New Maryland Means Test Decision: In re Watson

16 Apr New Maryland Means Test Decision: In re Watson

The Chief Judge of the Maryland Bankruptcy Court, Duncan Keir, has just issued an opinion on several important Means Test issues in In re Watson, BR No. 06-1-1948 DK. A copy may be found on the Court’s website at http://207.41.17.84/frmAnswer.aspx?qTarget=Opinion.

This Chapter 13 case involved two Means Test questions: (1) Could a debtor with no liens on his cars claim both the ownership and operation expenses on the Form 22 for those cars? (2) Should the Court restrict its confirmation analysis to the final number shown on Form 22, or may it also take into account other evidence regarding the Debtor’s income and expenses at the time of confirmation.

(Of side interest is the fact that eCast filed an objection to confirmation, and aggressively participated in the briefing and argument of this issue through its local counsel. It appears that now that the Courts have allowed their “proofless” Proofs of Claim, eCast is now aggressively challenging Plans.)

After summarizing the arguments on both sides of the car expense issue, Judge Keir first rejected In re Hardacre, 338 B.R. 718 (Bankr. N.D. Tex. 2006). He found that the reasoning in In re Fowler, 349 B.R. 414 (Bankr. D. Del. 2006), was correct, and adopting its holding that a debtor may claim ownership expenses for paid for vehicles on Form 22.

He then addressed the relationship and conflict between “Disposable Income” (under the Means Test) and “Projected Disposable Income” (under I and J). After noting the split between the “Form 22 Applies” camp of In re Farrar-Johnson, 353 B.R. 224 (Bankr. N.D. Ill. 2006) and In re Alexander, 344 B.R. 742 (Bankr. E.D.N.C. 2006), and the “Form 22 is Just a Starting Point” camp of In re McGuire, 342 B.R. 608, 615 (Bankr. W.D. Mo. 2006) and In re Kibbe, __ B.R. __, 2007 WL 512753 (1st Cir. BAP, Feb. 20, 2007), he attempts to strike somewhat of a middle ground, stating:

The Court further holds “disposable income” as calculated on Form B22C is the presumptive “projected disposable income” for application of Section 1325(b)(1)(B). However, by evidence a party may demonstrate “a substantial change in circumstance such that the numbers contained in Form B22C are not commensurate with a fair projection of the debtor’s budget in the future.” Id. [In re Jass, 340 B.R.] at 418. If the presumption is rebutted, a projected budget based upon the evidence, reflecting projected earnings and projected reasonable necessary expenses will govern the determination of “projected disposable income” for purposes of confirmation of the plan.

The practical application of this decision is unknown. The confirmation hearing was continued to allow all parties to present evidence.

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Brett Weiss, Esq.

Brett Weiss, a senior partner at The Weiss Law Group, LLC, represents people and businesses in all phases of bankruptcy. He has experience in complex individual Chapter 7, Chapter 11, and Chapter 13 bankruptcy cases, and in Chapter 11 small business restructuring and reorganization. Mr. Weiss lectures nationally on bankruptcy issues. He has testified before the Federal Bankruptcy Rules Committee, the Consumer Financial Protection Bureau, and has twice testified before Congress on bankruptcy and credit issues. Brett Weiss is the co-author of Chapter 11 for Individual Debtors, and has written Not Dead Yet: Bankruptcy After BAPCPA, for the Maryland Bar Journal, as well as hundreds of blogs for the Bankruptcy Law Network. With his colleague, Daniel Press, he recorded a 13-hour basic bankruptcy training series, and leads intensive three-day Chapter 11 training boot camps. Mr. Weiss has received international media attention in connection with his work. He was interviewed by Barbara Walters on The View, has appeared on the Today Show, Good Morning America, ABC News with Peter Jennings, the Montel Williams Show, National Public Radio, AARP-TV, the BBC World Service, German state television, and numerous local radio and television programs, and been quoted in Money magazine, The Washington Post and The Baltimore Sun, among others. Brett Weiss is the previous Maryland State Chair for the National Association of Consumer Bankruptcy Attorneys, a founding member of the Bankruptcy Law Network, on the board of the Maryland State Bar Consumer Bankruptcy Council, and a member of the American Bankruptcy Institute and the Bankruptcy Bar Association of Maryland. He has received the Distinguished Service Award from the National Association of Consumer Bankruptcy Attorneys for his work on behalf of consumers across the country. Mr. Weiss is admitted to practice before Maryland and District of Columbia federal and state courts, the United States Courts of Appeals for the DC, Fourth and Eighth Circuits, the United States Tax Court, and the Supreme Court of the United States, and has been practicing law since 1983.

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