MEANS TEST TWEAKED, SCORE TWO POINTS FOR THE CONSUMER
The "Means Test" became law as part of the Bankruptcy Consumer Protection Act Of 2005. The test is mandated by the bankruptcy code including a long, vague and confusing explanation of exactly how to set up the test, which was left to the Office of the United States Trustee. The backbone of the test is derived from the Internal Revenue Code. The test has gone through more than a few changes as people in charge attempted to make the test fit the statute and has been subject to a number of court rulings both by the Bankruptcy Courts and the Courts of Appeal. Two (2) changes that have recently taken place are:
The Court of Appeals for the Fifth Circuit, the Appellate Court that Texas is subject to has recently ruled on whether or not a debtor is entitled to an "Ownership Expense" deduction when the vehicle is paid for. The Court ruled that a debtor is entitled to an ownership expense deduction regardless of whether or not there is a debt against the vehicle.
Is a debtor entitled to an additional deduction with a vehicle that has high mileage? Obviously a car that has low mileage costs less to operate than a vehicle with high mileage. The Office of the United States Trustee has determined that a debtor is entitled to an extra deduction for vehicles that have over 200,000 miles on them. Exactly how much of a deduction is unclear at this point and is apparently determined on a case by case basis.
The result of the foregoing is that the bar has been lowered to some extent as to whether or not a debtor can be eligible to file a Chapter 7 bankruptcy rather than a Chapter 13 bankruptcy.