Theme Song for a Fresh Start

Posted on March 15, 2012 by Lex Rogerson

By Columbia – Lexington Bankruptcy Attorney Lex Rogerson

Stan Rogers’ shanty of a marine recovery exhorts us to rise again.

I’ve got to admit a weakness for Irish music.  Recently I was listening to a collection of songs sung by Liam Clancy, the last of the once-famous Clancy Brothers, and heard one called “The Mary Ellen Carter.”  Written by the late Canadian singer-songwriter Stan Rogers, it’s about a shipwreck and its aftermath.

In Rogers’ telling, the owners collect the insurance and forget about the vessel.  But the spirited men who lived and worked aboard her every day refuse to let her “crumble into scale.”  They dedicate themselves to a long, exhausting salvage operation, which is reaching its climax as the song ends.

The rousing yarn of this boat and the men who loved her is a thinly veiled allegory for the struggle of ordinary people to overcome extraordinary reversals.  That becomes clear in the final stanza and chorus:

And you, to whom adversity has dealt that final blow,                                                                   With smiling bastards lying to you everywhere you go,                                                                 Turn to, and put out all your strength of arm and heart and brain,                                                And, like the Mary Ellen Carter, rise again!

 Rise again, rise again; though your heart it be broken, and life about to end,                                No matter what you’ve lost, be it a home, a love, a friend.                                                              Like the Mary Ellen Carter, rise again.

When I hear this song, I can’t help thinking about my courageous and determined bankruptcy clients.  Many of them have been through experiences I can’t fully imagine – illness, unemployment, divorce, business failure – but instead of feeling sorry for themselves, they’ve decided to do something positive and start over.  And, while enduring the often nasty and degrading tactics of creditors and collection agencies, they’ve made the considerable effort the bankruptcy laws require to get a fresh start.

That’s one of the big reasons I’m proud to represent these fine people.

Click here to hear the ”The Mary Ellen Carter” performed by Stan Rogers or Liam Clancy.

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Pre-Bankruptcy Planning for Tax Claims

Posted on March 9, 2012 by Lex Rogerson

By Columbia – Lexington bankruptcy attorney Lex Rogerson

Consider these sophisticated strategies to get maximum benefit of your bankruptcy for past due taxes

For some of our clients, the most important service we render is advice about how to prepare themselves to get maximum benefit from bankruptcy, including advice on timing, asset transactions, and which debts to pay while waiting to file.  Strategies like this are probably most important as applied to tax debts.

Pre-bankruptcy tax strategy can be one of the most complex tasks handled by a bankruptcy attorney.  As we’ve stated in previous posts, don’t consider the information on this blog as legal advice.  You should not try any of these steps without customized advice from a lawyer – and not just any lawyer, but specifically one who concentrates in bankruptcy law.

 1st: You may need to wait to file bankruptcy.

 As we’ve discussed in earlier posts, most forms of income tax become dischargeable after specific periods of time.  Much of pre-bankruptcy tax strategy involves figuring out precisely when each of your tax liabilities will become dischargeable and waiting the necessary time before filing bankruptcy.  If you have to file quickly for some reason, we at least want to file when the maximum amount will be discharged as is possible under the circumstances.

2nd:  File past-due returns as soon as possible to start the clock running.

If you think you can’t pay your income tax for a given year, it may be tempting to avoid the issue altogether and not file your tax return.  But irrespective of any other rules, you cannot discharge a tax debt until two years after the pertinent tax return has been filed.  Your tax adviser may be able to advise you how to deal with the IRS or other taxing authority during those two years , but if you are going to try to discharge the taxes, get the returns filed as soon as possible.

3rd:  While you wait to file your bankruptcy case, designate any tax payments to the more recent tax years instead of older ones.

Because earlier years’ income tax liabilities are more likely dischargeable, you want to try to stay current on your most recent tax debts.  If you make any payment on past due taxes, then to the extent possible, include express instructions that the IRS apply the payment to a specific year’s liability – the most recent year for which you have liability.

4th:  Avoid any appearance of tax fraud or tax evasion, and whenever possible, pay withholding taxes first.

