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142 Best Case Bankruptcy for Windows
User’s Guide
Determining Your Debtor's Allowance: Best Case determines the IRS Standard Allowance for your
debtor based on the debto
r’s location and the Housing Family Size you specified in the
General tab and
asks you for the mortgage payment. Click the Secured Claims button to specify the mortgage payment:
1. The Means Test Debt Payment Treatment Detail window appears which lists all secured
claims (from Sch D) on one tab and all priority claims (from Sch E) on a second tab.
2. Highlight the mortgage claim and click, Change to open the Form 22 Means Test tab for the
creditor.
3.
Enter the debtor’s monthly payment, the number of payments due i
n the next 60 months, and
any escrow or balloon payments contractually due in the next 60 months. Best Case will show
the 60 month average payment, which will be transferred to the Debt Pmt tab in the Means
Test Calculator
and deducted from the debtor’s di
sposable income.
Tip: If you are unsure of the monthly payment, the Form 22 Means Test tab includes a
monthly payment calculator which you can use to determine the average monthly
payment over the next 60 months. For more information on accessing and using this
calculator see Specifying Means Test Treatment for Secured Claims on page149 .
4. If the debtor is behind in payments, enter the cure amount.
5. In the Means Test Treatment section on the right side, select
“Secured by Home”
then click
OK.
6. Click Close to return to the Means Test Calculator
, where you’ll see that the average payment
over 60 months has been deducted from the IRS Housing allowance, and Best Case has
entered the result of this calculation as the net housing allowance.
Overriding the Housing Allowance: If there are circumstances which require you to
adjust the debtor's standard IRS expenses for either mortgage or non-mortgage/
utilities expenses, click in the Override check box located beneath the amount for living
expenses, and you will be able to manually specify the debtor’s adjusted expenses.
Housing and Utilities Adjustment: The IRS actually has just one allowance for both mortgage and
utilities, but has split this allowance into the non-mortgage and mortgage/rent allowances for the purpose of
the Means Test in bankruptcy. If you contend that splitting the allowance as indicated on the Means Test
form does not allow your client to deduct the full amount to which he is entitled under the IRS Standards,
you can enter a housing and utilities adjustment and state the basis for your contention.
Home energy costs in excess of IRS utilities allowance: If the debtor's monthly home energy costs
exceed the IRS allowance, he may be able to deduct the additional expenses. Enter the amount of the
excess energy costs provided, and then use the Best Case Editor to create an attachment to document the
reason you are claiming these expenses. (For more information see Creating an Attachment on page 198. )
Deducting the Transportation Allowance
Form 22 allows debtor's to take two separate housing allowances: one for operating costs (maintenance), and one for
ownership (lease or car payments). These allowances are filled in for you by Best Case based on the information you
enter into the Car tab.
The operating allowance is based on the IRS region the debtor lives in and the number of vehicles he
operates. (Click the Show Table button opens a pop up window which shows the IRS operating allowances
for the debtor's region.)
The ownership allowance is national, and is based on the number of vehicles he owns or leases.
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Chapter 4
Means Test Calculator 143
Car Tab: The Debtor Gets an Allowance for Operating Costs and one for Ownership Costs
Number of Vehicles Operated/ Operating Allowance:
When you click the Car tab, you’ll first specify
the number of vehicles operated: zero, one, or two or more. Best Case fills in a set operating allowance for
you based on your answer and the debtor’s location. If the debtor does not operate any cars, he’ll get a
public transportation allowance.
Ownership Allowance:
How the Ownership Allowance Works: In bankruptcy, the IRS ownership allowances for cars work
the same way that IRS allowances for houses do: there is a set amount that the debtor can claim as an
allowance, but it essentially functions as a minimum since the debtor is allowed to deduct from
disposable income all secured payments contractually due in the next 60 months, even if the payments
exceed the allowance.
Any secured payments for cars can be deducted from the debtor's disposable monthly income. However,
because "double-dipping" is prohibited, secured payments on vehicles are subtracted from the debtor's
transportation allowance.
