Thursday, August 9, 2007

Another SD Fla Means Test Decision Sides with Wilson and Hartwick

In a previous post on August 4, 2007, I reviewed the Benedetti decision from the Southern District of Florida which sided with the Wilson and Hartwick line of cases and held that the Debtor was entitled to deduct her obligations on a motor vehicle lease in calculating the "means test" even though she intended to surrender the vehicle and would not be making the lease payments. In re Benedetti, ___ B.R. ___, 2007 WL 2083576 (Bkrtcy.S.D.Fla.(Cristol, J.).

On August 8, 2007, the Bankruptcy Court for the Southern District of Florida issued another case siding with this line of cases in In re Morgan, Case No. 06-11263-BKC-AJC (Bankr.S.D.Fla. August 8, 2007)(Cristol, J.). Morgan involved an over-median income debtor whose real property was not subject to a mortgage. The Debtor claimed a deduction for mortgage/rent under the Local Standards even though he did not actually have a mortgage payment. The chapter 13 Trustee argued that the Debtor was not entitled to this deduction as he did not actually have a mortgage payment. In accordance with the Wilson and Hartwick line of cases, the court agreed with the Debtor and held that the plain meaning of the phrase "applicable monthly expenses" found in section 707(b)(2)(A)(ii)(I) of the Bankruptcy Code entitled the Debtor to deduct from CMI the Local Standard allowance without regard to whether the Debtor actually pays a housing/rental expense. The court noted the distinction in the use of the words "applicable" and "actual" as used by the Bankruptcy Code. The court found that section 707(b)(2)(A)(ii)(I) provides that a debtor's expenses "shall be" the "amounts specified" in the Local Standards and that the statute makes no provision for reducing the specified amounts to the debtor's actual expenses.

The court noted that while few courts have addressed the Local Standard deduction with regard to housing, that bankruptcy courts across the country have faced the same issue with regards to the transportation deduction under the Local Standards and noted the split in authority. The court cited with approval other housing expense cases of In re Farrar-Johnson, 353 B.R. 224 (Bankr.N.D.Ill.2006) and In re Naslund, 359 B.R. 781 (Bankr.D.Mont.2006).
Post a Comment