In the Chapter 7 bankruptcy case of Altman, Daniel L.; In re, the bankruptcy court told the debtor to convert their Chapter 7 bankruptcy case to a Chapter 13 bankruptcy within 30 days or face a dismissal of their case.
The details of the bankruptcy case:
A debtor who earns an above-median income filed Chapter 7 bankruptcy and when taking the Means Test deducted $3,273 in mortgage payments for property he intended to surrender during the bankruptcy. The bankruptcy trustee asked the court to dismiss the debtor's Chapter 7 bankruptcy case because there was a presumption of abuse, citing the $3,273 mortgage payment deduction on the Means Test. The bankruptcy trustee argued that since the debtor would not be making those payments after bankruptcy because he clearly intended to surrender the property, he was simply trying to avoid paying creditors by placing the mortgage payment on his Means Test.
However, the bankruptcy court found that there was no presumption of abuse in that case because the bankruptcy law allows the debtor to include payments on their Means Test for property they intend to surrender. However, that fact does not prevent the bankruptcy court from considering the fact that the property will be surrendered in bankruptcy freeing up the cash which can be used to repay creditors.
"In calculating monthly income under the means test, the plain language of Section 707(b)(2)(A)(iii)(I) allows debtors to deduct payments due on secured debts notwithstanding the debtor's intention to surrender the collateral. However, despite finding that a presumption of abuse does not arise in the instant case, the court may still find the case abusive pursuant to Section 707(b)(3)."
The bankruptcy court found that the debtor had the ability to repay at least some of their unsecured debt and ruled that it would be abusive to grant the debtor a Chapter 7 bankruptcy discharge.