Massachusetts Means Testing Decision

18 Apr Massachusetts Means Testing Decision

Massachusetts Bankruptcy Judge Feeney recently held in the case of In re Guerriero, 2008 WL 321303 (Bkrtcy.D.Mass. 2008) that a debtor could deduct payments for secured property on their means test form even if they planned to surrender the property.

The Court agreed with a previous decision by Chief Judge Boroff reaching the same result. The United States Trustee had sought dismissal a Chapter 7 bankruptcy case based on an alleged presumption of abuse under 11 U.S.C. § 707(b)(2). The debtors had filed their bankruptcy petition with the intent of surrendering their home. Despite this, they took a deduction on their means test for their contractually due mortgage payments.

The U.S. Trustee argued that without this deduction their would be sufficient disposable income on the means test to create a presumption of abuse. The debtors countered that they were only following the dictates of the statute by deducting “amounts scheduled as contractually due to secured creditors” despite their intention not to actually make these payments.

The Court agreed with the debtors. The Court stated that “the deduction of secured payments due at the time of the petition filing-even if the debtor intends to eventually surrender the property-is consistent with the mechanical, discretion-void nature of the means test.” In other words, the Court applied the statute as written and not how it might have been written. The denial of the U.S. Trustee’s motion was without prejudice to the filing of a motion to dismiss based on the totality of the circumstances under 11 U.S.C. § 707(b)(3).

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