Simply put, you can never discharge any taxes related to fraud, fraudulent tax returns, or tax evasion.  Don’t do anything to suggest these kinds of illegal behavior.  If you have any doubt, talk to a knowledgeable tax accountant or attorney.  If you own or have a managing role in a business that has employees, your responsibility for any unpaid withholding taxes cannot be discharged.  So either try to avoid them from accruing or focus your resources on paying them off, because they will have to be paid either after your Chapter 7 case or as a priority debt during your Chapter 13 case.

5th:  Beware of tax liens.

Tax lien claims have to be paid in full in Chapter 13, with interest, and they continue to encumber anything you own after a Chapter 7 discharge.  So try to avoid having the taxing authority record a tax lien against you—admittedly sometimes easier said than done.  Or if that is not possible, at least refrain from building up equity in possessions or real estate.  Tax liens attach to literally everything the taxpayer owns, including property that is exempt from other creditors and from bankruptcy trustees.  So any built up equity just increases what you will have to pay to the taxing authority on debt you might otherwise been able to discharge completely.

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Study Finds Bankruptcy “Reform” a Costly Failure

Posted on February 23, 2012 by Lex Rogerson

Written by Lexington /Columbia Bankruptcy Lawyer Lex Rogerson

If the lending industry lobbyists who pushed Congress into the 2005 bankruptcy law amendments wanted to increase the amount of money creditors receive in bankruptcy, they failed completely. But they succeeded in driving up the costs to consumers and wreaking havoc on the bankruptcy system.

 Those are the findings of a definitive national study released in December 2011.  Its goal was to measure the effects of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), passed by Congress after a decade of lobbying and tens of millions in campaign contributions by lending interests.

 A joint project of the American Bankruptcy Institute and the National Conference of Bankruptcy Judges, the study was headed by University of Maine law professor Lois R. Lupica.  The researchers collected data from more than 11,000 consumer bankruptcy cases, complemented by surveys and focus groups composed of bankruptcy judges, trustees, and lawyers.

 The Primary Findings

 The authors found BAPCPA resulted in “no statistically significant difference . . . in distributions to unsecured creditors in Chapter 7 and Chapter 13 cases.”  In fact, the percentage of allowed claims that such creditors received “modestly declined” in Chapter 13 from 29.5% before the law changed to 26.4% afterward.  In Chapter 7 asset cases – those few Chapter 7′s where trustees distribute funds to creditors – the average distribution dropped from 10.4% to 5.1%.  The researchers concluded these decreases were minimal and resulted from economic factors, not the new rules.

 As a more substantial effect, the burdensome paperwork requirements and red tape of BAPCPA have driven up lawyer fees around the country.  In Chapter 7 no-asset cases – where creditors receive nothing, as they do in the great majority of such cases – fees increased everywhere, ranging from 10% in Vermont to 90% in Montana.

 By comparison, in successful Chapter 13 cases, where the debtor receives a discharge, fees rose in every state except Alaska and Wyoming.  In Idaho, Chapter 13 fees more than doubled.

 In South Carolina, Chapter 7 fees increased by a modest 22%.  But in successful Chapter 13 cases, Palmetto State debtors faced a hefty 66% rise.

Nationwide, the “total direct access costs,” including attorney’s fees, filing fees, and the cost of required educational courses, were up 27% for successful Chapter 13′s and 51% for no-asset Chapter 7′s.

The study also highlighted the significant toll the new requirements have taken on the bankruptcy system.  Some lawyers, faced with increased work on each case and fee limits imposed by either courts or the market, have been tempted to take short-cuts that could impair the quality of their representation.  And Chapter 7 trustees, whose fee of $60 for a no-asset case has not increased since 1994, have been forced to subsidize their trustee work from other areas of their practices.

Unintended Consequences

Professor Lupica noted the irony that BAPCPA, which was intended to ensure that debtors who have the resources to pay creditors would have to do so, helps high-income debtors to lower or avoid repayment obligations through a means test that allows expense deductions for high-dollar homes and cars.  In contrast, low-income consumers, who may need relief most, may be priced out of the bankruptcy system.

Click here for the complete study.

Who Speaks for You?

If you are a South Carolina voter with debt problems, this classic special-interest law is making your life more difficult right now (as if you needed that).  You may want to know how your representatives in Congress cast their votes back in 2005.

Of those members of the current delegation who were in office then, three voted for BAPCPA: Sen. Jim DeMint, Sen. Lindsay Graham, and Rep. Addison (Joe) Wilson.  One, Rep. Jim Clyburn, opposed the bill.