In other words, the debtor will be able reduce his disposable income by all car payments due in the next
5 years. If the total of all secured payments on cars is less than the car ownership allowance,
he’ll also
get to reduce his disposable income by the difference between his car payments and the allowance. If
the car payments are greater than the ownership allowance, he’ll just get the car payments.
Determining the Debtor's Ownership Allowance: The IRS ownership allowances are filled in on line
a; click the Secured Claims button to specify car payments if the car is not leased.
NOTE: If you have not already done so, you will need to enter any claims secured by the
debtor's vehicles on Schedule D before you can deduct them from the debtor's ownership
allowance on Form 22. When entering the claim on Schedule D, click on the Form 22 Means
Test tab, as described on page 149. Here you can specify that the claim is secured by either
the debtor's first or second vehicle, determine the average monthly payment due on the claim
over the next 60 months and specify any arrearage amounts to be deducted from the debtor's
disposable income.
1. The Means Test Debt Payment Treatment Detail window appears which lists all secured claims
(from Sch D) on one tab and all priority claims (from Sch E) on a second tab.
2. Highlight the claim on the first car and click, Change to open the Form 22 Means Test tab for
the creditor.
The CMI Summary
tracks your debtor’s
CMI, expense
deductions and DMI.
Use the Override Table
checkbox if there are
special circumstances
which require you to
change the debtor’s
standard transportation
allowances.
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144 Best Case Bankruptcy for Windows
User’s Guide
3. En
ter the debtor’s monthly payment, the number of payments due in the next 60 months, and any
escrow and balloon payments contractually due in the next 60 months. Best Case will show the 60
month average payment, which will be transferred to the Debt Pmt tab for Form 22 and deducted
from the debtor’s disposable income.
Tip: If you are unsure of the monthly payment, the Form 22 Means Test tab includes a
monthly payment calculator which you can use to determine the average monthly
payment over the next 60 months. For more information on accessing and using this
calculator see Specifying Means Test Treatment for Secured Claims on page 149 .
4. If the debtor is behind in payments, enter the cure amount.
5. In the Means Test Treatment selection on the right side, select
“Secured by Car 1”
then click
OK.
6. Click Close
to return to the Means Test Calculator, where you’ll see that the average payment
over 60 months has been deducted from the IRS ownership allowance, and Best Case has entered
the result of this calculation as the net ownership allowance for car 1.
7. If the debtor is claiming the ownership allowance for two vehicles, follow the steps above to
specify the payments for the second car.
Leased Vehicles and Cars Owned Outright: If your debtor leases a vehicle or owns it outright, then for that
vehicle, he gets the standard ownership allowance no matter what the lease payment and remaining term are.
There is nothing for you to enter regarding lease payments, and lease payments are not listed in the Dbt Pmt
tab.
Overriding the Standard IRS Transportation Allowances: If there are circumstances which require you to
adjust the debtor's standard IRS operating expenses for vehicles owned and/ or operated, click in the Override
check box located beneath the Operating Allowance amount on the right side of the screen, and you will be able
to manually specify the adjusted operating and/ or ownership expenses.
Necessary Expenses
In the Necessary tab, pictured below, you’ll enter expenses the debtor actually incurs which the IRS deems
necessary.
The first line, taxes, includes all payroll taxes since the income figures entered in the Income tab are gross income,
before taking taxes out. This field can also include personal property taxes, such as taxes on cars. It does not include
real estate taxes.
Best Case provides basic descriptions of each expense category on the screen, but you may want to print a copy of
Form 22 to refer to the complete descriptions.
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Chapter 4
Means Test Calculator 145
Necessary Tab: Enter Expenses the Debtor Actually Incurs for These Items
Additional Expenses
Expense categories on the Additional Tab are not recognized IRS expenses, but were written into BAPCPA as
legitimate expenses that can be deducted from the debtor’s disposable income. Like the expenses in the Necessary
Tab, you are required to list the debtor’s
actual expenses here.
