week: [Read more…]

Car Deduction Allowed on Means Test, Reversed by District Court

CAR DEDUCTIONS ALLOWED EVEN THOUGH NO LIEN
In re Thomas, Case No 06-21108
In re Camacho, Case No. 06-20729
October 2007,  Judge Berger

UST Motion To Dismiss under 707(b) for presumed abuse based upon totality of circumstances was denied. The Court concluded that the debtors are entitled to claim vehicle ownership for expenses, even though debtors did not have liens or leases on the vehicles. (See In Re Howell, 06-11652 for opposing view from Judge Nugent.). Judge Lungstrum subsequently reversed and remanded Thomas, 382 B.R. 793 (D. Kan. 2008).

Digest by:  Jan Hamilton, Trustee

What Does Confirmed Mean?

Confirmed: A plan of reorganization in Chapter 11, 12 or 13 approved by the court and binding on the parties is said to be confirmed.

No Early Payoff, But Chapter 13 Bankruptcy Plan Modification Possible

PLAN MAY NOT PROPOSE EARLY PAYOFF BUT 1329 MAY ALLOW POST
CONFIRMATION MODIFICATION
In re Kidd, et al, Case No. 06-41232
August 2007, Judge Karlin

The Court recognized changes in 1324(b)(4) and held that debtors may not propose an early pay off but may obtain the same in the right circumstances via 1329.

Digest by:  Jan Hamilton, Trustee

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