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Internal Revenue Service Collection Financial Standards and the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005





I. Internal Revenue Service Collection Financial Standards (including excerpts from IRS Tables):
Get the following online at: http://www.irs.gov/individuals/article/0,,id=96543,00.html
Collection Financial Standards
General
Collection Financial Standards are used to help determine a taxpayer's ability to pay a delinquent tax liability.
Allowances for food, clothing and other items, known as the National Standards, apply nationwide except for Alaska and Hawaii, which have their own tables. Taxpayers are allowed the total National Standards amount for their family size and income level, without questioning amounts actually spent.
Maximum allowances for housing and utilities and transportation, known as the Local Standards, vary by location. Unlike the National Standards, the taxpayer is allowed the amount actually spent or the standard, whichever is less.

Food, Clothing and Other Items
National Standards for reasonable amounts have been established for five necessary expenses: food, housekeeping supplies, apparel and services, personal care products and services, and miscellaneous.
All standards except miscellaneous are derived from the Bureau of Labor Statistics (BLS) Consumer Expenditure Survey (CES). The miscellaneous standard has been established by the IRS.

Alaska and Hawaii
Due to their unique geographic circumstances and higher cost of living, separate standards for food, clothing and other items have been established for Alaska and Hawaii .

Housing and Utilities
The housing and utilities standards are derived from Census and BLS data, and are provided by state down to the county level.

Transportation
The transportation standards consist of nationwide figures for monthly loan or lease payments referred to as ownership costs, and additional amounts for monthly operating costs broken down by Census Region and Metropolitan Statistical Area (MSA). Public transportation is included under operating costs. A conversion chart has been provided with the standards which shows which IRS districts fall under each Census Region, as well as the counties included in each MSA. The ownership cost portion of the transportation standard, although it applies nationwide, is still considered part of the Local Standards.
The ownership costs provide maximum allowances for the lease or purchase of up to two automobiles if allowed as a necessary expense. The operating costs are derived from BLS data.
If a taxpayer has a car payment, the allowable ownership cost added to the allowable operating cost equals the allowable transportation expense. If a taxpayer has no car payment, or no car, only the operating costs portion of the transportation standard is used to come up with the allowable transportation expense.

Recent Revisions
The Local Standards for housing and utilities and transportation were revised on 01/01/04 to:
?add family size to the housing and utilities allowances (two or less, three, and four or more);
?base automobile ownership/leasing costs on the five-year average of new and used car financing data compiled by the Federal Reserve Board of Governors; and,
?reflect updated information from the Bureau of Labor Statistics.
The revised Local Standards for housing and utilities and transportation are effective for financial analysis conducted on or after January 1, 2004.


Go here: http://www.irs.gov/individuals/article/0,,id=96543,00.html

  or copy paste this link to your browser.




II. Means Test Flow Chart from NACBA:
(provided by Jeffrey Norman to Houston Area Debtors' Association; special thanks to Michael Schlafly)
  click here

III. Excerpts from Internal Revenue Service Manual:
(Sections 5.15.1.7 through 5.15.1.11)
Get the following online, in its entirety, at: http://www.irs.gov/irm/part5/ch14s01.html
5.15.1  Financial Analysis Handbook

