Massachusetts: Means Test Not Safe Harbor in Chapter 7
By Nicholas Ortiz, Boston Bankruptcy Attorney on Mar 30, 2009 in Chapter 13 Bankruptcy, Chapter 7 Bankruptcy
Massachusetts Bankruptcy Judge Rosenthal issued an opinion recently in the case of In re Boule, No. 08-43199-JBR (March 18, 2009). The United States Trustee moved to dismiss the case because the debtor’s income and expense schedules indicated that he had more than $900 left over each month to pay creditors. The debtor responded that, since he was below-median income and not subject to the means test, he was in a safe harbor and not vulnerable to dismissal based on abuse. The U.S. Trustee argued that not being subject to the means test (or “passing” it) was not a safe harbor, and that a consumer debtor was still subject to the totality of the circumstances test under Section 707(b)(3). The U.S. Trustee’s position was consistent with the prevailing view on the matter and the Court agreed, setting the matter for trial. The take-away from this is that any time a consumer debtor has the income to pay a substantial portion of his debts, he almost certainly will face objections in a Chapter 7. Most such debtors file Chapter 13 cases and pay back a portion of their debts via a manageable, court-administered repayment plan.
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