A Connecticut Bankruptcy Judge has recognized that a person in Chapter 7 may deduct car expenses on the Means Test even if there is no car loan without triggering a presumption of abuse in Bankruptcy. Â Now there’s a mouthful, but what does it mean?
The Means Test was devised by the credit industry to ‘catch’ consumers filing Chapter 7 bankruptcy when they could otherwise ‘pay’ at least some of their debts in a Chapter 13 case. Congress adopted the process of keeping consumers as slaves to their debt. Â One long-standing assumption of that means test calculation was that car expenses could only be deducted from income if there was a car loan. Â That is no longer the case in Connecticut.
Judge Albert Dabrowski has ruled that there are really three ways of acquiring a car. Â The first two have been accepted by the credit industry and foisted on Congress; one, by car loan (borrow the money) and two, by car lease (or ‘fleece’ as some call it). Â The third way is the time-honored method long forgotten by those in power – by saving up for it. Â (Surprise!) Â This was previously recognized in Chapter 13 cases.
So now, if you are filing for bankruptcy in Connecticut, you may deduct vehicle expenses even if you do not have a car loan or lease because you could be budgeting for it by saving up. Â How cool would it be to pay for your next car IN CASH!
Gene Melchionne is a bankruptcy lawyer covering the entire State of Connecticut. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.
