new ruling by 9th circuit court affects our confirmation and maybe yours....

[flower04]

We were supposed to be confirmed two weeks ago, but it was "adjourned" and today we find out that we no longer qualify for a 36 months 13 with a payment of >200 per month. We now have to pay about $750 for 60 months. We passed the means test but are above the median income. We are surrendering our home.

This new ruling (a week or two ago) changes the plans because our trustee came to our attorney and said, "try again" at 60 months at $750+. According to what our attorney said, the new ruling states that you can't surrender your home and still count teh payment on our means test.

So, after some seriuos stress, we got it figured out and I hope we are allright. We have some pretty serious medical expenses and are hopeful that we have adjusted the plan to not include our mortgage, but include a much lower rent (which will be difficult to find something in our area for that price..). We are going to have to PROVE every single expense to our trustee and I am SO grateful we ahve kept good records and receipts.

I hope this helps someone...
I couldn't find a posting online of this ruling, so if you can, posting it would be great.

[UpsideDownMI]

In order to qualify for a 3 year you must be below the median income unless you are in a 100% plan. Since you are above the median income, I don't know why your lawyer had you in a 3 year plan to begin with. Hopefully you get this straightened out.

[ccfriend]

That would make sense. If you are surrendering your house you would no longer have the payment. I wonder though if when you found a new place to rent if the rent could be figured in.

[StartingOver08]

Here is a very good article on that ruling:

Another Unfavorable Bankruptcy Means Test Decision
By Michael G. Doan, San Diego Bankruptcy Attorney on Oct 20, 2009 in Bankruptcy Cases & Legislation, Chapter 13 Bankruptcy, General Bankruptcy Information

Recently I posted a Blog on the unfavorable In re Martinez decision recently handed down by the Ninth Circuit BAP on October 5, 2009. Well, the Ninth Circuit BAP did it again that same day in another case with a slightly different twist in the Smith matter.

The BAP essentially issued almost the same opinion, but applied its rational to property that was being surrendered as opposed to being stripped. Thus the BAP now holds that if a debtor will surrender vehicles, real estate, or other secured assets, one can no longer take a deduction on Form B22’s “projected disposable income” test. Perhaps the BAP didn’t realize how absurd this new ruling would play out?

Such an absurdity now arises from the irreconcilability between the Chapter 7 “means” test and the Chapter 13 “projected disposable income” test since deductions are allowed in chapter 7 cases on secured debt whose collateral will be surrendered, yet not allowed in chapter 13.

An example best illustrates this fatuousness. If a debtor proposes to surrender a vehicle in chapter 7 which provides a $300 per month deduction(assuming a $9,000 car with an $18,000.00 debt), he is still entitled to secured debt deductions on Form B22. Assuming Form B22 results in negative disposable monthly income of -($100.00),however, that same debtor would not be allowed the same deduction in chapter 13, which in turn would result in a positive $200.00/month for projected disposable income purposes.

Thus if this debtor had great intentions and desired to pay back creditors in chapter 13 instead of eliminating the same in chapter 7, he could be penalized a $200.00/month surcharge to unsecured creditors for 60 months simply by surrendering the vehicle.

Yet that same surrender in chapter 7 is completely proper and results in$0.00 to unsecured. That’s right, pay a mandatory $12,000.00 in chapter 13 or $0.00 in chapter 7, if you want to surrender the vehicle. But wait, it gets worse!

If the same debtor chose not to surrender the vehicle in chapter 13 and kept the vehicle instead, he now avoids the $200.00 per month unsecured surcharge and will eventually own the car free and clear. Instead, he pays about $150.00 per month with interest for 60 months and owns the car free and clear. Huh? Pay $200 per month and not own the car or pay $150 per month with interest and own the car????

If you think this is ridiculous, you are not alone. Many attorneys are struggling to make sense of the BAP decision right now, and it is anticipated that many Bankruptcy Courts will disregard its decision. But that is what happens when a court decides to stray away from the plan language of a statute and create its own interpretation solely based upon assumptions.

Due to assumptions, as in this case where property is being surrendered, it makes absolutely no sense to allow secured deductions in chapter 7 and disallow the same deductions in chapter 13. Such a disparity between the chapters completely disregards Congress intent of incorporating the chapter 7 “means” test in chapter 13 via 1325(b)(3).

But its not over yet. The BAP certified this case to the 9th circuit court of appeals. Perhaps the 9th circuit will get it right and reverse.

Written by Michael Doan
http://www.************************/...the-ninth-bap/

[flower04]

we were able to use rent and thankfully still have a negative amount on our means test. The rent was pretty low for our area, it is the IRS standard for a family of 4 of $1400ish. Places that fit our needs (not over the top) but in our area are about $1750. So, we will have to work something out.

Interesting turn of events.

[PatinCA]

We filed our plan with a $750 proposed payment. We are stripping our second mortgage. We had our 341 mtg on 10/20. We were told that because of this ruling our payment will most likely go up, but to keep paying $750 for now. Our atty is estimating our new pmt around $1500. Our second mortgage pmt was $1143. I read the article and also the pdf file on the ruling. If you read the first article this atty wrote, http://www.************************/...the-ninth-bap/ it appears he has cases in Southern California that are against this ruling. I am not sure I am understanding this right or not. He states that he thinks this ruling will eventually be overturned.

Question is: if they get this ruling overturned, will our payment go down? Or will our atty have to file something to get that done?

Also, if this ruling was in a district in Nevada, why is it affecting us in Northern Calif? It said this appeal was heard with only the appealing trustee pleading the case, with no objection by the debtors attorneys. In other words, no opposing opinion was heard. That doesn't seem right. Have any others had their proposed payment changed?

Also, if we have to pay double because of this ruling, what happens to all the people who came before us and were able to include their second mortgages when figuring out their payment? Do they get to keep their lower payment? That doesn't seem fair to us and all who come after. I know, I know...life isn't fair.