11 U.S.C. § 707; Means Test; Abuse
In re Walker, 2006 Bankr. LEXIS 845, Case No. 05-15010 (Bankr. N.D. Ga. May 1, 2006)(Drake)
Debtors filed a Chapter 7 Petition, with their means test reflecting no presumption of abuse. The Statement of Intention indicated that debtors would surrender their residence and one vehicle, each of which were subject to secured claims. The US Trustee, after reviewing the petition, filed a motion to dismiss for abuse pursuant to § 707(b)(1). The trustee’s motion was based upon the fact that the debtors included in their means test calculations the installment payments for the secured property they intended on surrendering.
The court held that the installment payments to secured creditors may be included in the means test calculations. Section 707(b)(2)(A)(iii) provides that a debtor may deduct amounts that are “scheduled as contractually due to secured creditors in each month of the 60 months following the date of the petition.” The purpose of the means test is to provide a snapshot of the debtors’ financial condition as of the filing date, and as of that date, based upon the plain meaning of the statute, the payments at issue were “contractually due to secured creditors.” Therefore, it was appropriate to include them in the means test calculations, even if they stated an intent to surrender the secured property. Had Congress wanted to add a requirement that the secured debts be reaffirmed in order to be included in the calculations, they would have done so.
The court noted other examples of the BAPCPA’s lack of precision in examining a debtor’s true financial condition. Debtors are required to use an average of six months’ income even though they may have been unemployed for a significant portion of that time. The applicable expenses are established by IRS national and local standards, rather than the debtor’s actual expenses. Additionally, under the US Trustee’s reasoning, the means test could not be accurately completed or examined until after the secured property was surrendered. Debtors also may be persuaded to retain property they cannot afford or do not need for the sole purpose of satisfying the means test, contrary to Congressional intent of protecting debtors from unwise reaffirmation agreements.
Finally, the court noted that even if a debtor satisfies the means test, the US Trustee still has the right to seek a dismissal under §707(b)(3), which provides that the court may consider the totality of circumstances of a debtor’s financial situation in determining abuse.