1 person $41,915
2 people $51,760
3 people $54,934
4 people $65,260
for cases after April 1, 2013 add $ 8,100 for each additional person after 4
http://www.justice.gov/ust/eo/bapcpa/20121101/bci_data/median_income_table.htm
Showing posts with label means test. Show all posts
Showing posts with label means test. Show all posts
Friday, April 12, 2013
Tuesday, May 8, 2012
Means Test New Income Guidelines for Ch. 7
Household Size
1 person $42,053
2 people $51,299
3 people $54,508
4 people $64,722*
*$7,500 for each additional person
1 person $42,053
2 people $51,299
3 people $54,508
4 people $64,722*
*$7,500 for each additional person
Saturday, February 18, 2012
Means Test Chapter 13
For a detailed explanation of the Means Test you might want to read The Bankruptcy Means Test Explained In English.
One of the biggest problems with the Means Test (and there are many!) is that if you have over a certain amount of Disposable Income ($182.50 in current monthly income available after allowed deductions, which equals $10,950 over five years) you are presumed to be abusing the Bankruptcy system by filing a Chapter 7 bankruptcy.
Because the Means Test takes a cookie cutter, one size fits all approach to expenses. Some examples:
• You are only permitted to claim $147.92 per month per child under the age of 18 for educational expenses, and you are going to have to have documentation to support those expenses.
• If you must be in a Chapter 13, you must be in it for 60 months if you are a an above means debtor. If you own an older vehicle and don’t have a car note, you can only claim an additional $250.00 per month for maintenance expenses. If you want to purchase a vehicle during your chapter 13 you must have approval from the trustee. You might be allowed a car payment of about $350 a month.
• In a Chapter 13 bankruptcy you are permitted to treat your withholding for retirement plans such as 401K expenses as an expense for your health and welfare, but you are not permitted to claim this expense in a Chapter 7 bankruptcy.
One of the biggest problems with the Means Test (and there are many!) is that if you have over a certain amount of Disposable Income ($182.50 in current monthly income available after allowed deductions, which equals $10,950 over five years) you are presumed to be abusing the Bankruptcy system by filing a Chapter 7 bankruptcy.
Because the Means Test takes a cookie cutter, one size fits all approach to expenses. Some examples:
• You are only permitted to claim $147.92 per month per child under the age of 18 for educational expenses, and you are going to have to have documentation to support those expenses.
• If you must be in a Chapter 13, you must be in it for 60 months if you are a an above means debtor. If you own an older vehicle and don’t have a car note, you can only claim an additional $250.00 per month for maintenance expenses. If you want to purchase a vehicle during your chapter 13 you must have approval from the trustee. You might be allowed a car payment of about $350 a month.
• In a Chapter 13 bankruptcy you are permitted to treat your withholding for retirement plans such as 401K expenses as an expense for your health and welfare, but you are not permitted to claim this expense in a Chapter 7 bankruptcy.
Tuesday, March 8, 2011
Bankruptcy Means Test Figures Changing March 15, 2011
The Bankruptcy Means Test figures are changing again on March 14, 2011 and I am once again reminded of how absurd the means test is. When the US Trustee posts new means test figures, I alway take a careful look at the numbers and compare them to determine how it will affect my clients. Increases in deductions or changes in median income can make be the difference between passing or failing the test.
http://www.justice.gov/ust/eo/bapcpa/20110315/meanstesting.htm
I don’t understand how anyone is expected to live on these made up figures. They don’t reflect reality or adjust for what a family really spends. The distance someone has to drive to work has no bearing on the case, nor the cost of their actual car or home maintenance. There was no increase in the operating costs for automobiles, despite the fact that the price of gas is rising.
Just to show you how absurd it is the allowance for housekeeping supplies for two people is a dollar more than for three people. Does the government think that three people need less cleaning products or use less toilet paper than two? The person setting this obiviously doesn't have a 5 yr old!