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Debts That Survive Bankruptcy: Domestic Relations Obligations

Posted on February 3, 2012 by Lex Rogerson

confused domestic obligations in bankruptcyWritten by Lexington/Columbia Bankruptcy Lawyer, Lex A. Rogerson, Jr.

Congress has declared that debtors usually cannot get rid of domestic (family court) obligations in bankruptcy.

When Chase or Wells Fargo extends credit, they know there is a risk that the borrower will not be able to repay the debt.  They continue to make loans because, as a matter of business judgment, the interest and fees they charge make these transactions worth the risk.  But domestic creditors – spouses, former spouses, and children of the debtor – never get to make that choice, and the effect of non-payment of a domestic obligation is usually much more damaging than non-payment of a commercial debt.

Whether a family court obligation is dischargeable depends on the type of bankruptcy the debtor files and the nature of the obligation. 

In Chapter 7, it’s simple: no domestic obligations of any kind are dischargeable.  As long as the obligation is written into a divorce decree, family court order, or separation agreement, it survives.

It’s different in Chapter 13.  Support-type obligations – alimony, child support, and other payments intended to support the spouse, former spouse, or child – are not dischargeable.  But other obligations, including property division and related payments, are dischargeable.  Sounds simple enough, right?  It isn’t.

First of all, what the decree or agreement calls the obligation doesn’t necessarily govern: it’s the real purpose that matters.  Something can be called “rehabilitative alimony” when it’s really intended to equalize the division of property.

In addition, lawyers who draft separation agreements and courts that issue divorce decrees often set out obligations with no indication of their nature or purpose.  Take for example the couple from Orangeburg, whose divorce decree contains a “hold-harmless” paragraph requiring the husband to pay three joint debts – with no further explanation.  Was the husband required to pay the debts (1) so the wife could maintain a reasonable standard of living, or (2) because he got most of the marital property, or (3) because his misconduct caused the breakup of the marriage?  With #1, it’s probably “in the nature of support” and therefore non-dischargeable.  With # 2 or #3, it’s probably dischargeable.  But it’s usually hard to tell for sure.

The problem doesn’t just arise with the allocation of joint debts. 

Lots of other common obligations don’t fall neatly into the property category or the support category.  These include requirements to pay the other spouse a sum of money, to pay his or her attorney’s fees, to keep a life insurance policy in force, to sign over the tax refund, or to deed over the marital home.

There are literally hundreds of court opinions deciding whether particular obligations are “in the nature of support.”  Not all reach consistent results.  So when we advise clients whether a domestic obligation in is dischargeable in Chapter 13, we are necessarily dealing in probabilities rather than certainties.

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Debts That Survive Bankruptcy

Posted on January 15, 2012 by Lex Rogerson

girl riding bikeWritten by Lexington/Columbia Bankruptcy Lawyer, Lex A. Rogerson, Jr.

In most cases, discharging debt is a major, if not the sole, reason for filing bankruptcy.  You file bankruptcy to get a fresh start and get on down the road of life.

While bankruptcy can discharge most debts, there are important exceptions that can affect your decision of what chapter to use – and, in some cases, whether to file bankruptcy at all.

Several provisions of bankruptcy law have the effect of keeping debts alive after bankruptcy, at least in certain respects.  The most obvious of these is section 523 of the Bankruptcy Code, which sets out the explicit exceptions to discharge.  Congress has made the policy judgment that people simply should not be able to wipe out 19 special kinds of debts.  The most common examples are alimony and child support, other domestic relations obligations, most taxes, student loans, government fines, and damages for injuring someone while driving under the influence.

Additionally, debts associated with certain kinds of misconduct can be non-dischargeable if the creditor raises the issue during the bankruptcy case.  These kinds of misconduct include mis-handling funds the debtor held in trust; intentionally injuring others or their property; or obtaining money, property, or credit by fraud or misrepresentation.  Courts have uniformly held a debt is fraudulent and non-dischargeable if the debtor did not intend to pay the debt when he incurred it.

Other bankruptcy rules mean that certain aspects of a debt can survive.  For example, with most secured debts, such as mortgages and car loans, the creditor’s lien on the collateral (e.g., the house or the car) survives or “rides through” a bankruptcy case.  If the debt is not paid, the creditor can foreclose or repossess when the bankruptcy case is over even though it cannot sue the debtor for money.  If the debtor wishes to keep the collateral, therefore, he must continue to pay the debt.

