Very interesting paper on the median income/Means test part of the BPCA

[LostOne0069]

I found this pdf formatted paper that is a very interesting analysis of the section of the new bankruptcy code that covers the median income rule and the means test.

Here's the link:

http://www.nacba.org/files/main_page/CatchingCanPay.pdf

[anonymuse]

Thanks for sharing, LostOne! (You're not lost in my book!)

Quite an interesting read. Some very quirky circular logic going on there. Judge's needed a uniform tool to determine who "can pay" so that there was consistency between judges on the delineation between BK7 & BK13; thus, the means test. And now, it looks like *some* of the judges are using their own "can pay" determinations after the means test is applied. Hmm....

Best quote from the article: If the means test or the whole package does not meet Congressional goals, Congress, not the judiciary, must fix it.

A lot of people presume that the latest set of laws was too "creditor friendly." But the means test seems more like a way congress was able to quantify what they already knew (95% would pass the means test) since the creditors weren't believing the more subjective determinations.

I can't read the whole thing now, but it will be very interesting to go through tonight.

[LostOne0069]

This paper is pretty long (36 pages) but if you are interested in the median income rule or the means test then you REALLY need to read it.

For anyone who is above the median income, this paper goes into all the details of how the means test is useless and can be used against itself to get a chapter 7. For instance, did you know that the means test allows you to put in ALL secured debt as an expense? It does not matter WHAT that secured debt is for? It doesn't even give limits on WHEN that secured debt was incurred!

Then there's the whole "charity" thing. Buy your way into heaven AND a chapter 7 at the same time!

[anonymuse]

I had read a separate ruling about anything less than 10% going to charity is acceptable. In some religions, you are expected to give 10% to the tithe. I think that's the underlying but unspoken reason behind it.

When I could afford, I used to have 5% of my salary coming out through payroll deduction every month. And there were other charitable donations make on top of that. Came to about 7-8% a year total. Although I would like to get back up to that level of giving, I do feel like it's cheating to take put on that expense if you had not previously done that.

If you look at this training for trustees, you'll see how some of this is mention in filling out the forms in respect to secured debts.

http://www.bankruptcyforum.com/t7296-what-trustees-look-for-when-filling-out-forms.html

[LostOne0069]

Thanks for sharing, LostOne! (You're not lost in my book!)

Quite an interesting read. Some very quirky circular logic going on there. Judge's needed a uniform tool to determine who "can pay" so that there was consistency between judges on the delineation between BK7 & BK13; thus, the means test. And now, it looks like *some* of the judges are using their own "can pay" determinations after the means test is applied. Hmm....

Best quote from the article: If the means test or the whole package does not meet Congressional goals, Congress, not the judiciary, must fix it.

A lot of people presume that the latest set of laws was too "creditor friendly." But the means test seems more like a way congress was able to quantify what they already knew (95% would pass the means test) since the creditors weren't believing the more subjective determinations.

I can't read the whole thing now, but it will be very interesting to go through tonight.

Wait until you read it in depth further. It has LOTS of good stuff in it.

One word of caution to those out there who get excited by reading this and think that they'll get that Chapter 7 no problem... You still have Judges who don't bother to really READ the law and analyze it. That takes effort and judges are human too (usually) and they're prone to just look at the "bold text" just as anyone else is. Meaning that they can tend to look at the parts that stand out and never really dig into it and untangle the legal "double speak" that is so common in laws. (you know, Person is guilty of A if conditions B & C exist unless they have situation M or situation L, but not if situation R and Q apply)

This document will be the MOST help to those who can afford to pay an attorney to FORCE the judge to read the damn law and apply it as it reads rather than just keep doing what they "feel is right". Remember a judge is supposed to objectively INTERPRET the law... not WRITE the law. Whether they feel that the law is written well is irrelevent.

There is no way that I would allow a lawyer to submit me under chapter 13 after reading this document and the law. Especially since I'm under the median income for my state.

Hell, even if I was OVER the median I wouldn't let them file me under chapter 13 as the means test would be a piece of cake to pass.

[anonymuse]

I'm under the median income in my state also (by $3K) at my current salary--if I count the previous six months, it's even lower.

But remember, it's not all about the means test, they still need to look at assets.

[LostOne0069]

I'm under the median income in my state also (by $3K) at my current salary--if I count the previous six months, it's even lower.

But remember, it's not all about the means test, they still need to look at assets.

OK, well yes, chapter 7 isn't for everyone. I was referring to my situation where I couldn't care less WHAT they take from me and sell. I don't own a home, I have no equity in my one vehicle or my boat, I have no expensive posessions. About all they can take from me in a chapter 7 is some woodworking machinery (which I'd miss a lot, but not so much that I want to pay for it for 5 years!) a laptop and possibly some other misc. junk that I'll never miss.

[SinkingFast]

This paper is pretty long (36 pages) but if you are interested in the median income rule or the means test then you REALLY need to read it.

For anyone who is above the median income, this paper goes into all the details of how the means test is useless and can be used against itself to get a chapter 7. For instance, did you know that the means test allows you to put in ALL secured debt as an expense? It does not matter WHAT that secured debt is for? It doesn't even give limits on WHEN that secured debt was incurred!