Additional Tab: Enter the Debtor’s Actual Expenses for Categories on this Tab.
Providing Documentation: If the debtor is claiming additional expense deductions for home energy costs,
education expenses for dependents or for food and clothing expenses, Form 22 stipulates that you must provide
documentation demonstrating that the additional amount claimed is reasonable and necessary. Use the Standard
Attachment feature in the Best Case Editor to scan in energy bills, clothing receipts or tuition bills or to create other
documentation detailing the reasons for the claims. (For more information on scanning documents to create an
attachment see Scanning Documents with BestScan:on page 230)
Entering Debt Payments
The Code allows you to deduct the following from the debtor’s disposable monthly income:
All secured payments contractually due in the next 60 months, divided by 60
All past due amounts on claims secured by property necessary to the debtor, divided by 60
All priority claims, divided by 60
The administrative expenses involved in a hypothetical Chapter 13 case, divided by 60
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146 Best Case Bankruptcy for Windows
User’s Guide
In the Debt Pmt tab Best Case will help you do this by allowing you to specify payments and cure amounts on all
Secured Claims entered in Schedule D, carrying priority debts from Schedule E to the Means Test, and showing you
an estimated 13 plan payment.
NOTE: If you have not already done so, you will need to enter any Schedule D and Schedule E claims
before you can deduct them from the debtor's income on Form 22. When entering claims on Schedule D,
click on the Form 22 Means Test tab, as described on page 149. Here you can specify that the claim is
secured by the debtor's house, car or other property, determine the average monthly payment due on the
claim over the next 60 months and specify any arrearage amount to be deducted from the debtor's
disposable income. If you are entering priority claims, the Schedule E Form 22 Means Test tab, as
described on page 152 , allows you to override pride priority amounts or exclude them from priority debt
calculation altogether.
The Debt Pmt Tab Reduces the Debtor’s DMI by the Amount of Secured and Priority Debt over the next 60 Months
Future payments on secured claims/ Past due payments on secured claims: Any claims you have
specified as being secured by the debtor's house and vehicles on the Housing and Living tabs are already
included in the total debt payment calculation displayed on your screen. If there are any additional secured
claims, click the View/Edit Secured Claims button to open the Means Test Debt Payment Treatment Detail
window. For each claim without payment information entered:
1. Highlight the claim and click, Change to open the Form 22 Means Test tab for the creditor.
2.
Enter the debtor’s monthly payment, the number of payments due in the next 60 months, and any
escrow and balloon payments contractually due in the next 60 months. Best Case will show the 60
month average payment, which will be transferred to the Debt Pmt tab for the Means Test
Calculator
and deducted from the debtor’s disposable income.
Tip: If you are unsure of the monthly payment, the Form 22 Means Test tab includes a
monthly payment calculator which you can use to determine the average monthly
payment over the next 60 months. For more information on accessing and using this
calculator see Specifying Means Test Treatment for Secured Claims on page 149 .
If the debtor is behind in payments, enter the cure amount. Cure amounts reduce the debtor's
DMI if the property is necessary for the debtor's support or the support of the debtor's
dependents. If you do not want to deduct the arrearage for a claim, check the box labeled
Property NOT necessary for debtor/dependent support.
3. In the Means Test Treatment selection on the right side, if the debt is not secured by the debtor's
house or car, select
“Secured by Other”
then click OK.
45
Chapter 4
Means Test Calculator 147
4. Click Close to return to the Means Test Calculator
, where you’ll see that the average payment
over 60 months has been included in calculation for future payments on secured claims.
Priority Claims: The Best Case Means Test Calculator will automatically total all priority amounts of Schedule
E Claims and divide by 60, as the code requires. If the Priority Claims line reads “0.00” or seems low, click the
View/Edit Priority Claims button to review Schedule E claims, or return to Schedule E to add them. If you
want to change the priority amount of a claim included in the Form 22 calculation or exclude it from the
calculation altogether, you can do so quickly and easily using the Form 22 Means Test tab. To access this
screen, simply highlight the claim in the Means Test Debt Payment Treatment Detail window and click
Change.
