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January 11, 2011


Craig D. Robins, Esq.

Although the decision does not help consumer bankruptcy debtors, there have been ways that they have been able to side-step this means test rule.

Debtors who do not have a financed vehicle can trade in their old car for a newer one that is financed, just before filing, and then get the "automobile ownership expense" means test deduction.

However, they would have to do so in good faith because they need a newer, more reliable vehicle. The good faith component of this "pre-bankruptcy planning" is necessary in order to avoid any allegation that they were gaming the bankruptcy laws and filing a bankruptcy case in an abusive manner.

Also, many jurisdictions permit debtors to take an additional means test deduction for an older car (one that is at least six years old) even if their car is not financed. This deduction, typically $200, is in line with IRS procedure, upon which much of the means test calculations are based.

Patrick Hart

As a bankruptcy lawyer I would disagree that this is not a blockbuster decision.

The court's interpretation is going to make it impossible for many people including a number, who have been caught up in the current mortgage crisis, from obtaining much needed relief in bankrupty.

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