As people are loosing their jobs and the median income drops, more will be required to take the means test which could say that Chapter 7 bankruptcy is presumed to be an abuse of process. The bankruptcy Means Test will apply to, and potentially hurt, more people as unemployment rises and salaries drop.
If the median income figures for a state drops, it lowers the bar for debtors who will be subjected to the means test and the possibility of being denied help in Chapter 7 bankruptcy.
If debtors fail the means test, they often have to file a Chapter 13 repayment plan if they want to file bankruptcy. If a debtor is above median income, that Chapter 13 repayment plan will last for five years. Unfortunately, even though the means test says there is money available to make the Chapter 13 plan payments, real income and expense comparisons show that there is less or even no funds left once regular living expenses are paid.
Families who might not have had to take the means test prior to November 1st, 2009 may now subject to take, and maybe fail the test. My experience with the means test has been that it is most unfair to people just above median income since many necessary, common, reasonable and/or actual expenses are not allowed as deductions on the means test.
In Florida the new figures are as follows:
one household member $40,029
two $50,130
three $54,595
four $65,135
add $7,500 for each member in excess of four
National out of pocket healthcare costs per person
under 65 $60
over 65 $144
ARE THEY FRICKING KIDDING ME!
Administrative Expenses Multipliers
11 U.S.C. § 707(b)(2)(A)(ii)(III) allows a debtor who is eligible for chapter 13 to include in his/her calculation of monthly expenses the actual administrative expenses of administering a chapter 13 plan in the judicial district where the debtor resides. The chapter 13 multiplier (for the State of Florida) needed to complete Official Bankruptcy Forms 22A and 22C (Statement of Current Monthly Income and calculations) is set forth below. Form 22A is the form most chapter 7 debtors will complete and the multiplier is
entered on Line 45.b; Form 22C is the form most chapter 13 debtors will complete and the
multiplier is entered on Line 50.b.
Florida
FLM Middle District of Florida 7.4%
FLN Northern District of Florida 10.0%
FLS Southern District of Florida 9.8%
Collection Financial Standards for Food, Clothing and Other Items
Expense One Person Two Persons Three Persons Four Persons
Food $300 $537 $639 $757
Housekeeping supplies $29 $66 $65 $74
Apparel & services $86 $162 $209 $244
Personal care products & services
$32 $55 $61 $67
Miscellaneous $87 $165 $197 $235
Total $534 $985 $1,171 $1,377
More than four persons Additional Amount Per Person
For each additional person, add to four-person total allowance: $262
Bankruptcy Allowable Living Expenses – National Standards (See 11 U.S.C. § 707(b)(2)(A)(ii)(I))
Housing CostsA family of 2 in Pinellas w/ a mortgage or rent = $874 housing
A family of 4 $1026
Hillsborough $967 family 4 $1136
Pasco $746 $875
Operating Costs for Car
one car $244 two cars $488
Ownership Costs for Car
one $496
two $992
http://www.justice.gov/ust/eo/bapcpa/20110315/bci_data/median_income_table.htm
http://www.justice.gov/ust/eo/bapcpa/20110315/meanstesting.htm
I don’t understand how anyone is expected to live on these made up figures. They don’t reflect reality or adjust for what a family really spends. The distance someone has to drive to work has no bearing on the case, nor the cost of their actual car or home maintenance. There was no increase in the operating costs for automobiles, despite the fact that the price of gas is rising.
Just to show you how absurd it is the allowance for housekeeping supplies for two people is a dollar more than for three people. Does the government think that three people need less cleaning products or use less toilet paper than two? The person setting this obiviously doesn't have a 5 yr old!
As people are loosing their jobs and the median income drops, more will be required to take the means test which could say that Chapter 7 bankruptcy is presumed to be an abuse of process. The bankruptcy Means Test will apply to, and potentially hurt, more people as unemployment rises and salaries drop.
If the median income figures for a state drops, it lowers the bar for debtors who will be subjected to the means test and the possibility of being denied help in Chapter 7 bankruptcy.