?5.15.1.1   Expectations
?5.15.1.2   Analyzing Financial Information
?5.15.1.3   Verifying Financial Information
?5.15.1.4   Shared Expenses
?5.15.1.5   Internal Sources
?5.15.1.6   External Sources
?5.15.1.7   Allowable Expense Overview
?5.15.1.8   National Standards
?5.15.1.9   Local Standards
?5.15.1.10   Other Expenses
?5.15.1.11   Determining Individual
                  Income
?5.15.1.12   Business Entities
?5.15.1.13   Business Expenses
?5.15.1.14   Determining Business Income
?5.15.1.15   Assets
?5.15.1.16   Determining Equity in Assets
?5.15.1.17   Jointly Held Assets
?5.15.1.18   Income-Producing Assets
?5.15.1.19   Assets Held By Others as
                  Transferees, Nominees or
                  Alter Egos
?5.15.1.20   Cash
?5.15.1.21   Securities
?5.15.1.22   Life Insurance
?5.15.1.23   Retirement or Profit Sharing
                  Plans
?5.15.1.24   Furniture, Fixtures, and
                  Personal Effects
?5.15.1.25   Motor Vehicles, Aircraft and
                  Vessels
?5.15.1.26   Real Estate
?5.15.1.27   Mortgage and Real Estate
                  Loans
?5.15.1.28   Accounts and Notes
                   Receivable
?5.15.1.29   Inventory
?5.15.1.30   Machinery and Equipment
?5.15.1.31   Tax-Exempt Securities
?5.15.1.32   Loans to Shareholders
?5.15.1.33   Intangible Assets
?5.15.1.34   Cash Flow Analysis
?5.15.1.35   Making the Collection
                  Decision
?5.15.1.36   Business Entity and Collection
?Exhibit 5.15.1-1   Questions and Answers
                 to Assist in Financial Analysis
                (Reference: 5.15.1.3)
?Exhibit 5.15.1-2   Financial Analysis: On-
                Line Access to the Allowable
                Expense Tables (Reference
               5.15.1)

