The means test can be seen as a simple form in your bankruptcy petition preparation package – a glorified Form 1040 to be filed with each consumer case – or we can view it as it truly is. The simple becomes hazy, and what we knew coming into this aspect of our practice is persistently uncertain . Even the most seasoned consumer bankruptcy attorney is routinely dumbfounded at the issues that confront us when none should exist.
“We live by two different words…” Care to hum along on the bankruptcy lawyer version of the song?
When the client reported receipt of an annual bonus midway through the means test look back period, I chortled “received and derived” and cut the included income by 75%.
“Current monthly income”, the income we report on B-22, is defined as
The term “current monthly income”— (A) means the average monthly income from all sources that the debtor receives (or in a joint case the debtor and the debtor’s spouse receive) without regard to whether such income is taxable income, derived during the 6-month period ending on— (i) the last day of the calendar month immediately preceding the date of the commencement of the case if the debtor files the schedule of current income required by section 521 (a)(1)(B)(ii)
My reading of the statute says that if the income wasn’t “derived” in the lookback period, it is not current monthly income.
In my client’s case , only the fraction of the annual bonus related to months in the look back period that is both received and derived in those six months is included. She earned the bonus over twelve months, so some part of it was derived outside the six months. Accordingly, I included three months of the bonus on the means test form and the client ended up negative on the bottom line.
Read the statute, give meaning to each word of the statute, and apply it to your facts.
None of us knows everything, from the novice to the veteran with thousands of cases under his or her belt. The means test is five years old, which seems like a long time until you realize that for the first few years after enactment of the current set of rules there were precious few cases to look to for guidance. It is only now that many are coming to grips with the intricacies and ambiguities of means testing and the impact it has on our clients.
A few months ago I had the opportunity to create a 2-hour soup-to-nuts course on means testings for a local group of consumer bankruptcy attorneys. I have never repeated that course in a live environment; there’s just no time. The truth is that it would take me years to present to even a fraction of lawyers on this critical aspect of the U.S. Bankruptcy Code – something I am unable to undertake.
Over time, a number of the students in my Fundamentals of Bankruptcy course clamored for help with the means test.
This coming Wednesday – October 27, 2010 – I will be releasing this video to the public for the first time. I intend to reward those of you who are serious about grabbing the means test bull by the horns, and will do so with a limited-time introductory offer. I have not yet settled on pricing, but the live attendees each paid over $250 for the education. I’m hoping to deliver it to you at a significantly more cost-effective level of investment.
Watch for word here on Wednesday, October 27, 2010.
Image credit: Tim Cummins (flickr)