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Just visited a lawyer and he stated the following about the means test:

"Any secured debt not reaffirmed, is not considered in the means test. Thus since most of your debt is secured, you are only eligible for a Chapter 13."

Is this true? I got a funny feeling when his fees for a 7 is $900 and his fees for a 13 is $4400.


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I think it depends on what circuit you are in. There is case law developing on this. Technically, if you are not going to keep whatever secured asset you are referring to, it doesn't make much sense to include it in the means test, does it? I'll try to look it up later today and give you some sort of guidance. I think this is one of those contested questions that has resulted in a circuit split.

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The majority of courts have adopted this general rule: When calculating the means test, allowing the deduction of secured payments due at the time of filing the petition from income for purposes of the means test, regardless of the debtor's intent regarding the secured property, was consistent with the mechanical language of the statute.

In re Rudler, 388 B.R. 433, May 23, 2008, 1st Cir.

“Regardless of a debtor's intention to surrender property, the fact remains that payments are "contractually due" under 11 U.S.C.S. § 707(B)(2)(2)(A)(iii). And those amounts remain contractually due, regardless of whether said payments will actually be made, whether the debtor will reaffirm the debt, or whether the debtor will surrender the property to the secured party….

…Courts may only delve into what Congress intended where the statute is ambiguous, or where a plain reading would result in an absurd result or one demonstrably at odds with congressional intent. When the statute's language is plain, the sole function of the courts, at least where the disposition of the text is not absurd, is to enforce it according to its terms….”

This decision was cited and followed in the 1st Circuit (In re: Burbank, 2009), 4th Circuit (In re Quigley, 391 B.R. 294, 2008), and the 11th Circuit (In re Castillo, 60 Collier Bankr. Cas. 2d (MB) 1188).

Here’s more…

In re: Castillo:

“The Court disagrees with this analysis because § 707(B)(2)(A)(iii)(I) makes no reference to a debtor's Statement of Intention. It only allows for deductions for debt scheduled as contractually due to secured creditors. Therefore, "as a matter of statutory construction the Statement of Intention cannot be morphed into the 'Schedules.'" In re Anderson, 383 B.R. 699, 707 (Bankr. S.D. Ohio 2008). Moreover, "regardless of a debtor's intention to surrender property, the fact remains that payments are 'contractually due. In re Rudler, 388 B.R. 433, 438 (B.A.P. 1st Cir. 2008).”

The In re Anderson case (6th Circuit) spells out the two sides of to the issue:

“There are two main lines of cases regarding whether pursuant to § 707(B)(2)(A)(iii)(I) debtors can deduct secured debt for collateral proposed to be surrendered. The majority line of cases is exemplified by In re Sorrell, 359 B.R. 167, 183-87 (Bankr. S.D. Ohio 2007). Sorrell was a Chapter 7 case which addressed this issue in the context of determining how such debts should be treated under the "means test" for determining whether Chapter 7 cases should be dismissed or converted to Chapter 13. Sorrell concluded that under § 707(B)(2)(A)(iii)(I) secured debt expense can be deducted for vehicles being surrendered. Sorrell relied upon the plain language of the statute in arriving at that conclusion. Sorrell and the other cases in the majority essentially take a snapshot of the debtor's schedules on the petition date and conclude that "scheduled as contractually due to secured creditors" unambiguously refers to secured debts that are contractually owed by the debtors to secured parties as of the petition date….

…The other line of cases on this issue is exemplified by In re Burden, 380 B.R. 194 (Bankr. W.D. Mo. 2007). Burden summarized the minority position as follows: ‘The term "scheduled" in § 707(B)(2)(A)(iii)(I) has a bankruptcy-specific meaning which refers to how the debt is listed in a debtor's schedules and statements. Thus, if the debtor has indicated an intent to surrender the debt on his Statement of Intention, then the debt is not "scheduled as contractually due," and the debtor cannot deduct the payment on that debt on the means test. The minority asserts that its approach better effectuates BAPCPA's goal of ensuring that those debtors who can pay their debts do so….'

This court finds the holding of Sorrell and of the other cases in the majority on this issue to be more persuasive. Without repeating the principles of statutory construction exhaustively reviewed and applied in Sorrell, the court notes that the Bankruptcy Code and Bankruptcy Rules specifically differentiate between "schedules" and "statements" and in referencing "scheduled" secured debt in § 707(B)(2)(A)(iii)(I) the most logical construction of that phrase is to construe it as meaning contractually incurred debt scheduled on "Schedule D - Creditors Holding Secured Claims," which would be debt that is owed by the debtor on the petition date that is secured by collateral.”


Okay, now the minority and majority positions are spelled out. Most circuits have adopted the “plain meaning of the statute” interpretation of the means test, meaning that secured debts contractually due on the date of filing, regardless of future intent to surrender, are included in the means test calculation.

You are within the 6th Circuit in Kentucky. Ohio is within the 6th circuit. In re Anderson, and a handful of cases that followed, adopted the plain meaning interpretation along with the majority of the courts across the country. Curiously, no cases from Kentucky, but unless the Kentucky districts have spoken on this issue (I see no case law), Kentucky courts have or likely will adopt the plain meaning interpretation. Thus, you should be able to use all secured debt contractually due at the time of filing, regardless of future intent to reaffirm or surrender, in the means test calculation.

This is not legal advice of any kind. Just a starting point for you. Good luck.

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