In some situations, the debtor may find it advantageous to reaffirm a debt.  The most common example is a car loan.  The bankruptcy code now says that if a debtor fails to reaffirm a car loan, the creditor can declare the loan in default even if the payments are current.  To avoid the risk that the creditor will repossess the car, my clients frequently chose to reaffirm, which means that particular debt is not discharged.

In a prior post, we explained which kinds of taxes can and cannot be discharged.  In future posts, we’ll discuss other kinds of debts that can’t be wiped out.  You can also check out this video put out by the U.S. Courts for an overview of this topic.

Photo Credit: Charleston Photographer Marissa DeMott of Hazel Eyes Photography.

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Avoiding Bankruptcy

Posted on December 10, 2011 by Lex Rogerson

avoiding bankruptcyWritten by Lexington/Columbia Bankruptcy Lawyer, Lex A. Rogerson, Jr.

Avoiding bankruptcy.  There can be a number of  potential reasons why someone with debt problems decides not to file bankruptcy.  Fairly often we’ll advise our Columbia area clients not to file – at least, not yet.

Sometimes it’s a matter of delaying for tactical reasons, and sometimes it’s just not a good idea flr that client.  But there are a few things someone in that position should do, and probably more things they should not do, whether or not they eventually decide to file.

  • Don’t run up unnecessary debt.  Sometimes paying off debts can seem so hopeless that a client says, “What the heck?  I’ll never get out of debt, so I might as well enjoy myself.”  This is dangerous thinking and can lead folks to incur debt they have no intention of repaying.  That’s not only dishonest, it can lead to the new debt being declared non-dischargeable if they do eventually decide to file bankruptcy.
  •  Pay mortgages and car loans first.  When creditors are hounding you, it can be tempting to pay the ones that are making life unpleasant now instead of the ones that can cause the biggest problems in the long run.  Unsecured debts such as credit cards, retail charge accounts, and finance company loans are usually dischargeable in bankruptcy, and it usually makes little difference whether they have been paid down after the debtor begins feeling financial distress.  By contrast, a mortgage company’s lien on a debtor’s home, or an auto lender’s lien on his car, is are usually affected relatively little by bankruptcy.  And keeping payments on these debts current can keep open some beneficial options if the debtor does decide to file.  So secured debts like these should almost always be the first priority.
  •  Pay non-dischargeable debts next.  Special debts like taxes, student loans, and family court obligations usually survive bankruptcy.  So if a client eventually decides to file, he’ll be glad if he has used whatever funds he had available to pay these kinds of debts rather than his dischargeable Visa card or Macy’s charge account.
  •  Don’t take out a second mortgage or home equity line to pay off debt.  The exemption laws allow all of us to protect a certain amount of the value of our homes – in South Carolina, the amount is a little over $53,000 per person.  So for most people, whose home has less than this amount of equity (or, if the home is jointly owned, twice this amount), unsecured creditors like the ones we were just discussing have no way to collect their debts out of the home.  But exemptions don’t apply against mortgages.  So if a debtor draws on the equity in his home by taking out a second mortgage or home equity line of credit (HELOC) in order to pay off debt, he is giving his creditors value out of his home that they could not otherwise reach – usually a very bad tactical decision.
  • Don’t give away or hide property.  When debt becomes a problem, some people decide they’ll simply put things they own into someone else’s name, wrongly believing this will protect the property.  This is dishonest, and it rarely works.  State laws allow creditors to recapture fraudulently transferred property from the recipient, and bankruptcy law allows a trustee to recover transferred property whenever the debtor does not get “reasonably equivalent value” in return.  What’s worse, once the trustee recovers the property, the debtor can’t claim an exemption in it, making the situation worse than before.  And to top it all off, this tactic can even prevent the debtor from receiving a discharge of any of his debts if he files bankruptcy.  So the cute trick of “selling” property to one’s brother-in-law for $50 can backfire big time.

 

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Bankruptcy Means Test and Falling Incomes

Posted on November 16, 2011 by Lex Rogerson

bankruptcy means test declining incomesWritten by Lexington/Columbia Bankruptcy Lawyer, Lex A. Rogerson, Jr. 

In the last two years, household incomes have generally fallen in South Carolina, pulling a cruel switcheroo on many distressed middle-income families at a time when the economy makes avoiding bankruptcy especially difficult.