If debtors fail the means test, they often have to file a Chapter 13 repayment plan if they want to file bankruptcy. If a debtor is above median income, that Chapter 13 repayment plan will last for five years. Unfortunately, even though the means test says there is money available to make the Chapter 13 plan payments, real income and expense comparisons show that there is less or even no funds left once regular living expenses are paid.
Families who might not have had to take the means test prior to November 1st, 2009 may now subject to take, and maybe fail the test. My experience with the means test has been that it is most unfair to people just above median income since many necessary, common, reasonable and/or actual expenses are not allowed as deductions on the means test.
In Florida the new figures are as follows:
one household member $40,029
two $50,130
three $54,595
four $65,135
add $7,500 for each member in excess of four
National out of pocket healthcare costs per person
under 65 $60
over 65 $144
ARE THEY FRICKING KIDDING ME!
Administrative Expenses Multipliers
11 U.S.C. § 707(b)(2)(A)(ii)(III) allows a debtor who is eligible for chapter 13 to include in his/her calculation of monthly expenses the actual administrative expenses of administering a chapter 13 plan in the judicial district where the debtor resides. The chapter 13 multiplier (for the State of Florida) needed to complete Official Bankruptcy Forms 22A and 22C (Statement of Current Monthly Income and calculations) is set forth below. Form 22A is the form most chapter 7 debtors will complete and the multiplier is
entered on Line 45.b; Form 22C is the form most chapter 13 debtors will complete and the
multiplier is entered on Line 50.b.
Florida
FLM Middle District of Florida 7.4%
FLN Northern District of Florida 10.0%
FLS Southern District of Florida 9.8%
Collection Financial Standards for Food, Clothing and Other Items
Expense One Person Two Persons Three Persons Four Persons
Food $300 $537 $639 $757
Housekeeping supplies $29 $66 $65 $74
Apparel & services $86 $162 $209 $244
Personal care products & services
$32 $55 $61 $67
Miscellaneous $87 $165 $197 $235
Total $534 $985 $1,171 $1,377
More than four persons Additional Amount Per Person
For each additional person, add to four-person total allowance: $262
Bankruptcy Allowable Living Expenses – National Standards (See 11 U.S.C. § 707(b)(2)(A)(ii)(I))
Housing CostsA family of 2 in Pinellas w/ a mortgage or rent = $874 housing
A family of 4 $1026
Hillsborough $967 family 4 $1136
Pasco $746 $875
Operating Costs for Car
one car $244 two cars $488
Ownership Costs for Car
one $496
two $992
http://www.justice.gov/ust/eo/bapcpa/20110315/bci_data/median_income_table.htm
Thursday, February 3, 2011
US Sup Ct Limits Car-Ownership Deduction for BAPCPA's Means Test
The Supreme Court of the United States recently held that, under BAPCPA’s means test, a debtor in Chapter 13 Bankruptcy who does not make loan or lease payments may not take the car-ownership deduction.
A copy of the opinion is available at:
http://www.supremecourt.gov/opinions/10pdf/09-907.pdf.
This case came before the Supreme Court on certiorari from the United States Court of Appeals for the Ninth Circuit. Petitioner Jason Ransom, a debtor in Chapter 13 Bankruptcy, had liabilities which included $82,500 in unsecured debt, part of which consisted of a claim by respondent FIA Card Services N.A. Ransom, who owned his vehicle outright, contended that under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
(BAPCPA) means test used to determine a debtor’s disposable income, he was entitled to deductions in relation to the vehicle for both “Ownership Costs” and “Operating Costs.” FIA disputed Ransom’s proposed repayment plan stating that it “did not direct all of Ransom’s disposable income to unsecured creditors” because it improperly included the ownership deduction.
As you may recall, Chapter 13 of the Bankruptcy Code enables an individual to obtain a discharge of his debts if he pays his creditors a portion of his monthly income in accordance with a court-approved plan. 11 U. S. C.
