Lynch v. Jackson a Victory for Consumer Debtors

In Lynch v. Jackson, 2017 WL 59011, the Fourth Circuit handed a victory to consumer debtors considering whether debtors can use national and local standards for the means test when their actual expenses are lower.

The debtors earned more than the North Carolina median household income, so their Chapter 7 petition was subject to the expenses portion of the means test.  On Form 22-A-2, the debtors included the local standard mortgage deduction of $1548.00 when their actual mortgage expense was $878.00 per month.  The debtors also listed the local standard expense of $488.00 per month for each of their two cars, when their actual monthly auto loan payments consisted of $111.00 for one car and $90 for the other.

The trustee moved to dismiss their Chapter 7 petition as abusive, stating that a Chapter 7 debtor is “limited to deducting their actual expenses or the applicable National or Local standard, whichever is less.”

The bankruptcy court ruled for the debtors and the Fourth Circuit upheld the decision, holding that debtors are entitled to the full National and Local Standard amount for a category of expenses if they incur an expense in that category.  This is true even if the actual amounts incurred are less than the standard amounts.

If you have a bankruptcy question or need representation in a Chapter 7 or Chapter 13 bankruptcy, please do not hesitate to call the lawyers at Winslow & McCurry at (804) 423-1382.