5.15.1.7  (05-01-2004)
Allowable Expense
Overview
1.Allowable expenses include those expenses that meet the necessary expense test. The necessary expense test is defined as expenses that are necessary to provide for a taxpayer's and his or her family's health and welfare and/or production of income. The expenses must be reasonable. The total necessary expenses establish the minimum a taxpayer and family needs to live.
2.There are three types of necessary expenses:
?National Standards
?Local Standards
?Other Expenses
3.National Standards: These establish standards for reasonable amounts for five necessary expenses. Four of them come from the Bureau of Labor Statistics (BLS) Consumer Expenditure Survey: food, housekeeping supplies, apparel and services, and personal care products and services. The fifth category, miscellaneous, is a discretionary amount established by the Service. It is $100 for one person and $25 for each additional person in the taxpayer's household.
Note:
All five standards are included in one total national standard expense.
4.Local Standards: These establish standards for two necessary expenses: housing and transportation. Taxpayers will be allowed the local standard or the amount actually paid, whichever is less.
A.Housing - Standards are established for each county within a state. When deciding if a deviation is appropriate, consider the cost of moving to a new residence; the increased cost of transportation to work and school that will result from moving to lower-cost housing and the tax consequences. The tax consequence is the difference between the benefit the taxpayer currently derives from the interest and property tax deductions on Schedule A to the benefit the taxpayer would derive without the same or adjusted expense.
B.Transportation - The transportation standards consist of nationwide figures for loan or lease payments referred to as ownership cost, and additional amounts for operating costs broken down by Census Region and Metropolitan Statistical Area. Operating costs were derived from BLS data. If a taxpayer has a car payment, the allowable ownership cost added to the allowable operating cost equals the allowable transportation expense. If a taxpayer has no car payment only the operating cost portion of the transportation standard is used to figure the allowable transportation expense. Under ownership costs, separate caps are provided for the first car and second car. If the taxpayer does not own a car a standard public transportation amount is allowed.
5.Other - Other expenses may be allowed if they meet the necessary expense test. The amount allowed must be reasonable considering the taxpayer's individual facts and circumstances.
6.Conditional expenses. These expenses do not meet the necessary expenses test. However, they are allowable if the tax liability, including projected accruals, can be fully paid within five years.
7.National local expense standards are guidelines. If it is determined a standard amount is inadequate to provide for a specific taxpayer's basic living expenses, allow a deviation. Require the taxpayer to provide reasonable substantiation and document the case file.
8.Generally, the total number of persons allowed for national standard expenses should be the same as those allowed as dependents on the taxpayer's current year income tax return. Verify exemptions claimed on taxpayer's income tax return meet the dependency requirements of the IRC. There may be reasonable exceptions. Fully document the reasons for any exceptions. For example, foster children or children for whom adoption is pending.
9.A deviation from the local standard is not allowed merely because it is inconvenient for the taxpayer to dispose of valued assets.
10.Revenue officers should consider the length of the payments. Although it may be appropriate to allow for payments made on the secured debts that meet the necessary expense test, if the debt will be fully repaid in one year only allow those payments for one year.
5.15.1.8  (05-01-2004)
National Standards
1.National standards include the following expenses:
A.Apparel and services. Includes shoes and clothing, laundry and dry cleaning, and shoe repair.
B.Food. Includes all meals, home and away.
C.Housekeeping supplies. Includes laundry and cleaning supplies; other household products such as cleaning and toilet tissue, paper towels and napkins; lawn and garden supplies; postage and stationary; and other miscellaneous household supplies.
D.Personal care products and services. Includes hair care products, haircuts and beautician services, oral hygiene products and articles, shaving needs, cosmetics, perfume, bath preparations, deodorants, feminine hygiene products, electric personal care appliances, personal care services, and repair of personal care appliances.
E.Miscellaneous. A discretionary allowance of $100 for one person and $25 for each additional person in a taxpayer's family.
2.Allow taxpayers the total national standard amount for their income level.
Example: The taxpayer's expenses are: housekeeping supplies - $150, clothing - $150, food - $600, miscellaneous - $400 (Total Expenses - $1,300). The taxpayer is allowed the national standard of $1,100.
