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October 18, 2007

Improper Delegation of Authority?

There is a great post on the Credit Slips blog today by John Rao, the Secretary and a Board Member of NACBA.  It seems the IRS has been working away revising the various tables that are now used to determine whether or not a person qualifies for chapter 7 as well as to compute the plan payment for over-median chapter 13 debtors.  The new tables were to be effective on October 1, 2007.  The IRS has even added a new standard called Out-of-Pocket Health Care Expenses. 

The problem is the IRS did not tell anyone in the bankruptcy world about these revisions.  In the meantime, a Bankruptcy Rules Committee has been revising the means test forms not knowing that the changes they were laboring over would not work in some cases with the new tables.  The IRS then announced that it would delay implementation of the new tables until the first of the year to give the Rules Committee to include the changes.   

Rao raises an interesting question then about whether or not Congress has improperly delegated the authority to decide who can file bankruptcy to the IRS.  In a way he is right.  Furthermore, on what basis can the IRS delay implementation based on the bankruptcy system?  Some debtors will or won't qualify to file chapter 7 today who might or might not have qualified under the new tables.  The new tables will affect directly what the chapter 13 plan payments will be to at least some over-median debtors.  The IRS is then administratively deciding which debtors qualify.  The IRS is at the helm deciding how much plan payments will be in at least some cases.  The revisions probably do not affect loads of debtors but certainly as to some people, the IRS is doing the deciding.

Not to get to preachy, but this issue has come up before in the area of exemptions.  The Bankruptcy Act of 1898 was attacked as unconstitutional because it permitted the various states through exemptions to decide what property of the debtor the trustee could take.  The Supreme Court found the "scheme" to be constitutional in Hanover Nat. Bank v. Moyses, 186 U.S. 181  (1902).      

October 18, 2007 in Current Affairs | Permalink


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