The bankruptcy means test, designed to keep people out of bankruptcy, has a fatal weakness. Like so much recently, it’s health care. Health care, in the future, to be paid before creditors get any money. It works because, in a logic that only Congress could employ, the means test deducts future expenses from past income. And, since […]
Are 401(k) Contributions Disposable Income Or Not?
For a system that is supposed to rehabilitate personal finances and set debtors back on their feet, Chapter 13 nationwide is schizophrenic about on- going retirement savings. We’re divided about whether post petition contributions to retirement accounts preclude confirmation of a Chapter 13 plan. Are 401(k) Contributions Disposable Income Or Not? Too many courts, in […]
Marital Adjustment: Everything But The Kitchen Sink
Not every expenditure that benefits the debtor’s household or his family is a household expense. And, if it’s not a household expense, it doesn’t get added to CMI in a single spouse bankruptcy filing. That’s how the marital adjustment should work. But it’s not so simple. Household expense is not an expansive definition During a NACBA […]
Diaz & The Tax Refund
On its face, Diaz (Diaz v. Viegelahn , No. 19-50982 (5th Cir. Aug. 26, 2020)) is a pretty straightforward decision that struck down a local form plan as violating a below-median income debtor’s right to use her tax refund to finance necessary expenses for maintenance and support. On a deeper level, it appears to highlight […]
Wrestling With The Means Test
The timeless questions asked by mankind include “why are we here“, “which came first…” and “coffee or tea“. Bankruptcy lawyers wrestle with “which controls, b-22 or Schedules I and J“. My argument is: if Congress wanted a means test, then the means test controls, unless you show special circumstances. But if I minus J controls, […]
The Means Test Allows Health Care Before Creditors
Health insurance is an allowable means test deduction, even if the debtor doesn’t currently have health insurance. In my view, the sweetest words in an otherwise miserable bankruptcy means test are found buried in a long paragraph of ยง707(b)(2)(A)(ii)(1): The debtor’s monthly expenses “shall include reasonably necessary health insurance, disability insurance and health savings account expenses…” […]
When The Means Test Is Meaningless
A local bankruptcy attorney stumbled over the most basic part of the means test. Just this week… nearly 15 years after the bankruptcy “reform” act of 2005. I thought we were several years past bankruptcy attorneys clueless about the means test. But apparently not. When the means test doesn’t apply This fine fellow told a […]