3.A taxpayer that claims more than the total allowed by the national standards must substantiate and justify each separate expense of the total national standard amounts.
Example: A taxpayer may claim a higher food expense than allowed. Justification would be based on prescribed or required dietary needs.
5.15.1.9  (05-01-2004)
Local Standards
1.Local standards include the following expenses:
A.Housing and Utilities. The utilities include gas, electricity, water, fuel, oil, bottled gas, trash and garbage collection, wood and other fuels, septic cleaning, and telephone. Housing expenses include: mortgage or rent, property taxes, interest, parking, necessary maintenance and repair, homeowner's or renter's insurance, homeowner dues and condominium fees. Usually, this is considered necessary only for the place of residence. Any other housing expenses should be allowed only if, based on a taxpayer's individual facts and circumstances, disallowance will cause the taxpayer economic hardship.
B.Transportation. Vehicle insurance, vehicle payment (lease or purchase), maintenance, fuel, state and local registration, required inspection, parking fees, tolls, driver's license, public transportation. Transportation costs not required to produce income or ensure the health and welfare of the family are not considered necessary. Consider availability of public transportation if car payments (purchase or lease) will prevent the tax liability from being paid in part or full. Public transportation costs could be an option if it does not significantly increase commuting time and inconvenience the taxpayer.
Note:
If the taxpayer has no car payment, or no car, question how the taxpayer travels to and from work, grocer, medical care, etc. The taxpayer is only allowed the operating cost or the cost of transportation.
5.15.1.10  (05-01-2004)
Other Expenses
1.Other expenses may be considered if they meet the necessary expense test - they must provide for the health and welfare of the taxpayer and/or his or her family or they must be for the production of income. This is determined based on the facts and circumstances of each case.
2.If other expenses are determined to be necessary and, therefore allowable, document the reasons for the decision in your history.
3.The amount allowed for necessary or conditional expenses depends on the taxpayer's ability to full pay the liability within five years and on the taxpayer's individual facts and circumstances. If the liability can be paid within 5 years, it may be appropriate to allow the taxpayer the excessive necessary and conditional expenses. If the taxpayer cannot pay within 5 years, it may be appropriate to allow the taxpayer the excessive necessary and conditional expenses for up to one year in order to modify or eliminate the expense. (See IRM 5.14, Installment Agreements)
Expense ItemExpense is Necessary if:Notes/Tips
Accounting and legal fees.Representation before the Service is needed or meets the necessary expense tests. Amount must be reasonable. Disallow any other accounting or legal fees. Disallow costs not related to solving current liability.
Charitable contributions (Donations to tax exempt organizations) If it is a condition of employment or meets the necessary expense tests. Example: A minister is required to tithe according to his employment contract. Disallow any other charitable contributions that are not considered necessary. Example: Review the employment contract.
Child Care(Baby-sitting, day care, nursery and preschool) It meets the necessary expense test. Only reasonable amounts are allowed. Cost of child care can vary greatly. Do not allow unusually large child care expense if more reasonable alternatives are available. Consider the age of the child and if both parents work.
Court-Ordered Payments(Alimony, child support, including orders made by the state, and other court ordered payments)If court ordered and being paid, they are allowable. If payments are not being made, do not allow the expense. Child support payments for natural children or legally adopted dependents may be allowed. Review the court order.
Dependent Care(For the care of the elderly, invalid, or handicapped.)If there is no alternative to the taxpayer paying the expense.
EducationIt is required for a physically or mentally challenged child and no public education providing similar services is available. Also allowed only for the taxpayer and only if required as condition of employment. Example: An attorney must take so many education credits each year or they will not be accredited and could eventually lose their license to practice before the State Bar. A teacher could lose their position or in some States their pay is commensurate with their education credits.
Health CareRequired for the health and welfare of the family. Elective surgery would not be allowed such as plastic surgery or elective dental work. The taxpayer must provide proof of excessive out of pocket medical expenses. To determine monthly expenses, the total out of pocket expenses would be divided by 12. The Schedule A may also be used to determine the yearly expense. Ensure that the amount used is out of pocket after insurance claims are paid. Substantiate that payments are being made.
Involuntary DeductionsIf it is a requirement of the job; i.e. union dues, uniforms, work shoes. To determine monthly expenses, the total out of pocket expenses would be divided by 12.
Life InsuranceIf it is a term policy on the life of the taxpayer only.If there are whole life policies, these should be reviewed as an asset for borrowing against or liquidating. Life insurance used as an investment is not a necessary expense.
Secured or legally perfected debtsIf it meets the necessary expense test.Taxpayer must substantiate that the payments are being made.
Unsecured DebtsIf the taxpayer substantiates and justifies the expense, the minimum payment may be allowed. The necessary expense test of health and welfare and/or production of income must be met. Except for payments required for the production of income, payments on unsecured debts will not be allowed if the tax liability, including projected accruals, can be paid in full within 90 days. Examples of unsecured debts which may be necessary expenses include: Payments required for the production of income such as payments to suppliers and payments on lines of credit needed for business and payment of debts incurred in order to pay a federal tax liability.
TaxesIt is for current federal, FICA, Medicare, state and local taxes.Current taxes are allowed regardless of whether the taxpayer made them in the past or not. Delinquent state and local taxes are allowable depending on the priority of the FTL and/or Service agreement with the state and local taxing agencies.
Optional Telephones and Telephone Services (Cell phone, pager, Call waiting, caller identification or long distance)It must meet the necessary expense test.
Student LoansIf it is secured by the federal government and only for the taxpayer's education. Taxpayer must substantiate that the payments are being made.
Internet Provider/E-mailIf it meets the necessary expense test - generally for production of income. 
Repayment of loans made for payment of Federal TaxesIf the loan is secured by the taxpayer's assets when those assets are of reasonable value and are necessary to provide for the health and welfare of the family. 
5.15.1.11  (05-01-2004)
Determining Individual Income
1.For purposes of determining the taxpayers' ability to pay, total household income must first be determined. Refer to Section 5.1.15.1.4, Shared Expenses for a complete explanation of determining proportionate income and expense calculations. If the taxpayer refuses to provide total household income, allocate 50% (or an appropriate percentage based on the number of household individuals) of household expenses to the taxpayer.
2.Income consists of the following:
A.Wages - Wages include salary, tips, meal allowance, parking allowance or any other money or compensation received by the taxpayer as an employee for services rendered. This includes the taxpayer and spouse.
Note:
Use the following formulas to calculate gross monthly wages or salaries:
If paid weekly, multiply weekly gross wages by 4.3.
If paid bi-weekly (every 2 weeks), multiply bi-weekly gross wages by 2.17.
If income is sporadic or seasonal, use the annual income figure from the W-2 or the 1040 and divide by 12 to determine the average monthly income.
B.Interest and Dividends. Includes any interest or dividends that the taxpayer receives or that is credited to an account and can be withdrawn by the taxpayer and used for household expenses. The annual total should be divided by 12 to determine the average monthly income Look for brokerage accounts for dividends from publicly traded corporations and look for undisclosed bank accounts for interest payers.
Note:
If the interest bearing accounts are used as an asset, and the taxpayer will be withdrawing the funds from the account to reduce the tax liability, the dividends or interest would not be used in the income stream.
C.Net Income from Self-Employment or Schedule C. The amount the taxpayer earned after paying ordinary and necessary business expenses. This amount may be determined from an analysis of the Form 433-B or the Schedule C from the most current Form 1040. If the net business is a loss, enter " zero" . Do not enter a negative number.
Note:
If the 433-B is used or the taxpayer provides their own income and expense statement, it must reflect a sufficient time frame to accurately determine the monthly average that could be expected for the entire year.
D.Net Rental Income. The amount earned after paying ordinary and necessary monthly rental expenses. If it is a loss, enter a "zero" . Do not enter a negative number.
E.Pensions. Includes social security, IRA, profit sharing plans, etc. Pensions could be used as an asset or as part of the income stream. Refer to IRM 5.15.1.13, Business Expenses.
F.Child Support. Include the actual amount received in addition to other debts or bills the spouse is paying. For example, the court order assigns $200 a week for support but also requires all medical bills to be paid. In determining total expense, adjust the expense accordingly.
G.Alimony. Includes the assigned payments made by the non-resident spouse. However, consider if other bills are being paid, such as the mortgage, and adjust the expense accordingly.
Other. This could include payments from a trust account, royalties, renting a room, gambling winnings, sale of property, etc. Tax return information could include various sources of income.

IV. Some Real Life Examples:

Example No. 1  Single, no kids, $1,500/mo.
National Standards for Allowable Living Expenses$460
Texas - Housing and Utilities Allowable Living Expenses943
Allowable Living Expenses for Transportation:0
Ownership Costs336
Operating Costs & Public Transportation Costs332
Total$2071
Available for Plan0

Example No. 2  Single, no kids, $3,000/mo.
National Standards for Allowable Living Expenses$577
Texas - Housing and Utilities Allowable Living Expenses943
Allowable Living Expenses for Transportation:0
Ownership Costs336
Operating Costs & Public Transportation Costs332
Total$2188
Available for Plan$812

Example No. 3  Single, 1 kid, $3,000/mo.
National Standards for Allowable Living Expenses$794
Texas - Housing and Utilities Allowable Living Expenses943
Allowable Living Expenses for Transportation:0
Ownership Costs336
Operating Costs & Public Transportation Costs332
Total$2405
Available for Plan$595

Example No. 4  Married, no kids, 2 cars, $3,000/mo.
National Standards for Allowable Living Expenses$794
Texas - Housing and Utilities Allowable Living Expenses943
Allowable Living Expenses for Transportation:0
Ownership Costs475
Operating Costs & Public Transportation Costs-First Car338
Operating Costs & Public Transportation Costs-Second Car336
Total$2886
Available for Plan$114

Example No. 5  Married, 1 kid, 2 cars, $3,000/ mo
National Standards for Allowable Living Expenses$908
Texas - Housing and Utilities Allowable Living Expenses1,109
Allowable Living Expenses for Transportation:0
Ownership Costs336
Operating Costs & Public Transportation Costs-First Car338
Operating Costs & Public Transportation Costs-Second Car425
Total$3,116
Available for Plan0

Example No. 6  Married, 2 kids, 2 cars, $4,000/mo.
National Standards for Allowable Living Expenses$1,131
Texas - Housing and Utilities Allowable Living Expenses1,276
Allowable Living Expenses for Transportation:0
Ownership Costs336
Operating Costs & Public Transportation Costs-First Car338
Operating Costs & Public Transportation Costs-Second Car425
Total$3,506
Available for Plan$494

Example No. 6  Married, 3 kids, 2 cars, $4,000/mo.
National Standards for Allowable Living Expenses$1,319
Texas - Housing and Utilities Allowable Living Expenses1,276
Allowable Living Expenses for Transportation:0
Ownership Costs336
Operating Costs & Public Transportation Costs-First Car338
Operating Costs & Public Transportation Costs-Second Car425
Total$3,694
Available for Plan$306





V. Appendix: Nice summary of Bankruptcy Law changes from ABI
Get the following online at: http://abiworld.net/bankbill/changes.html

 
"Bankruptcy Abuse Prevention and Consumer Protection Act of 2005"
109th Congress-First Session
25 Changes to Personal Bankruptcy Law
1.Means Test for Chapter 7 Eligibility
The Trustee or any creditor can bring a motion to dismiss under ?707(b) if the debtor's income is greater than the state median income. Abuse is presumed if the debtor's currently monthly income (as determined by an average of the previous 6 months) less secured payments divided by 60, less priority debts divided by 60, less the allowed expenses permitted by the IRS, less certain other allowed expenses, is greater than $100 per month of a Chapter 13 plan. Debtors who meet this new standard would be shifted to 5 year repayment plan in Chapter 13.
If a debtor's income falls below the state median, the court may still find abuse but the creditors do not have the standing to file the motion.
In determining whether the median threshold has been reached, the law looks at the number of people in the debtor's household (which the census bureau defines to be all the people occupying a dwelling unit) compared to census figures adjusted by the CPI.
The presumption of abuse may only be rebutted by demonstrating "Special circumstances that justify additional expenses or adjustments of current monthly income."
2.Mandatory Credit Counseling
No individual may be a debtor under title 11 unless they have, within 180 days prior to filing, received credit counseling from an "approved nonprofit budget and credit counseling agency", either in an individual or group briefing. Said counseling agencies are to be approved by the U.S. Trustee. (There are exceptions where there is an emergency and the person could not receive counseling within five days, or where the U.S. Trustee has determined that the approved agencies are not adequate to provide the required counseling.) If a debt management plan is developed it must be filed with the court.
3.Limit on Auto Lien Stripping in Chapter 13
A Chapter 13 plan must provide that a secured creditor retain its lien until the payment of the entire debt, not just the secured portion, where the creditor holds a security interest in a motor vehicle purchased within 910 days of the filing.
4.Mandatory Debtor Education
The court may not grant a Chapter 13 discharge unless the debtor has completed an education course in personal financial management as approved by the U.S. Trustee. A debtor can be denied discharge under ?727 if the debtor fails to complete the course.
5.Scope of Discharge
Debts owed to a single creditor totaling more than $500 for luxury goods incurred within 90 days of filing are presumed non-dischargeable; cash advances of $750 within 70 days are similarly treated.
6.Serial Filings (Chapter 20)
A discharge will not be granted in Chapter 13 if the debtor obtained a discharge in Chapter 7, 11 or 12 within the 4 years prior to the date of filing of the pending case, or in a Chapter 13 case filed within 2 years of the pending case. This provision, though, does not prevent the debtor from filing a Chapter 13 case, and receiving the benefits of the stay, including the ability to cure arrearages on secured claims over a period of time.
7.Time between Discharge
Chapter 7 Debtor cannot receive a discharge if a prior discharge was received within 8 years (rather than 6) of the new filing.
8.Homestead Exemption
Debtors may elect state exemptions in the state in which they have lived for the 730 days prior to the bankruptcy. If they have moved during that 730-day period, the state exemptions are those for the state in which they lived the majority of the time for the 180 days before the 730-day period. Regardless of the level of state exemptions, the debtor may only exempt up to $125,000 of interest in a homestead that was acquired within the 1,215-day period prior to the filing, but the calculation of that amount does not include any equity that has been rolled over during that period from one house to another within the same state. For those who have violated securities laws of engaged in certain criminal conduct, the cap is $125,000, notwithstanding a higher State law allowance. To the extent the homestead was obtained through fraudulent conversion of nonexempt assets during the 10-year period before the filing, the exemption is reduced by the amount attributed to the fraud.
9.Reaffirmations
Section 524 now contains extensive new disclosures, detailing the rights that the debtor has and specifying the amount of debt reaffirmed, rates of interest, when payments will begin, filing requirements with the court, the right to rescind, a certification that the agreement does not impose an undue hardship on the debtor. Such agreements are presumed to create a hardship if the debtor's expenses including the reaffirmed debt exceed income. If there is such a presumption, the debtor must explain to the court why it can, nevertheless still afford to satisfy the debt (but no such requirement applies if the reaffirmed debt is owed to a credit union. The disclosure requirements are satisfies if "given in good faith." A creditor can accept payments under a non-compliant reaffirmation as long as the creditor "believes in good faith" that the agreement is effective.
10.Limit on Automatic Stay
The new law limits the application of the stay or provides that it does not go into effect, in certain circumstances, where there are serial filings under circumstances that would indicate bad faith or abusive filings. The stay terminates after 30 days if there is a filing by an individual in Chapter 7, 11 or 13 (but not Chapter 12) within 1 year after the prior case (under any Chapter) was dismissed (except for a case refiled in another chapter after a dismissal of a Chapter 7 case based on the means test). A party in interest (including the debtor) may move to extend the stay and show that the filing is in good faith. A case is presumed to be in bad faith for this purpose if more than one case was pending in Chapters 7, 11 or 13 (again, not in Chapter 12) and at least one such case was dismissed for failure to file required documents without substantial excuse, to provide adequate protection, or to complete a plan, and there is no showing that the debtor's financial situation has changed so as to allow a final discharge or completion of a plan. If two or more cases under any Chapter were dismissed during the prior year, the automatic stay does not go into effect at all until the court so orders after a hearing and a demonstration that the filing was made in good faith. The same bad faith factors noted above are also applicable to this determination. The law also provides that the stay will terminate if the debtor does not timely file (i.e., within 30 days after the petition date) its statement of intent with respect to property subject to a security interest and timely (i.e. within 30 days after the first date set for the ?341 meeting) complies with the stated intention. The court may extend the stay upon the motion of the trustee if the property is of the value to the estate and adequate protection is afforded to the creditor.
11.Notice to Creditors
Notice to be given by a debtor to creditors must be to the address designated by the creditor, either in communications to the debtor or by the creditors preferred address as provided to the court. Such notice to creditors must include account numbers.
12.Duration of Chapter 13 Plans
If the Chapter 13 debtor's income is greater than the state median income, the plan proposed must be for 5 years. On the anniversary date of a confirmed plan, a debtor must file a new statement of income and expenses.
13.Dismissal for Failure to file Documents and Schedules
In addition to the list of creditors, schedules of assets liabilities, income and expenses, debtors must provide:
a.certificate of credit counseling
b.evidence of payment from employers, if any, received 60 days before filing
c.statement of monthly net income and any anticipated increase in income of expenses after filing
d.tax returns or transcripts for the most recent tax year
e.tax returns filed during the case including tax returns for prior years that had not been filed when the cases began and
f.a photo ID, among other items.
Failure to provide the documents within 45 days after the petition has been filed (with a possibility of a 45-day extension) results in automatic dismissal of the case after the time period has passed.
14.Attorney Verification Required
Attorneys must make "reasonable inquiry to verify that the information contained" in petitions and schedules are "well grounded in fact." "The signature of an attorney on the petition shall constitute a certification that the attorney has no knowledge after an inquiry that the information in the schedules filed with such petitions is incorrect"
15.Disposable Income Test in Individual Chapter 11 Case
Under the newly-added ?1115, property of the estate includes, in addition to the property specified in ?541, all property "that the debtor acquires after the commencement of the case but before the case is closed, dismissed or converted" and "earnings from services performed by the debtor after the commencement of the case but before the case is closed, dismissed or converted." Under an amendment to ?1129, the plan must commit the debtor's disposable income for the 5 year plan period.
16.Debtor's Statement of Intent
Debtor must perform ?521 statement of intent as to secured property within 30 days after the date set for the first creditors meeting. Failure to either redeem the property of reaffirm the debt within 45 days after the ?341 meeting results in termination of the automatic stay (as noted above) and allows the creditor to exercise whatever remedies it has under applicable non-bankruptcy law, subject to a request by the trustee to extend the stay upon providing adequate protection to the creditor.
17.Domestic Support Obligations
Support obligations are a first priority, but the administrative costs of a trustee are paid ahead of the support costs to the extent that the trustee is administering assets that can be used to pay support costs. To the extent such support claims have been assigned to or are directly recoverable by a governmental entity, such claims are subordinated to the support of claims that are not assigned. The stay does not apply to the payment of a domestic support obligation from property that is not property of the estate or to the enforcement of a wage withholding order under a judicial or administrative order, or statute, including obligations accruing from both before and after the filing. Failure to remain current on support claims is grounds for conversion or dismissal of a case, the debtor must be current on post petitions obligations in order to confirm a plan, the plan must provide for priority payment or support debts (with a limited cram down available for claims assigned to or owed directly to a governmental unit), and the debtor may not obtain a discharge unless such obligations are paid in accordance with the terms of the plan.
18.Superdischarge in Chapter 13 Reduced
Debts for trust fund taxes, taxes for which returns were never filed or filed late (within two years of the petition date), taxes for which the debtor made a fraudulent return or evaded taxes; fraud and false statements under ?523(a)(2), unscheduled debt under ?523(a)(3), defalcation by a fiduciary under ?523(a)(4), domestic support payments, student loans, drunk driving injuries, criminal restitution and fines and civil restitutions or damages rewarded for willful or malicious personal actions causing personal injury or death are now excepted from discharge.
19.Attorneys as "Debt Relief Agencies"
Must disclose to the public tin advertising that "we help people file for relief under the Bankruptcy Code" They cannot advise a debtor to incur more debt in contemplation of bankruptcy. They must disclose all their costs, enter into as written contract with the debtor and disclose that an attorney is not necessary to file bankruptcy, among other disclosures.
20.Asset Protection Trusts
Under new ?548(e), a trustee can avoid the debtor's transfer in an interest in property made within 10 years of the filing if the transfer was made to a self-settled trust or similar device by the debtor for the benefit of the debtor and the transfer was made with the actual intent it hinder delay or defraud any creditor
21."Ride-through" Prohibited
The "fourth option" in Chapter 7 cases authorized by some circuits, to retain secured property without reaffirmation by continuing payments (installment redemption) is no longer allowed. The provisions of the ?521 and ?362 overlap, but are somewhat contradictory. ?362(h)(1) and ?521(a)(2) provide that the requirements to file the intention and timely perform it apply to any debt secured by property of the estate and that failure to comply terminates the automatic stay. ?521(a)(6) appears to set out a different process and time period for the subset of property secured by a purchase money security interest, but the rights provided there appear to be less generous than those already provided by the broader language in Sections 362(h)(1) and 521(a)(2), so it is not clear which would apply.
22.Changes in Treatment of Taxes
Taxes related to a fraudulent return or that the debtor attempted to evade are made non-dischargeable in Chapter 11. The debtor is required to pay administrative tax claims whether or not the government files a "request". The new law requires periodic cash payments of priority tax under Chapter 11 over not more than five years from the petition date and, in any event, under terms not less favorable than those accorded to the most preferred unsecured non-priority creditors (excluding "nuisance" claim payments). The rate of interest on tax claims is the rate specified under applicable non-bankruptcy law.
23.Eviction Proceedings
The stay will not prevent or halt a detainer action if the debtor failed to pay rent after filing.
24.Tax Returns Mandatory
The Debtor must provide a copy of their latest tax return or a transcript at least 7 days before the meeting of creditors or the case "shall" be dismissed. Said information must also be provided to any creditor who requests. All tax returns must be filed for a plan to be confirmed in Chapter 13. The debtor must file all returns from 4 years prior to the Chapter13 filing.
25.Nondischargibility of Student Loans Expanded
Student loan nondischargeability is extended to for profit and non-governmental entities.