Saturday, August 4, 2007

Means Test Decision - SD Fla Case Sides with Wilson and Hartwick

In a previous post on April 10, 2007, I reviewed In re Sawdy, ___ B.R. ___, 2007 WL 582535 (Bkrtcy.E.D.Wis)(Pepper J.) in which the court concluded that the debtors were entitled to deduct on their Form B22C "means test" the IRS Local Standard expense amount for vehicle ownership even though they own their vehicle outright and do not make monthly note or lease payments. The court noted that two distinct lines of decisions had emerged on this issue. One was represented by In re Hardacre, 338 B.R. 718 (N.D.Tex.2006) and In re McGuire, 342 B.R. 608 (Bankr.W.D.Mo. 2006), which held that a debtor cannot deduct an ownership expense for a vehicle he owns free and clear in both the chapter 13 and 7 contexts. The opposite position was adopted in the In re Wilson, 356 B.R. 114, (Bankr.S.Del.2006) and In re Hartwick, 352 B.R. 867 (Bankr.D.Minn.2006) cases which held that the debtor may deduct the vehicle ownership whether or not a debtor actually has a note or lease payment.

On July 13, 2007, apparently the first decision on this issue in the Southern District of Florida was issued in In re Benedetti, ___ B.R. ___, 2007 WL 2083576 (Bkrtcy.S.D.Fla.)(Cristol J.). The court sided with the Wilson and Hartwick position and held that the debtor was entitled to deduct her obligations on the motor vehicle lease in calculating the "means test" even though she intended to surrender one of the vehicle and would not be making the lease payments.

The court concluded that the application of the provisions of 707(b)(2) "involves an evaluation of the Debtor's financial condition on the petition date such that a post-petition surrender of the collateral is irrelevant and inconsequential. The means test is statutorily defined as a mechanism for determining whether a presumption of abuse arises in a Chapter 7 case, with reference to expenses 'as in effect on the date of the order for relief.'"
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