In the case of In re Phillips, 417 B.R. 30 (Bankr. W.D.OH 2009), Debtor filed chapter 7 bankruptcy in an effort to discharge debts. Debtor was required to satisfy the “means test” to qualify for the chapter 7 discharge because debtor’s income was above the median income level for debtor’s state. Debtor deducted from her current monthly income expenses related to real property vacated and surrendered prior to filing bankruptcy.
Debtor’s discharge was challenged by the US Trustee (UST). The UST maintained that debtor’s case should have been dismissed pursuant to §707 because debtor failed the means test that resulted in a presumption of abuse for above median income debtors when the debtor’s current monthly income was reduced by allowed deductions. Specifically, the UST asserted that it was improper for debtor to take deductions for payment of mortgages and taxes on a house that had been surrendered by debtor prior to debtor’s bankruptcy filing.
The issue before the Phillips court was whether the Bankruptcy Code’s “means test” allowed debtor to deduct from her current monthly income expenses related to real property vacated and surrendered prior to filing bankruptcy. The court noted that the majority view was that a debtor may deduct expenses on the means test for payments on secured debt even when the collateral was surrendered as long as the debtor’s continuing contractual obligations remained unextinguished on the date of the bankruptcy filing. Generally, these courts interpreted the plain language “scheduled as contractually due to secured creditors” to mean that a debtor may deduct secured debts that are contractually owed by the debtor to secured parties as of the petition date. The Phillips court believed that the majority courts essentially take a snapshot of the debtor’s schedules on the petition date to calculate the secured debt deduction on the means test form.
Finally, the Phillips court held that the means test allowed debtor to deduct from her current monthly income expenses related to real property vacated and surrendered prior to the date the bankruptcy case was filed. Consequently, the court found that a presumption of abuse did not arise under §707(b)(2).
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Click for Bankruptcy Lawyer Job Opportunities.
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
Friday, January 1, 2010
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment