Means Test Does Not Require Dismissal if Chapter 13 Is Zero

By: Bryan Kotliar
St. John's Law Student
American Bankruptcy Institute Law Review Staff 

Recently, in In re Siler,[1] the court allowed a debtor whose monthly disposable income created the presumption of abuse under the means test to remain in chapter 7 since the creditors would not receive any distribution under a chapter 13 plan.[2] Generally, if a debtor cannot rebut the presumption of abuse, the case must be dismissed or converted to chapter 13, which is why the Bankruptcy Administrator[3] moved to dismiss.[4] However in this case, under a chapter 13 plan, the debtor would be entitled to deduct her ERISA contributions and 401(k) loan obligation repayments from her monthly disposable income—deductions not available for her CMI calculation under chapter 7.[5] Because of these deductions, creditors would not receive any distribution under an alternate chapter 13 plan.[6] Therefore, the court held that the debtor was entitled to remain in chapter 7, notwithstanding the language of 707(b), because dismissing or converting her case to chapter 13 would create absurd results contrary to Congress’s intent.[7]

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