Chapter 13 Plan Payment and Administrative Expenses: To calculate administrative expenses involved in a
Chapter 13 plan, you’ll enter a projected Monthly 13 Plan Payment
and the multiplier for your district, to be
published by the U.S. Trustee. (Note: If you are filing in the Western District of North Carolina, check the
override button to manually enter your multiplier. If you are unsure of the number, check with your Bankruptcy
Administrator to obtain the multiplier.)
Summary and Outcome
Chapter 7: Determination of § 707(b)(2) Presumption
If this is a Chapter 7 filing, Best Case shows you the final calculations which are used in determining whether or not
there is a presumption of abuse in the Summary
tab. The debtor’s current monthly income is listed along with total
deductions detailed on the right, yielding the disposable monthly income. (If this is a Chapter 13 case, see Chapter
13: Determ
ination of the Debtor’s Disposable Income Under § 1325(b)(2)
on page 148.)
Summary Tab for a Chapter 7 Filing
Best Case calculates the 60-month disposable income, which is the hypothetical amount that unsecured creditors
could receive in a five-year Chapter 13 plan. If the debtors five year disposable income:
is less than $6,575 , he passes the means test and may file Chapter 7 without presumption of abuse.
is greater than or equal to $10,950, there is a presumption of abuse if the debtor files Chapter 7.
is between $6,575 - $10,950, the Means Test looks at how much unsecured, non-priority debt there is. If
there is enough disposable income to repay at least 25% of the debt, there is a presumption of abuse.
NOTE: If the debtor's 60-month disposable income is between $6,000 and $10,000, you will need to exit
the Means Test and enter the debtor's non-priority unsecured debts on Schedule F. To save time, you
may not want to fill in all claim details: we just need the monthly payment, term, and past due amounts.
Best Case totals the debts listed on Schedule F and enters them on the Means Test summary screen as
the total non-priority unsecured debt.
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148 Best Case Bankruptcy for Windows
User’s Guide
Chapter 13: Determination of the Debtor’s Disposable Income Under § 1325(b)(2)
If this is a Chapter 13 Filing, Best Case shows you the final calculations which are used to determine the debtor’s
disposable monthly income. The debtor’s current monthly income is listed, alon
g with the total deductions
detailed on the right, yielding the disposable monthly income.
Summary Tab for a Chapter 13 Filing
You can also use the Summary tab to make two additional deductions to the
debtor’s
income:
Support Income for Child Included in Line 7: Enter the monthly average of any child support payments,
foster care payments, or disability payments for a dependent child, included in Line 7, that you received in
accordance with applicable nonbankruptcy law, to the extent reasonably necessary to be expended for such
child. (Note: For a quick reference, the Summary tab includes the amounts you entered for on line 7 for
both the debtor and, if applicable, the debtor's spouse.)
Qualified Retirement Deductions: Enter the monthly average of :
a. All contributions or wage deductions made to qualified retirement plans, as specified in § 541(b)(7)
b. All repayments of loans from retirement plans, as specified in § 362(b)(19).
Best Case automatically subtracts any amounts you enter on this screen from the debtor's current monthly income,
and displays the new amount as the debtors Monthly Disposable Income on line 58.
Special Circumstances
If the debtor has any additional expenses required for the health and welfare of himself or his family that are not
already listed on the form, and you contend that that they should be an additional deduction from the debtor's CMI,
you can enter them in the Special tab.
30
Chapter 4
Means Test Calculator 149
Special Circumstances: Enter any additional expenses for the debtor here
The claims will be listed in the Additional Expense Claims section on Form 22, but per instructions on the form,
expenses arising from special circumstances do not affect the debtor’s DMI as reported on the form, and they don’t
affect which box is checked at the beginning of the form (Presumption arises or Presumption Does Not Arise).
However, they do give the trustee additional information about your debtor’s situation that will be taken into
consideration.
Specifying Means Test Treatment for Secured Claims
Form 22 allows the debtor to deduct the average of payments due to secured creditors over the next 60 months. In
addition, if a secured claim is in default, and the property securing the claim is necessary for the support of the
debtor or the debtor's dependents, the debtor may deduct 1/60th of the cure amount.
You can use the Means Test tab for Schedule D creditors to compute the 60-month average payment on a secured
claim as well as to include or exclude any arrearages. You can also use the Means Test tab to designate a claim as
secured by the debtor's house or vehicles, which Best Case uses to calculate the debtor's housing and utilities and
transportation allowances.
NOTE: The extra information collected in the Form 22 Means Test tab is only required if the debtor's income
is above the state median. If the debtor's income falls below the state median, you can skip this tab.
Accessing this Screen
To access the Form 22 Means Test screen for a Schedule D claim:
If you are entering information on Schedule D:
1. Highlight your claim in the Schedule D summary list window and click Change.
2. Click the Form 22 Means Test tab.
If you are working in the Means Test Calculator:
1. Open Form 22 to the Housing tab.
2. Click the Secured Claims button located just below the data fields for mortgage and rent expenses.
3. In the Means Test Debt Treatment window that opens, highlight the secured creditor you want to modify
and click Change.
4. The Form 22 Means Test tab for the creditor opens.
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150 Best Case Bankruptcy for Windows
User’s Guide
NOTE: You can also access the Form 22 Means Test tab from the Debt Pmt tab of Form 22. To do so,
simply click on the View/Edit Secured Claims button to the right of the Monthly 1/60th total for secured
claims, and then follow steps two through four as outlined above.
The Form 22 Means Test Tab Helps You Calculate Future Payments on Secured Claims
Entering Data into the Form 22 Means Test Tab
The Form 22 Means Test tab collects information about cure amounts, calculates average monthly payment over the
next 60 months and gathers other important means test data not entered in other Schedule D screens. It is available
for all individual or joint Chapter 7 and 13 Filings.
Means Test Treatment:
If you do not want the claim to be included with the secured payments on Form 22, simply click in the
Exclude claim from Means Test check box in the top right corner of the screen.
If you are including the secured claim, you must specify a Means Test Treatment from the list on the
screen.
o
Secured by Home: Select this option for any debts secured by the debtor's home. (Note: If you
select this option, Best Case automatically subtracts the amount you enter for the 60 month
average payment for the claim, as described below, from the debtor's IRS mortgage/rental expense
allowance when calculating the debtor's Net mortgage/rental expense.)
o
Secured by Car 1: Select this option for any debts secured by the first vehicle for which the
debtor intends to take the IRS transportation/lease expense allowance. (Note: If you select this
option, Best Case automatically subtracts the amount you enter for the 60 month average payment
for the claim, as described below, from the debtor's IRS transportation/lease expense allowance
when calculating the debtor's Net transportation/lease expense for vehicle 1.)
o
Secured by Car 2: Select this option for any debts secured by the second vehicle for which the
debtor intends to take the IRS transportation/lease expense allowance. (Note: If you select this
option, Best Case automatically subtracts the amount you enter for the 60 month average payment
for the claim, as described below, from the debtor's IRS transportation/lease expense allowance
when calculating the debtor's Net transportation/lease expense for vehicle 2.)
o
Secured by Other: Select this option if the claim is secured by any property other than the
debtor's house or his first or second vehicles.
Future Payments Due Next 60 Months: There are two ways to determine the 60 Month Average payment
for a claim. If you know the debtor's regularly monthly payment and remaining term on the contract, you
can enter the information right on this screen.
o
For the Monthly Payment, enter the debtor's regular monthly mortgage payment, (PMI payment).
Check the Exclude
checkbox to omit a
claim from the
Means Test.
Specify a Means Test
Treatment to link claims to the
debtor’s Home or Car and
subtract them from the IRS
Allowances.
The Calc Pmt button opens the
Means Test Payment Calculator
which helps you calculate future
payments on claims.
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