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.

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