24 Sep Will the Trustee Object to My Bankruptcy if My Monthly Rent Exceeds the IRS Standards?
One of the practical problems caused by the means test arises from the imposition of IRS derived budget figures on debtors who are subject to the means test. Specifically, a common complaint I get from my client is that the IRS housing standards frequently have no relationship to real life housing costs. Further, even if a debtor wanted to move, the cost and inconvenience of moving and problems finding new housing leave most debtors stuck where they are currently.
I recently dealt with a Chapter 13 case where my client’s monthly rental cost was $1,677, whereas the IRS/means test standard for a family of two in Fulton County, Georgia was less than $868.00 per month. How did I deal with the trustee’s objection?
In a Chapter 13 case, one of the bottom line figures generated is on Line 58 which is the “Monthly Disposable Income Under Section 1325(b)(2). Multiplied this figure by 60 (in a 5 year Chapter 13 plan) and you get the pool of funds available for unsecured creditors.
In my case, I multiplied the monthly plan payment by 60, then subtracted out the attorney’s fees payable in the plan, the secured debts and the trustee fees. The remaining balance was more than the pool of funds. Therefore, I was able to argue that even though our real life housing costs exceeded the IRS guidelines, the unsecureds would get more under my plan than they would using a means test budget.
I also argued that as a practical matter, my client was in the middle of a residential lease, and that she and her husband lived in a location convenient to their work. Moving would not be practical because there was no alternative housing in the area that could be had for $868 and given their credit limitations (caused by the bankruptcy filing itself), actually finding replacement housing would be next to impossible.
I sensed that the trustee was most convinced by the “pool of funds” argument and she withdrew her objection and confirmed my case.
by Jonathan Ginsberg, Atlanta bankruptcy lawyer
Jonathan Ginsberg, Esq.
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