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Manipulating the Means Test

posted by Katie Porter

Several months ago, I wrote on Credit Slips about my instinct that BAPCPA effectively has empowered the US Trustee's office to expand its authority.   My suspicision hasn't gone away. The prior post noted that the US Trustee's office has promulgated the median income numbers from the Census (an act that requires the exercise of some discretion and is subject to multiple interpretations). More recently, the UST took it upon itself to promulgate the so-called "IRS Expense" standards for non-mortgage home expenses." (number 2a when you link). Debtors seem to be required to use these numbers or face an objection from the UST office. The US Trustee is basically breaking down what the IRS gives in its own Collection Standards as a single figure (housing) into two numbers--ownership (mortgage/rent) and non-ownership (repairs, insurance, utilities, etc). The UST seems to be using a figure of about 67% for the former and 33% for the latter, but in other counties it was closer to half and half. Where on earth did this come from? Does the US Trustee have any expertise in determining the costs of maintaining a residence? Where does the statute empower the UST to be the interpretative guide of the IRS Standards? Section 707 says "IRS Expenses", not IRS Expenses as souped up or split out by the UST. Is this overreaching? Shouldn't the IRS standards be interpreted by, well, the IRS? Obviously, if there is a dispute, someone needs to solve it. But isn't that what we have bankruptcy courts for? Or why Congress can amend statutes? Does this go too far beyond the boundaries of the UST's traditional role of "maintaining the integrity of the bankruptcy system" and become substantive law-making?

Comments

I basically agree with your analysis, but I'd like to point out that frequently there's a good reason for this kind of toying around with the standards. You have to remember that BAPCPA was written by lobbyists, not practitioners, with basically no regard for real life problems and situations. This comes up in situations where the debtor has a situation thats not easily pigeonholed into the statutory provisions. An example I recently encountered dealt with a debtor who operated a household in terms of supporting a family, paying for utilities, maintenance, etc., but did not actually pay rent or mortgage payments, because the house, including on-going mortgage payments, was part of his wife's property settlement with her ex-husbands. The debtor additionally had an ex-wife and settlement of his own that had to be accounted for. I actually found the UST's office to be very flexible in coming up with a fair solution instead of just tossing him into CH13, no questions asked. As usual with BAPCPA, I'd lay the blame with Congress on this one, and recognize that frequently the UST's office is just trying to get along with a means test that's not written with actual people in mind.

Very interesting catch, Katie -- I certainly don't see a basis for Chevron deference to the EOUST. So they can promulgate whatever they want, but when push comes to litigational shove, that's up for judges to interpret what Congress wrote....

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