§1301 et seq. To determine how much income the debtor is capable of paying, Chapter 13 uses a statutory formula known as the “means test.” The means test instructs a debtor to deduct from his current monthly income “amounts reasonably necessary to be expended” for, inter alia, “maintenance or support.” 11 U. S. C. §1325(b)(2)(A)(i). The result is his “disposable income”—the amount he has available to reimburse creditors.
§1325(b)(2).
As relevant here, the statute provides that “[t]he debtor’s monthly expenses shall be the debtor’s applicable monthly expense amounts specified under the National Standards and Local Standards, and the debtor’s actual monthly expenses for the categories specified as Other Necessary Expenses issued by the Internal Revenue Service [IRS] fort he area in which the debtor resides.” The Standards are tables listing
standardized expense amounts for basic necessities, which the IRS prepares to help calculate taxpayers’ ability to pay overdue taxes. The IRS also creates supplemental guidelines known as the “Collection Financial Standards,” which describe how to use the tables and what the amounts listed in them mean. The Local Standards include an allowance for transportation expenses, divided into vehicle “Ownership Costs” and vehicle “Operating Costs.” The Collection Financial Standards explain that “Ownership Costs” cover monthly loan or lease payments on an automobile.
The expense amounts listed are based on nationwide car financing data. The Collection Financial Standards further state that a taxpayer who has no car payment may not claim an allowance for ownership costs.
The Supreme Court examined the language of the Bankruptcy Code at §707(b)(2)(A)(ii)(I), which states, “The debtor’s monthly expenses shall be the debtor’s applicable monthly expense amounts specified under the National Standards and Local Standards.” The Court focused on the term “applicable,” stating that whether or not Ransom could claim the car ownership deduction hinged on whether this amount “is “applicable” to him.” The Court then noted that as this term is undefined in the statute they look to the “ordinary meaning of the term” which is “appropriate, relevant, suitable, or fit.”
The Court stated that applicability, in the context of BAPCPA, is determined by making “individualized determination” of a debtor’s monthly expenses. The Court noted that if Congress had not intended to differentiate between debtors who did and did not qualify for a deduction, it “could have omitted the term ‘applicable’ altogether.” The Court also noted that the “statutory context” gives support to this reading as the Code defines disposable income as “current monthly income…less amounts reasonably necessary to be expended.” Lastly, the Court examined the legislative intent behind BAPCPA, which was to prevent perceived bankruptcy abuses by ensuring “[debtors] repay creditors the maximum they can afford.”
Ransom argued that the term “applicable” refers to the deduction tables, directing the debtor to chose the “applicable” ownership deduction of whether he or she owned one or two vehicles. The Court noted that this interpretation made the use of the word “applicable” superfluous, and was contrary to the statutory purpose effected by the means test giving an allowance for ““reasonably necessary” expenses.” The Court further noted that “[e]xpenses that are wholly fictional are not easily though of as reasonably necessary.” The Court also disagreed with Ransom’s contention that this reading would conflate “applicable” with “actual”, noting that although an expense can only be deducted if actually incurred, the actual debtor expenses incurred does not necessarily control, if for instance the debtor’s “actual expenses exceed the amounts listed in the tables….”
The Court also disagreed with Ransom’s contention that the car-ownership deduction cannot cover only loan and lease payments, because a separate sentence of the means test provides that “notwithstanding” the other provisions of the test, “the monthly expenses of the debtor shall not include any payments for debts.” The Court held that this sentence did not apply solely to the car-ownership provision, and that this sentence could only serve to “exclude, and not authorize, deductions.”
Lastly, Ransom argued that his reading of the means test was necessary to avoid results not intended by Congress. Ransom gave as an example of such “senseless results” as that of a debtor timing their bankruptcy filing so that he or she would have only a few car payments left, and thus claim an ownership deduction that would not be applicable soon after entering bankruptcy. The Court stated that such anomalies were “the inevitable result of a standardized formula like the means test”, and Ransom’s reading introduced its own problems, namely, “the strangeness of giving a debtor an allowance for loan or lease payments” when he or she is incurring no such costs. The Court held that all of Ransom’s arguments miss the point of both BAPCPA and the means test, which are to prevent bankruptcy abuses while simultaneously assuring that a debtor has enough money for “reasonable expenses.”
