Bankruptcy Means Test: New Case Allows Three Vehicle Operating Expenses

06 Aug Bankruptcy Means Test: New Case Allows Three Vehicle Operating Expenses

If you’re considering filing bankruptcy, you probably already know how important it is to properly complete Form B22, the bankruptcy means test, which determines whether you are eligible to file chapter 7, or whether you must instead file a repayment chapter 13 case. The means test also affects how much you must pay into a chapter 13 plan each month towards repaying your debts.

Conventional wisdom has long held that no matter how many motor vehicles you have in your household, you are limited to claiming operating expenses for only two vehicles on the means test form. Now there is good news for debtors, as a Florida bankruptcy court has ruled that expenses can be claimed for any number of vehicles in the household, so long as such vehicles are reasonably needed by the family.

In re Johnson, case no. 8:11-bk-00810-MGW (Bky.M.D.Fla. July 8, 2011), allowed the debtors to claim the standard $239.00 operating expense allowance for three vehicles, as long as the three vehicles were necessary to the family, as well as an extra $200.00 operating/ownership expense for third vehicle. This would allow the debtors to “pass” the means test and remain in chapter 7, rather than being forced to convert to chapter 13.

The debtors in Johnson owned three vehicles, two of which were subject to loans. The third was owned free and clear of liens, and it was used by their teenage daughter to assist in transporting her and her siblings to school, medical appointments and other activities.

The U.S. Trustee objected to the debtors including all three vehicles’ operating expenses on the means test in the amount of $239.00 each, pointing out correctly that the means test form only provides for two vehicles, which in turn implied that only one vehicle could be claimed for each of the two married debtors.

The debtors countered that the U.S. Supreme Court’s recent ruling in Ransom v. FIA Card Services, 131 S.Ct. 716 (2011), mandated a broad reading of theterm “applicable number of vehicles” in the means test form. If they owned and operated three vehicles, they argued, then the applicable number of vehicles for which an operating expense could be claimed was indeed three, regardless of the language appearing on Form B22. It was, after all, only a form.

The court agreed and allowed an operating expense for all three vehicles, as long as it could be shown that all three cars were reasonable necessary for the debtors to have in their household.

If other courts follow this reasoning, it will be easierfor chapter 7 debtors with more than two vehicles in their households to pass the all-important bankruptcy means test.

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Craig Andresen is a Minnesota bankruptcy attorney who represents both consumers and small business owners in chapter 7 and chapter 13 cases. With thirty years experience, Mr. Andresen is a frequent speaker on the topics of stopping mortgage foreclosures, and stripping off second mortgages in chapter 13. His office is located in Bloomington just across the street from the Mall of America. Call his office at (952) 831-1995 for a free consultation about protecting your rights using bankruptcy.
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