The bankruptcy means test was not thrown into the toilet in the Lanning decision. A District Court in the Ninth Circuit has recently ruled that the Supreme Court decision in Lanning does not mean that the bankruptcy means test can be completely ignored (click here to see a blog post I wrote about Lanning).
In the case of Michael and Stefanie Thiel, the District Court ruled that their Chapter 13 could not be confirmed because their bankruptcy means test results required them to pay back $1,102.70 times sixty months to their unsecured creditors. In their schedule J, these bankruptcy debtors showed that they could not afford to pay this amount because they spent $1,290 per month on gas and insurance for their vehicles.
The Court noted that their bankruptcy attorney made no attempt to take any kind of additional fuel allowance on the means test. Instead, their bankruptcy attorney argued that the means should be ignored because the debtors just could not afford that Chapter 13 payment that was required by their means test results.
The District Court ruled that simply arguing that actual disposable income is less than what the means test requires to paid into the plan will NOT relieve a debtor of the required payment.
In Lanning, the debtor had an unusual lump sum income payment that she would never receive again. As a consequence, the means test income was distorted. In her case, the Supreme Court ruled that a bankruptcy court can depart from a mechanical approach in applying the means test.
While this District Court decision has no binding effect on bankruptcy debtors in Northwest Georgia, I think the rationale is persuasive.
Unfortunately, the means test is still mean. However, any person who is considering bankruptcy should not simply fill out some form on the internet and be discouraged away from filing bankruptcy.
I recently met with client from Dalton, Georgia who was convinced that they would not be able to file bankruptcy because they looked on the internet and concluded it would not be possible. Fortunately, they had a friend who insisted that the meet with me. In their case, we were able to take a deduction for the daycare expenses which resulted in a Chapter 13 payment that worked for them.
Your bankruptcy attorney might be able to find ways to reduce the harsh results. You won’t know for sure until you sit down with your bankruptcy attorney and allow him to go through every debt and every expense you have.