An early but pivotal stage of the means test requires us to determine whether our clients’ household income is above or below the median family income for their family size here in South Carolina.  The answer can influence whether Chapter 7 is an option for those clients and how much and how long they must pay toward their debts if they file Chapter 13.

The bankruptcy laws provide for periodic updates to the median income figures we must use to compare against debtors’ income.  During normal times, when incomes are increasing, this rule helps debtors, much like a cost-of-living increase helps retirees.  But the decline in median incomes since their peak late 2009 has put a bankruptcy law squeeze on the most productive working people that compounds the economic squeeze they face every day.

In South Carolina the median income for a household of one, as applied beginning November 2009, was $39,191.  Two years later, it had fallen to $36,660, a decrease of 3.9%.  Middle-sized families showed larger declines, topped by three-person households, where income decreased by 8.1% during the same two years.  In early 2010, a couple from Irmo who had two children and an annual income of $65,000 were slightly below median.  Now they are above.

So the means test is now hitting harder on middle-sized families with middle incomes–the people who pay their taxes and play by the rules, and the segment of the population that has made America great.

The irony is that the means test can actually be beneficial for those in higher income brackets who file Chapter 13.  In calculating how much they must pay their creditors, they can deduct certain fixed amounts of allowed expenses–including auto, home, and medical expenses–that may be more than they actually spend.  We take advantage of that idiosyncracy when we represent upper-income clients, but it’s not fair to the folks in the middle.

Aside from the political lessons these facts teach, the practical lesson for those in financial distress is that it is even more important than ever to consult a bankruptcy lawyer who is experienced in applying the means test and thoroughly knows the complex legal precedents on how it works.

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What if I Fail the Means Test?

Posted on November 12, 2011 by Lex Rogerson

failing the means testWritten by Lexington/Columbia Bankruptcy Lawyer, Lex A. Rogerson, Jr.

If you “fail” the mean test, this results in a presumption of abuse.  You still may be able to file Chapter 7, but trying to do so becomes a little more complicated.

The bottom line of the means test is a dollar figure we call disposable income.  It’s the difference between our client’s household income (based on the last 6 months) and expenses (based on a hybrid of fixed allowances and actual expenses incurred).  If the figure is either negative (a deficit) or a surplus of less than $118 per month, no presumption arises.  If the figure is $195 or more, it is presumed that a Chapter 7 would be abusive.  If the figure is in between, abuse is presumed if the monthly disposable income, extended over five years, would pay 25% or more of the client’s unsecured debt.

If the presumption arises, there are two kinds of situations where the client might still receive a Chapter 7 discharge.  First, the Bankruptcy Code itself allows for a few special circumstances that can rebut, or overcome, the presumption of abuse.

The examples stated in the law are serious illness and military service, and there certainly could be others.  For example, the courts are about evenly divided whether the need to repay a non-dischargeable student loan is a special circumstance.  But all agree that any circumstance the debtor asserts must cause increased expenses or decreased income, and the client must not have any reasonable alternative about the change occurring.

Second, there can be factors that may not strictly fit the mold of special circumstances but that, practically speaking, make a finding of abuse unlikely.  The classic is unemployment.  If a couple had good income for most of the last six months, but one of them has been out of work for a good while, it would be surprising to see the US Trustee move to dismiss their case.

If the court ultimately finds it would be abusive for the debtors to remain in chapter 7, they have two alternatives.  They can convert to Chapter 13 and pay as much as possible toward their debts, usually for five years, or they can allow the case to be dismissed.  Fortunately, our clients so far  have avoided being faced with that choice.

When figuring the likely outcome of an abuse issues like these, it’s often as important to know the behavior of the various actors involved as it is to know the law.  For this reason, you should select a bankruptcy lawyer that is not only book-smart but concentrates on bankruptcy law sufficiently to be experienced in the trenches.

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What’s the Bankruptcy Means Test?

Posted on November 7, 2011 by Lex Rogerson

means testWritten by Lexington/Columbia Bankruptcy Lawyer, Lex A. Rogerson, Jr.

In the 25-plus years I’ve been helping people file bankruptcy here in the Columbia area, one of the biggest changes has been the advent of the means test, designed to limit the number of people who can take advantage of the simplest form of bankruptcy, Chapter 7.

