Means Test on Old or High Mileage Cars

29 Sep Means Test on Old or High Mileage Cars

The Means Test is not a pretty part of the new bankruptcy filing requirements. Above Median Income filers need to compare their income and expenses against allowances based on the Internal Revenue guidelines for delinquent taxpayers. The new statute is not particularly clear on a number of issues, including two which concern the form’s three places where vehicle expenses might fit: The two IRS allowances for vehicles, one for ownership expenses one for operating expenses, and the catch-all “special circumstances” which is left to the Court’s discretion (for example, for excessive commuting costs needed to retain employment).

Courts are split on whether a bankrupt may use the IRS vehicle ownership allowance where there is no vehicle loan. They are also split on whether a bankrupt may also use the extra $200 allowance for a car older than six years or having more than 75,000 miles, found in the Internal Revenue Manual, as an addition to ownership expenses, to operating expenses, to special circumstances, or simply not at all.

This can decisively determine if your Chapter 7 case gets dismissed. Be sure your attorney knows the issues and the local decisions.

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L. Jed Berliner practices exclusively in consumer bankruptcy, foreclosure defense, and related consumer protection litigation such as credit card defenses and suing debt collectors. He established his Springfield, MA practice in 1988. Attorney Berliner is a regular and active contributor to the Bankruptcy Law Network, the Bankruptcy Roundtable, and the National Association of Consumer Bankruptcy Attorneys, three specialized consumer bankruptcy forums on the Internet, and is an informal mentor to regional practitioners. He is recognized by his peers as an expert in consumer bankruptcy issues. He thoroughly enjoys being rated "excellent" in his client surveys.

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