Bankruptcy Cases in the News
Judge Walter Shapero recently issued a written opinion which is instructive to higher income folks considering bankruptcy and their legal counsel. In In re: Rebecca Weinert, the debtor had a monthly gross income which was above the “means test.” Under these circumstances, the debtor would ordinarily not be entitled to relief under Chapter 7 but required a Chapter 13 plan. However, debtor argued that her monthly income, when reduced by monthly payments to her employer to repay personal savings plan loans, was under the local mean income and qualified for relief. Judge Shapero disagreed, ruling that her case would either have to be dismissed or converted to a Chapter 13 for a repayment plan. In his analysis, the Judge stated:
“A case can be dismissed for abuse under §707(b)(1). Abuse is presumed by application of the formula in §707(b)(2)(A)(i), part of which takes into account a debtor’s “currently monthly income” and “monthly expenses.” Incident to that determination, Debtors are required to file the means test form, which shows current income and expenses and the calculations that determine whether or not the presumption arises. “Monthly expenses” are defined in §707(b)(2)(A)(i)(I), (II), (III), (IV), and (V). However, “current monthly income” is not itself defined in §707(b)(2), but the means test form utilizes income as set forth in Schedule I for these purposes. If a presumption of abuse arises it may only be rebutted by “demonstrating special circumstances,” such as are defined and determined under §707(b)(2)(B)(i), (ii), (iii), and (iv). If a presumption of abuse does not arise or is rebutted, the case may still be dismissed for abuse. In determining abuse in that circumstance, the Court considers (1) whether the case was filed in bad faith and (2) whether the “totality of the circumstances” of the debtor’s financial condition demonstrates abuse.”
Turning his analysis then to whatever the loan repayment was “another necessary expense,” he concluded that it was not. The repayment was neither a condition of employment, nor did it arise from some unique circumstances. While it was beneficial to debtor to make the repayment to avoid taxes and penalties on an early distribution, the repayment was not mandatory and therefore did not qualify as an appropriate deduction for the calculation of disposable income. As such, the §707(b)(2) trigger for presumption of bankruptcy abuse was pulled, which equals disqualification from eligibility. The court then went on to determine whether there were any unique circumstances to rebut the presumption of abuse. Finding none, the debtor was give the option to dismiss her case or convert to Chapter 13. If you or a loved one are considering whether bankruptcy relief would be helpful for you, please make sure to consult a qualified debt relief agency/attorney. Guy Vining is available for a no-charge initial bankruptcy consultation and would be pleased to meet with you.
Guy Vining, a bankruptcy attorney, in metro-Detroit, maintains his office in Taylor, Michigan where he serves the downriver communities of Monroe, South Rockwood, Gibraltar, Brownstown Township, Grosse Ile, Woodhaven, Trenton, Southgate, Riverview, Allen Park, Lincoln Park, Dearborn, Dearborn Heights, Westland, Wayne, and Ecorse. If you or a family member of friend would like a no-obligation no cost consultation/financial analysis, just call or E-mail Guy Vining of Vining Law Group, P.L.C to schedule a meeting.]