Source: https://www.scribnerbankruptcyblog.com/2009/11/when-can-a-creditor-file-a-means-test-motion-a-legislative-history-of-sections-707b6-and-707-b7.shtml
Timestamp: 2019-04-23 18:03:11+00:00

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When can a creditor file a means test motion? A legislative history of Sections 707(b)(6) and 707 (b)(7) | Peter R. Scribner, Esq.
On behalf of Peter R. Scribner, Esq. posted in Notes from BAPCPA on Tuesday, November 17, 2009.
Section 707(b) allows a Chapter 7 bankruptcy case to be dismissed as an abuse. Section 707(b)(2) allows a case to be dismissed if the debtor fails the "means test"; that is, if the debtor's income over the previous six months exceeds the expenses allowed by the IRS collection system, plus other expenses provided by the complicated means test calculation. Section 707(b)(3) allows a case to be dismissed if, under the totality of circumstances, the case is abusive. This usually means the debtor has actual ongoing income that exceeds actual necessary expenses, and that there is no special circumstance, such as unemployment or health issues, that justify a bankruptcy filing.
The Office of the United States Trustee, a division of the United States Justice Department, monitors abusive chapter 7 cases and always has standing to file a 707(b) abuse motion. But what about creditors? Can an aggressive creditor file a motion to dismiss a case, perhaps intending to pressure the debtor to settle with them? Yes, IF the debtor has higher income than the median for the state. However, there is a slight wrinkle in this provision when a debtor is married and files alone.
For a Section 707(b)(2) "Means test" motion, the non-debtor's spouse is counted in calculating whether the debtor is above the state median. If the debtor and non-debtor spouse's combined income is below median, no one (no creditor, no trustee, no US trustee) may file a "Means test" motion. But if the debtor's income, plus the non-debtor spouse's contribution to household expenses, do not exceed the state median, the US Trustee, and only the US Trustee, may bring a Section 707(b)(3) totality of circumstances motion.
These two limitations are located next to each other in the bankruptcy code, as Sections 707(b)(6) and 707(b)(7). But these two provisions, with their seemingly inconsistent results, arrived next to each other through different routes through the legislative history of the 2005 bankruptcy amendments. The issue may not come up often, but if it does, it is helpful for a debtor's attorney to know when a creditor may - or may not - file an abuse motion.
Only the judge or United States trustee (or bankruptcy administrator, if any) may file a motion under section 707(b), if the current monthly income of the debtor, or in a joint case, the debtor and the debtor's spouse, as of the date of the order for relief, when multiplied by 12, is equal to or less than... (B) in the case of a debtor in a household of 2, 3, or 4 individuals, the highest median family income of the applicable State for a family of the same number or fewer individuals..." [Emphasis added].
No judge, United States trustee (or bankruptcy administrator, if any), trustee, or other party in interest may file a motion under paragraph (2) if the current monthly income of the debtor, including a veteran (as that term is defined in section 101 of title 38), and the debtor's spouse combined, as of the date of the order for relief when multiplied by 12, is equal to or less than ... (ii) in the case of a debtor in a household of 2, 3, or 4 individuals, the highest median family income of the applicable State for a family of the same number or fewer individuals..." [Emphasis added].
In 2005, in anticipation of the implementation of the Bankruptcy Abuse Prevention and Consumer Protection Act ("BAPCPA"), I reviewed BAPCPA and presented a Continuing Legal Education seminar on the statute in Rochester, Buffalo, Syracuse and Corning. Among other things, I reviewed 'Thomas', the online service of the Library of Congress, and downloaded the text of the various bankruptcy statutes that had been introduced in Congress from 1997 through BAPCPA in 2005.
By reviewing changes in these various versions of bankruptcy bills over time, I believe that we can have some understanding as to how BAPCPA §707(b)(6) and §707(b)(7), with their slightly different wording, came about. The 2005 BAPCPA modifications to §707(b) were essentially identical to versions passed by one house or the other of Congress since 2001, and statutory variations in bills from 1999 through 2001 shed light oin how this language was settled on.
The first bankruptcy reform bill, which eventually produced BAPCPA eight years later, was introduced in the Senate October 21, 1997 by Senator Grassley of Iowa, among others. As introduced, Grassley's bill, S. 1301, amended §707(b) by deleting the party in interest limitation (the bill simply struck out "but not at the request or suggestion of a party in interest"). The initial bill did not include any limitation on any party bringing an abuse motion.
After notice and a hearing, the court - (A) on its own motion or on the motion of the United States trustee or any party in interest, shall dismiss a case filed by an individual debtor under this chapter; or (B) with the debtor's consent, convert the case to a case under chapter 13 of this title; if the court finds that the granting of relief would be an inappropriate use of the provisions of this chapter.
H.R. 3151 as passed by the House did not include any limitation on what party may bring a §707(b) motion.
H.R. 3151 was then passed in an extensively modified version by the Senate Sept. 23, 1998. This version changed §707(b) from "the court, on its own motion, or on a motion by the United States Trustee, but not at the request or suggestion of any party in interest" to "the court, on its own motion, or on a motion by the United States Trustee, or at the request or suggestion of any party in interest."
Only the judge, United States trustee, bankruptcy administrator or panel trustee may bring a motion under this section if the debtor and the debtor's spouse combined, as of the date of the order for relief, have current monthly total income equal to or less than the national median household monthly income calculated on a monthly basis for a household of equal size [emphasis added].