Justice Scalia alone dissented from the majority opinion. His dissenting opinion took issue with the majority’s assertion that Ransom’s reading of the word “applicable” would render it superfluous, noting “[t]he canon against superfluity is not a canon against verbosity.” Justice Scalia then stated that “[t]he point of the statutory language is to entitle debtors who own cars to an ownership deduction” and that an independent interpretation of the tables used was unnecessary as there was “little doubt” that a debtor would be able to choose whether to claim a deduction for one car or two. Scalia also noted that the Court’s job was not to “eliminate or reduce” the “oddities” mentioned by the court, but to “give the formula Congress adopted its fairest meaning.”
A copy of the opinion is available at:
http://www.supremecourt.gov/opinions/10pdf/09-907.pdf.
This case came before the Supreme Court on certiorari from the United States Court of Appeals for the Ninth Circuit. Petitioner Jason Ransom, a debtor in Chapter 13 Bankruptcy, had liabilities which included $82,500 in unsecured debt, part of which consisted of a claim by respondent FIA Card Services N.A. Ransom, who owned his vehicle outright, contended that under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
(BAPCPA) means test used to determine a debtor’s disposable income, he was entitled to deductions in relation to the vehicle for both “Ownership Costs” and “Operating Costs.” FIA disputed Ransom’s proposed repayment plan stating that it “did not direct all of Ransom’s disposable income to unsecured creditors” because it improperly included the ownership deduction.
As you may recall, Chapter 13 of the Bankruptcy Code enables an individual to obtain a discharge of his debts if he pays his creditors a portion of his monthly income in accordance with a court-approved plan. 11 U. S. C.
§1301 et seq. To determine how much income the debtor is capable of paying, Chapter 13 uses a statutory formula known as the “means test.” The means test instructs a debtor to deduct from his current monthly income “amounts reasonably necessary to be expended” for, inter alia, “maintenance or support.” 11 U. S. C. §1325(b)(2)(A)(i). The result is his “disposable income”—the amount he has available to reimburse creditors.
§1325(b)(2).
As relevant here, the statute provides that “[t]he debtor’s monthly expenses shall be the debtor’s applicable monthly expense amounts specified under the National Standards and Local Standards, and the debtor’s actual monthly expenses for the categories specified as Other Necessary Expenses issued by the Internal Revenue Service [IRS] fort he area in which the debtor resides.” The Standards are tables listing
standardized expense amounts for basic necessities, which the IRS prepares to help calculate taxpayers’ ability to pay overdue taxes. The IRS also creates supplemental guidelines known as the “Collection Financial Standards,” which describe how to use the tables and what the amounts listed in them mean. The Local Standards include an allowance for transportation expenses, divided into vehicle “Ownership Costs” and vehicle “Operating Costs.” The Collection Financial Standards explain that “Ownership Costs” cover monthly loan or lease payments on an automobile.
The expense amounts listed are based on nationwide car financing data. The Collection Financial Standards further state that a taxpayer who has no car payment may not claim an allowance for ownership costs.
The Supreme Court examined the language of the Bankruptcy Code at §707(b)(2)(A)(ii)(I), which states, “The debtor’s monthly expenses shall be the debtor’s applicable monthly expense amounts specified under the National Standards and Local Standards.” The Court focused on the term “applicable,” stating that whether or not Ransom could claim the car ownership deduction hinged on whether this amount “is “applicable” to him.” The Court then noted that as this term is undefined in the statute they look to the “ordinary meaning of the term” which is “appropriate, relevant, suitable, or fit.”
The Court stated that applicability, in the context of BAPCPA, is determined by making “individualized determination” of a debtor’s monthly expenses. The Court noted that if Congress had not intended to differentiate between debtors who did and did not qualify for a deduction, it “could have omitted the term ‘applicable’ altogether.” The Court also noted that the “statutory context” gives support to this reading as the Code defines disposable income as “current monthly income…less amounts reasonably necessary to be expended.” Lastly, the Court examined the legislative intent behind BAPCPA, which was to prevent perceived bankruptcy abuses by ensuring “[debtors] repay creditors the maximum they can afford.”
