Court Decisions

Car related expenses are important deductions in the means test analysis. A debtor’s car expenses, including car payments and car operation expenses, often determine whether a prospective bankruptcy debtor passes a means test analysis for bankruptcy eligibility.

Means test calculation are technical and complicated. I infrequently comment on details of means test computations.

There are so many reasons to stay away from bankruptcy- here is one more. In state court proceedings a debtor may do anything he wants with his exempt assets. In asset is exempt under Florida law a debtor can transfer it to a family member, put it in a trust, or sell it and by an alternative exempt asset. The definition of “assets” in our fraudulent transfer statutes specifically excludes exempt assets.

Not so in bankruptcy court. Bankruptcy trustees can attack pre-petition fraudulent transfers under either of two theories.

Two married Florida debtors own an upside down homestead property. They are seeking mortgage modification in the hopes of holding on to their home. They file Chapter 7 bankruptcy and do not claim their house as exempt homestead because there is no equity to exempt. The debtor’s Statement of Intention stated that they wanted to retain the homestead property. The debtors claimed a “wildcard” exemption which is available to debtors who do not receive benefits of the homestead exemption.

Debtors may want to amend their exemption plan (on Schedule C) for several reasons during their bankruptcy case. For example, the debtors may find it advantageous to shift their exemption limits from one asset to another asset to make sure preferred assets are completely covered by exemptions. If the  valuation of one or more assets becomes an issue a debtor may want to remove an exemption from one asset to fully protected the increased value of another asset.

Because of substantial decline in Florida real estate values Chapter 13 bankruptcy is commonly used to strip off second and third mortgages from the debtor’s upside down  primary residence. Junior mortgages are not stripped off the residence at start of the Chapter 13. If that were the case then homeowners could file the Chapter 13 to wipe out the junior mortgage and quit payments soon thereafter. No, debtor’s junior mortgages are stripped at the “back end”, that is, at the end of the Chapter 13.