In the late 1990s, when Congress first started trying to “reform” the Bankruptcy Code, one of its main focus areas was abuse of Chapter 7.  Representatives of banks and other lenders argued that many people file this form of bankruptcy, which does not require payments to unsecured creditors, when they could afford to pay a meaningful portion of their debts.

Since 1984, bankruptcy judges have had the power to dismiss Chapter 7 cases for “substantial abuse.”  Courts had developed a substantial body of law for determining when debtors were abusing the system.  But the lenders thought this standard gave judges too much discretion:  a judge in California might think a debtor with $150 more income than expenses should be granted a discharge, while another judge in Maine might dismiss the case of a debtor with $50 of surplus.  The lenders argued there should be a standardized test to determine when a debtor should be bounced out of bankruptcy based on his income.

The lenders won that argument in 2005, when Congress enacted the so-called Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”).  One of the most important provisions of BAPCPA was a mathematical formula to determine when a Chapter 7 case would be presumed to be abusive–a means test.

The means test is a sort of modified monthly budget, involving a calculation of income and–sometimes–expenses.  In my office, we carefully work through this formula with the client using information he provides.  It works like this.

On the income side, we begin by averaging the client’s household income over the last six months.  At that point, the test divides people into two groups.  If the household income is less than the median family income for households of the same size, the client “passes” the means test.  The court will not presume he would be abusing the system if he  files Chapter 7.

If the client’s income is above median, we then proceed to the expense side of the formula–what we call the full means test.  At this stage, we deduct certain expenses from the client’s income in order to determine whether he is operating at a significant surplus.

In some categories, such as the housing, household expenses, and automobile expenses, we can deduct fixed allowances, regardless of what the client actually spends.  In other areas, including taxes, support payments, child care, and telecommunications, we can deduct the actual amount of expense he incurs.

We then add up all these expense categories, producing a total that is a hybrid of allowed and actual figures.  If the client’s income exceeds this expense total by more than a certain threshold amount (calculated by another formula), it’s presumed a Chapter 7 would be abusive. That doesn’t mean Chapter 7 is automatically off limits.  It does mean we need to look carefully at any special circumstances that may allow the client to file Chapter 7.

The means test is important, but it’s also complicated.  It requires that the debtor’s attorney be informed and experienced in applying the rules.  In assisting those considering bankruptcy, we believe our clients have a right to expect us to guide them through the means test accurately and to advise them how the result affects their bankruptcy options.

 

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Chapter 13 and the Means Test

Posted on November 4, 2011 by Lex Rogerson

means test in bankruptcyWritten by Lexington/Columbia Bankruptcy Lawyer, Lex A. Rogerson, Jr.

The means test is found in Chapter 7 of the Bankruptcy Code and was primarily intended as a screening mechanism for Chapter 7 cases.  However, it plays a significant role in Chapter 13 as well.

To recap, in Chapter 13, the debtor files a plan for paying toward his debt for three to five years by making a single fixed payment each month through a Chapter 13 trustee.  The payments must be sufficient to catch up with any amount the debtor is behind on mortgages, to pay off car loans and other short-term secured debts in full, and to pay some dividend – usually a few cents on the dollar – on unsecured debts. The debtor is required to devote all his disposable income to the plan for the entire length of the plan.

When we run the means test, we first determine whether the client’s income is above or below median for his household size.  In Chapter 13, this question determines the “applicable commitment period” – how long the plan must last.  Those whose income is below the median for their household size must pay in for at least three years, but they can pay for up to five years if necessary to accomplish the purposes of the plan (for example, to catch up on the mortgage or to pay off past due taxes).  Above median clients must pay for five years, period.

For above median clients, the means test also affects the required plan payment, at least provisionally.  The bottom line of the means test is a dollar figure we call disposable income.  Usually the client must pay that much each month toward his unsecured debt, in addition to payments to secured creditors.  However, if future changes in income or expenses are known or reasonably certain, the plan payment can be adjusted to account for them.

The mechanics of the Chapter 13 means test vary somewhat from the Chapter 7 formula.  The most obvious example is that, in calculating Chapter 13 disposable income, the debtor can deduct  contributions to retirement plans such as 401(k)’s and payments on loans against such plans.  Chapter 7 debtors cannot.

So while the means test cannot exclude people from filing Chapter 13 as it sometimes does in Chapter 7, it can impact how much and how long our clients must pay.

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