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Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) to correct perceived abuses of the bankruptcy system.2 Some BAPCPA supporters felt that consumer bankruptcy was no longer a last resort for providing a fresh start for individuals in severe financial distress, but a financial device providing a head start for individuals who could repay some or all of their debts but preferred not to.3 As part of BAPCPA, Congress enacted the "means test" to address this perceived abuse, utilizing a formula with specified income and expense parameters and mandating amounts for calculating above-median-income debtors' monthly disposable income.4
Three primary issues soon emerged: whether (1) calculation of projected disposable income under the means test requires a mechanical approach in chapter 13; (2) all debtors who possessed a vehicle are eligible to deduct from their income, in addition to maintenance and operating costs, a monthly expense amount for vehicle acquisition costs regardless of loan or lease payments: and (3) debtors who have surrendered collateral in connection with a loan, and therefore have no obligation to continue making payments on that loan, may deduct from their monthly disposable income the payments associated with the loan.
The first issue was resolved by the Supreme Court in Hamilton v. Lanning.5 In January, the Court decided the second issue in Ransom v. FIA Card Services." This article examines how the means test is to be applied in accordance with Ransom and Lanning, and submits that the third issue has already been decided by Ransom and Lanning in the chapter 13 context. Early indications are that those decisions are guiding bankruptcy courts on this issue in the chapter 7 context as well.
Future Income and Expenses Information Is Relevant
In a chapter 13 case, a bankruptcy court may confirm a repayment plan only if the debtor commits either to pay unsecured creditors in full or apply ali of the debtor's "projected disposable income" during the plan period to repaying those creditors.7 The means test is utilized in chapter 1 3 to calculate the amount of disposable income that a debtor must devote to creditor repayment pursuant to a courtapproved plan that typically lasts from three to five years.8 "The statute defines 'disposable income' as 'current monthly income"...