Then there's the whole "charity" thing. Buy your way into heaven AND a chapter 7 at the same time!

The one attny we retained but wound up booting cause he didn't do anything was gonna do this with our house on the Means Test.

We're giving up the house in BK and he's gonna include the debt and annualize it forward on the Means Test?? How?? He asked how long we'd owned it. Going on 14 years. No problem he said. If we'd bought it less than 5 years before, he couldn't do it. But since we'd owned the house so long, he said he could. How, I haven't a clue. But he intended to do it some way.

[LostOne0069]

hmm, weird. I cant see how they could keep the debt in the means test if you are giving up the asset in the bk.

[SinkingFast]

He's the only attny that said that. All the others said if the house was going in the BK all the debt and expenses associated with it were too.

We'd left the power and water on for the Realtors to show the house. When the BK attnys said we couldn't include those bills, and we couldn't really afford to keep it all going anyway, we shut off the power and the water.

About a month ago, our mower guy called. The one who'd been maintaining the place for us last fall. $400/month for mowing. I told him we didn't need his services this spring. I can well imagine the yard is butt high by now. But, oh well. C'est la Vie!!

I read thru about the first half of the article. The upshot is pretty much what our attny said is happening here. If the BK petition shows any disposable income, even at the $100/mo level, the Court is forcing the filers into Ch 13 plans. Regardless of the wording of the law, Judges are using their own interpretation for presumption of abuse beyond the Means Test. And in the case of the local Judge, if you have $100/mo in disposable income, your 7 is gonna be dismissed or you'll be forced to refile for Ch 13.

[LostOne0069]

I read thru about the first half of the article. The upshot is pretty much what our attny said is happening here. If the BK petition shows any disposable income, even at the $100/mo level, the Court is forcing the filers into Ch 13 plans. Regardless of the wording of the law, Judges are using their own interpretation for presumption of abuse beyond the Means Test. And in the case of the local Judge, if you have $100/mo in disposable income, your 7 is gonna be dismissed or you'll be forced to refile for Ch 13.

You gotta read the rest of the article... it points out that judges that do this are NOT following the law. Judges rulings CAN be apealed you know. Also, remember that to get your case dismissed and/or converted, they have to submit a motion to do so and they have to submit what piece of the bk code that they're basing their motion on... It would seem to me to be a simple matter of pointing out to a judge that they're not following the code to get this overturned... or at least when you appealed it over their head it should be easy to do.

Unfortunately what this means is that those who can't afford to pay an attorney are going to get screwed by judges who are too lazy to read the law or who are so impressed with themselves that they think they can do whatever they want, regardless of what the law says.

It's a sad world sometimes.

[FoolAndHisMoney]

You gotta read the rest of the article... it points out that judges that do this are NOT following the law. Judges rulings CAN be apealed you know. Also, remember that to get your case dismissed and/or converted, they have to submit a motion to do so and they have to submit what piece of the bk code that they're basing their motion on... It would seem to me to be a simple matter of pointing out to a judge that they're not following the code to get this overturned... or at least when you appealed it over their head it should be easy to do.

Unfortunately what this means is that those who can't afford to pay an attorney are going to get screwed by judges who are too lazy to read the law or who are so impressed with themselves that they think they can do whatever they want, regardless of what the law says.

It's a sad world sometimes.

I read this too and always thought that the judges simply "stamped their approval" for your discharge under old and new law unless a party of interest files a motion or complaint for some reason. While they certainly could I never heard of a judge demanding you go into a chapter 13. I figured if the US Trustee or standing trustee file a motion under 707B or if a creditor disputes a particular discharge, or the trustee objects to an exempt asset, only then it's up to the judge to decide. At least that's what I always thought.

[LostOne0069]

Yep, I obviously did a poor job of explaining... I was speaking about the decision that the judge makes to accept or reject the objection or motion that the trustee, us trustee etc. etc. makes to dismiss or convert.

Also, I would expect that judges don't just "rubber stamp" bankruptcies all the time. My guess would be that they take a look at all the documents that are given them... a *brief* look. Then, if everything looks OK and there are no objections... THEN they stamp their approval.

I'm not 100% positive on this... but I'm pretty confident of it. I do know that the Judge is the final decision point on a bankruptcy... I mean, if a trustee decides to object, they file the objection with the court... then, if you appeal the objection, I would imagine that it's the judge that decides whether or not to uphold the objection or not.

Anyway, as my attorney explained to me... trustees are important... but the Judge is who we REALLY need to convince.

[no_it_all]

<snip> For instance, did you know that the means test allows you to put in ALL secured debt as an expense? It does not matter WHAT that secured debt is for? It doesn't even give limits on WHEN that secured debt was incurred!

So? What is the big deal with that? Please explain...

[LostOne0069]

It's just a way for someone who is over the median income to still get a chapter 7 discharge. Since they get to include all secured debt as an expense, it's MUCH easier to pass the means test.

This wouldn't be so remarkable except the authors go on to explain that there is no explicit rule about what kind of secured debt is allowed or when it was purchased... so you could buy a new mercedes or a new house and put the payments into the means calculator and show that you can't afford a chapter 13.