Cal Bar Insolvency Law Committee Writing Competition 2009 Winner Announced

Ali Matin, from my alma mater, Loyola Law School, is the winner of the 2009 Writing Competition hosted by the Business Law Section of the California Bar Assn.  The article entitled "Phantom Home Mortgage Deductions on Chapter 7 Means Tests: Why Bankruptcy Courts’ Treatment of Secured Debt Payments is Contrary to Legislative Intent and Against Public Policy" can be accessed here.  The argument is that persons who are not paying their mortgages should not be entitled to deduct the payments on the means test.  I smell a big firm creditor lawyer in the making.  My view is that Congress makes the law and 707(b)(2) says a debtor may deduct "The debtor's average monthly payments on account of secured debts shall be calculated as the sum of - (I) the total of all amounts scheduled as contractually due to secured creditors in each month of the 60 months following the date of the petition."  If Congress didn't mean that, they should correct it and the 100 other mistakes they made.  Since almost everyone passes the means test anyway, all the logic in the world about the equities and fairness are beside the point. 

Anyway, 707(b)(3) says that if a debtor passes the means test, the court still can dismiss the case based on the totality of the circumstances.  Several judges have ruled that secured payments you are not going to make is a factor in determining if the filing was an abuse and I have been told that the US Trustee will file motions to dismiss in these cases.  

But huzzah to Mr. Matin for a good article and a nice explanation of the means test.