Aiieeee!! Phantom Expenses Haunt Means Testing

Bankruptcy Judge Jury of the Central District has joined the majority of courts across the land in holding that a chapter 7 debtor may deduct, for purposes of means testing, expenses which the debtor has sworn elsewhere in her bankruptcy papers she has no intention of paying. The case is In re Wilkins, 2007 WL 1933591 (Bankr. C.D.Cal.).

Ms. Wilkins owned property in Georgia which she indicated in her Statement of Intention that she would surrender to the secured creditor, Ameriquest Mortgage. The payment to Ameriquest was $1,994.07 per month. If Ms. Wilkins was not allowed to deduct the amount of that payment, she flunked the means test.

The Court was called upon to interpret 11 U.S.C. §707(b)(2)(A)(iii), which states that for purposes of means testing: “The debtor's average monthly payments on account of secured debts shall be calculated as the sum of-(I) the total of all amounts scheduled as contractually due to secured creditors in each month of the 60 months following the date of the petition.”

The US Trustee took the position that “scheduled” refers to the bankruptcy schedules, and that since the schedules in that case reflected that the payment would not be made, it should not be deducted. Judge Jury followed the reasoning of the majority of the courts in ruling that “scheduled” has the Webster’s dictionary meaning, and that those mortgage payments were, indeed, scheduled to be made under the mortgage contract.

Does the phrase “scheduled as contractually due” seem clear and unambiguous in this context? Wilkins is part of a crowded field of cases in which “plain language” reasoning is applied to reach a result which seems contrary to the purposes of BAPCPA.