Ransom argued that the term “applicable” refers to the deduction tables, directing the debtor to chose the “applicable” ownership deduction of whether he or she owned one or two vehicles. The Court noted that this interpretation made the use of the word “applicable” superfluous, and was contrary to the statutory purpose effected by the means test giving an allowance for ““reasonably necessary” expenses.” The Court further noted that “[e]xpenses that are wholly fictional are not easily though of as reasonably necessary.” The Court also disagreed with Ransom’s contention that this reading would conflate “applicable” with “actual”, noting that although an expense can only be deducted if actually incurred, the actual debtor expenses incurred does not necessarily control, if for instance the debtor’s “actual expenses exceed the amounts listed in the tables….”
The Court also disagreed with Ransom’s contention that the car-ownership deduction cannot cover only loan and lease payments, because a separate sentence of the means test provides that “notwithstanding” the other provisions of the test, “the monthly expenses of the debtor shall not include any payments for debts.” The Court held that this sentence did not apply solely to the car-ownership provision, and that this sentence could only serve to “exclude, and not authorize, deductions.”
Lastly, Ransom argued that his reading of the means test was necessary to avoid results not intended by Congress. Ransom gave as an example of such “senseless results” as that of a debtor timing their bankruptcy filing so that he or she would have only a few car payments left, and thus claim an ownership deduction that would not be applicable soon after entering bankruptcy. The Court stated that such anomalies were “the inevitable result of a standardized formula like the means test”, and Ransom’s reading introduced its own problems, namely, “the strangeness of giving a debtor an allowance for loan or lease payments” when he or she is incurring no such costs. The Court held that all of Ransom’s arguments miss the point of both BAPCPA and the means test, which are to prevent bankruptcy abuses while simultaneously assuring that a debtor has enough money for “reasonable expenses.”
Justice Scalia alone dissented from the majority opinion. His dissenting opinion took issue with the majority’s assertion that Ransom’s reading of the word “applicable” would render it superfluous, noting “[t]he canon against superfluity is not a canon against verbosity.” Justice Scalia then stated that “[t]he point of the statutory language is to entitle debtors who own cars to an ownership deduction” and that an independent interpretation of the tables used was unnecessary as there was “little doubt” that a debtor would be able to choose whether to claim a deduction for one car or two. Scalia also noted that the Court’s job was not to “eliminate or reduce” the “oddities” mentioned by the court, but to “give the formula Congress adopted its fairest meaning.”
Friday, November 5, 2010
Are 401k withdraws income for the Means Test?
My understanding is that withdrawals from qualified retirement plans (pension, IRA) within six months prior to filing bankruptcy are included as income for purposes of the means test. Large amounts of income from retirement accounts may disqualify a debtor from filing Chapter 7 in which case the debtor should postpone filing Chapter 7 until the retirement withdrawals “age” beyond the six month means test look back.
On the other hand, if the debtor chooses to file Chapter 13 bankruptcy the pre-filing pension withdrawals will not be used to calculate available income to fund a Chapter 13 plan. In other words, the pension withdrawals will not increase the plan payment amount.
On the other hand, if the debtor chooses to file Chapter 13 bankruptcy the pre-filing pension withdrawals will not be used to calculate available income to fund a Chapter 13 plan. In other words, the pension withdrawals will not increase the plan payment amount.
Monday, October 25, 2010
Sunday, August 1, 2010
Means test calculations figures
Means test calculations figures
http://www.irs.gov/individuals/article/0,,id=96543,00.html
http://www.justice.gov/ust/eo/bapcpa/20100315/bci_data/median_income_table.htm
http://www.irs.gov/individuals/article/0,,id=96543,00.html
http://www.justice.gov/ust/eo/bapcpa/20100315/bci_data/median_income_table.htm
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