Wednesday, March 06, 2013

The Means Test and the Marital Adjustment

In In re Pamela Persaud, case No. 12-43602-CEC, US Bankruptcy Court, EDNY, February 4, 2013 involved the Means Test, the presumption of abuse and what expenses can be deducted in calculating the Means Test. On Line 17 of the Means Test, the Debtor deducted $5,742.19 form the total monthly income as a "marital adjustment", which she claimed is income of her husband that was not regularly contributed for household expenses. The United States Trustee contended that tuition payments for the couples children were household expenses and should have been counted as a Debtor's income in the means test calculation. The Bankruptcy Judge provided that income of a non-filing spouse can be excluded only to the extent it is not regularly contributed to household expenses. An expense paid by the non-debtor spouse will be considered a household expense and thus included in income on the means test, unless the expense is purely personal to the non-debtor spouse. The Debtor's position was that since the tuition was paid for solely by the non-filing husband who was contractually liable, from his separate monies, those expenses should not be considered household expenses. The Bankruptcy Judge disagreed citing section 101(10A)(b) of the Bankruptcy Code which provides that income includes any amount paid by any entity other than the debtor... on a regular basis for the household expenses of the debtor or the debtor' dependents. The Means Test is an extremely complex calculation and debtor's must use extreme care and caution when making those calculations. Jim

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