Bankruptcy’s Means Test and the New IRS Allowances

Yesterday I provided a brief overview of the Means Test and its three parts. IRS Allowable Living Expenses Standards are critical for the 10% of bankruptcy filers who have above-median income. Those standards just changed. (IRS allowances update.)

The new standards create a new minimum amount for out-of-pocket health care expenses (what had they been thinking; that we didn’t have any before?), fixes one standard for food & clothing (this standard used to vary by income, so that richer folks had a higher allowance), allows cellphone costs (welcome to the 21st Century), allows equal allowances for owning a second vehicle (somehow a second vehicle used to be thought of as costing less), decreases allowed expenses for operating a vehicle, slightly increases residential expenses, and allows a new public transportation allowance (um, hey, didn’t people take buses before?)

The new IRS standards are effective 10/01/07 for IRS matters, but the United States Trustee says it will apply the standards to bankruptcy cases filed after 01/01/08, and the US Trustee’s website still has the old IRS standards. There may be legal challenges to this delay, as it seems to violate 11 USC 707(b)(2)(A)(ii)(I)’s requirement that the standards used in bankruptcy cases are those “in effect” on the filing date. Other arguments include whether the IRS has authority to change bankruptcy law without public hearings