The House version of H.R. 3151 did not include any 'means test' provision, but the Senate version of H.R. 3151 included the short means test provision of S. 1301 (see paragraph 12, above).
A new bill, S. 625, was introduced in the Senate March 16, 1999. This version changed §707(b) from "the court, on its own motion, or on a motion by the United States Trustee, but not at the request or suggestion of any party in interest" to "the court, on its own motion, or on a motion by the United States Trustee, panel trustee or at the request or suggestion of any party in interest." This was essentially the language used in all later bills, including the 2005 BAPCPA legislation.
Only the judge, United States trustee, bankruptcy administrator, or panel trustee may bring a motion under this section if the debtor and the debtor's spouse combined, as of the date of the order for relief, have a total current monthly income equal to or less than the national or applicable State median family monthly income calculated on a monthly basis for a family of equal size [emphasis added].
On May 5, 1999, the House passed their own bankruptcy bill, H.R. 833. This bill included an extensive means test provision similar to S. 625, and a §707(b) safe harbor provision identical to S. 625, as set out in paragraph 20 above.
The safe harbor provision of H.R. 833, as passed by the Senate in 2000, was essentially the same language as the BAPCPA §707(b)(6).
(C) in the case of a debtor in a household exceeding 4 individuals, the highest median family income of the applicable State for a family of 4 or fewer individuals last reported by the Bureau of the Census, plus $525 per month for each individual in excess of 4.
On July 17, 2001, the Senate passed their version of H.R. 333, but with the same §707(b)(6) & (7) safe harbor language as S. 420.
A year later, on July 26, 2002, a conference committee of the House and Senate reported a compromise bill, which used the same §707(b)(6) & (7) safe harbor language as the original H.R. 333 as passed by the House.
The House passed H.R. 975 March 19, 2003, using the same §707(b)(6) and (b)(7) language as the House version and the Conference version of the 107th Congress' H.R. 333.
BAPCPA, as S. 256, was finally passed by the Senate March 10, 2005, and included essentially the same safe harbor provisions of §707(b)(6) and (b)(7) as the 2001 conference report.
From the very first bill introduced in 1997, the bankruptcy bills that lead up to BAPCPA all deleted the provision of the pre-BAPCAP Bankruptcy Code that limited to the court and the U.S. Trustee the standing to make, or even suggest, an abuse motion.
Below is a list that shows the chronological development, through various bankruptcy bills, of the language that eventually became §707(b)(6) and §707(b)(7).
As shown on the list above, all these bankruptcy bills, other than the 1998 House bill, included a provision that limited the right of parties other than the Court or the United States Trustee to file any §707(b) abuse motion to cases where the debtor income was above-median. Through 1999, the bills stated that in cases where a married person files individually, the limitation would be if the debtor and the non-filing spouse's combined income was above median. Starting in 2000, all bills calculated the limitation as being the debtor's current monthly income in an individual case.
As described above, a simplified "means test" was introduced in the very first 1997 Senate bankruptcy bill. The extensive means test that we now use, with six month pre-bankruptcy income compared to IRS expenses, was introduced in 1999 with S. 625. In 2001, a separate limitation on means test motions was first introduced. Prior to the 2001 limitation, a means test motion could have been made even if the debtor's income was below median.
I believe it would be correct to say that the means test was debated publically and in Congress far more than any other provision of the bankruptcy bills leading up to the passage of BAPCPA. The original means test proposals, prior to 2001, were not limited to above-median debtors. In theory, a modest income debtor with even more modest expenses might have been caught up in a means test motion.
In other words, §707(b)(6) and §707(b)(7) have their origins in two different aspects of the bankruptcy bills. The predecessor of §707(b)(6) was inserted at the very beginning of the process, to replace the pre-BAPCPA limitation on who can bring any abuse motion. §707(b)(7) was inserted for an entirely different purpose, to shelter below-median income debtors from the application of the means test.
Looking at it from this perspective, the slightly different language between how median income is calculated in §707(b)(6) and §707(b)(7) in a case where a married debtor files individually - only the debtor's CMI is used in §707(b)(6) and the combined debtor-and-spouse CMI is used in §707(b)(7) - is irrelevant: the two provisions are dealing with two separate issues and the fact that they are located next to each other in the statute is little more than a coincidence.
In any case, the limitation of §707(b)(6) was not some provision thrown into BAPCPA at the last minute. The language of §707(b)(6), which limits cases where a creditor can bring an abuse motion to those where the individual debtor's CMI is above median rather than the combined CMI of the debtor and a non-filing spouse, has been the standard language in every bankruptcy bill since 2000. The fact that bankruptcy bills 1997 through 1999 used language that calculated combined household median income, and the bills from 2000 through 2005 used language calculating the limitation as the debtor's individual CMI, shows that Congress must have considered both alternatives and intentionally chose the current language.
The language used in §707(b)(7) first arose in 2001. The House versions of the 2001 bankruptcy bill used the BAPCPA language, stating that the means test only applies if the debtor-and-spouse combined income is above median. The Senate bills in 2001 set the median income calculation at the debtor's individual CMI. It appears that in conference the House version prevailed.
Related Posts: New Means Test Figures: Median Income, Expenses Up in NY, When are Private Student Loans Discharged in Bankruptcy?, Blast from the Past: Elizabeth Warren on BAPCPA, Is a Sallie Mae Career Training Loan dischargeable in bankruptcy under BAPCPA?

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