Bankruptcy Means Test Meaner as Family Incomes Drop

As the economy worsens, unemployment rises and family incomes are dropping, getting bankruptcy help gets a little tougher.

The bankruptcy income guidelines go down a few hundred dollars for Kansas cases filed on or after March 15, 2010.  While this change probably won’t disqualify many debtors, the downward trend is disturbing and more evidence the means test is a mean test.

Here are the new Kansas median income figures by family size used for part one of a two part-test to determine bankruptcy eligibility:

  1. $41,210
  2. $57,561
  3. $63,212
  4. $72,352

But do not despair if your income is higher than these numbers and you need bankruptcy help.  You are not automatically disqualified. These numbers are used in part one of the means test to figure out whether Kansans may get rid of their general debts such as credit cards and medical bills in bankruptcy.

You have a second chance to pass the bankruptcy means test [Read more…]

Means Test Form Controls Unless Significant Changes in Circumstances

In re Lanning, Case No. 06-41037
May 2007, Judge Karlin

Over the Chapter 13 Trustee’s objection, the Court confirmed the plan because of significant changes in circumstances at the time of filing that caused Line 58 on B22C to be higher than what the debtor could afford to pay. BAP and 10th Circuit Court of Appeals affirmed, Petition for Cert to U.S. Supreme Court pending. Lanning controls in Judge Karlin’s court, until, if and when, the decision is overturned.

Digest by:  Jan Hamilton, Trustee

Who Gets Paid Out of Chapter 13 Pool?

In re Puetz, Case No 0620756
June 2007, Judge Berger

B22C presumptively shows debtors projected disposable income, schedules I and J no longer determine plan payment for above median debtor, but, rather, demonstrate feasibility unless there are special circumstances justifying adjustments to B22C. This is not the plan payment but is what goes to “unsecured creditors”, which are general unsecured claims, anticipated attorney fees but not Chapter 13 Trustee fees or priority claims as these are already netted out in the B22C calculations. Contributions and 401(k) loan repayments are not included in calculating disposable income.

Digest by:  Jan Hamilton, Trustee

My Wife Didn't File Bankruptcy, Can I Deduct Her Car Payment on My Means Test?

In re Shahan, Case No. 06-11638
April 2007, Judge Nugent

Above median debtor filed 13; wife did not. Trustee objected to confirmation on basis of various B22C deductions. Debtor was allowed to take a marital deduction on Line 19 from his paycheck, which represented mandatory withholdings from her paycheck and, as such, was not dedicated to household expenses. Debtor sought to deduct future payments on secured debts for wife’s debts on Line 47. Since these were not debtor’s expenses, they were not allowed. Additionally, debtor sought to deduct $415.00 on line 59. This includes wife’s monthly recreational expenses, loan repayment to family, tax prep fees and $200.00 per month to help an adult daughter. These are to be actual expenses. None of these qualified, except for the tax preparation expenses as analyzed by the Court.

Digest By:  Jan Hamilton, Trustee

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