Post Filing Amendments to Means Test should use Current Standard Expenses

In a case that can make a difference in a number of chapter 13 cases, Judge Mark in the Southern District of Florida ruled that when an amended means test is filed in chapter 13, the standard expenses allowed on the means test should be those in effect on the date the amendment is filed, not those in effect when the bankruptcy was filed. In re Mosley, 2022 Bankr. LEXIS 3219, Case No 19-15907-RAM (Bankr. S.D. Fla., 15 November 2022). The case came before the court initially on a request by the Debtor to modify the confirmed plan based on an increase in the ongoing payment to their condominium association, which was being paid through the plan. The order confirming plan had included a provision requiring an obligation to verify ongoing income if income increased by more than 3% over the prior year. As the debtor had received a $12,000 raise in 2021, which exceeded this figure, she was obligated to verify her income, which including filing an updated means test.

The legal basis of requiring updated income information is 11 U.S.C. §1325(b)(1)(B), which requires a debtor to devote their projected disposable income to unsecured creditors in order to confirm a chapter 13 plan. This figure is computed by the means test form, which includes a limit on certain expenses per the National Standards and Local Standards published by the IRS. When the case is filed, these figures are those in effect as of the filing of the case. However, as those standards change over time, the issue in the case was whether an amended means test would use the limits as of the date of filing, or the limits as adjusted since the case was filed.

Judge Mark found that logic and fairness requires that the courts allow debtors to calculate disposable income per the means test using the allowed expenses as of the date of the amendment, which often includes an increase in allowed expenses for those set by the IRS standards. The court gave an example of a debtor with a 5% raise in a given year, when the IRS standards increase by 5%, such debtor should not be required to increase the dividend to unsecured creditors.

The decision seems a triumph of logic and common sense in a field where too often the contrary prevails.

Michael Barnett
Michael Barnett, PA
506 N. Armenia Ave.
Tampa, FL 33609-1703
813 870-3100