Chicago Bankruptcy Judge Says Chapter 13 Projected Monthly Income is based on Actual Income and Expense

26 Jan Chicago Bankruptcy Judge Says Chapter 13 Projected Monthly Income is based on Actual Income and Expense

Chapter 13 can be very confusing.  That’s because it was written very poorly.  Judges all over the country decide cases differently, even when they read the same law. 

One of the most difficult questions in chapter 13 for debtors is to figure out how much they have to pay evey month under their plan.  Is this to be decided based upon how they were doing in the last six months under the complex means test form?  Or should they be guided by their present income and expenses?

Judge Eugene Wedoff just issued his opinion in Richard and Linda Johnson addressing this question.  He decided that the Debtors’ “projected monthly income” had nothing to do with the debtors’ “current monthly income” over the prior six months.  Instead, he considered the Debtors’ actual income and expenses expected in the future.  In Johnson, this was considerably less than the Debtors had earned previously.  As a result, Debtors’ chapter 13 plan was upheld even though they proposed to pay less than they would have under the “means test” form.

What does this mean to you?  These days, many debtors are making less than they did before.  If you have lost a job, or hours, or are working less, you may still be able to confirm a plan under chapter 13 based on your current income level even if you could no longer afford to pay what you would be required to pay under the “means test.” 

Remember, there are many interpretations in chapter 13.  Many courts interpret the law completely differently than did Judge Wedoff, particularly in courts in the 9th Circuit covering the West Coast and Hawaii.  So get a competent bankruptcy lawyer from the attorneys here, on the Bankruptcy Law Network, to help you decide what will work for you in Chapter 13 where you live.

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Jay S. Fleischman is a bankruptcy lawyer with offices in Los Angeles and New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.
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