Trustee Blog

Phantom Expense

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Riverside Bankruptcy Trustee Larry Simons and the Means Test automobile expense. The phantom deduction. Trustee Simons is also a debtor’s attorney. He knows how to construct a petition from the other side of the table and often asks a debtor about his means test. One of the questions he asks is if the client has an automobile expense. More specifically he asks about lines 23 and 24 of the Mean Test which talk about “Local Standards: transportation ownership/lease expenses”. While a debtor can take an expense for driving an auto on a different line in the means test, the debtor cannot take an expense for making a car payment, when he does not make a car payment. The means test instructions (Form 22A) seem to indicate that the expense would be allowed whether or not there is actually an expense paid by the debtor. However in “In re: Ransom” the matter was decided that the debtor cannot take this “phantom expense”.

In addition, according to the US Trustee  “Outside the Fifth, Seventh, and Eighth circuits, debtor cannot claim the vehicle ownership expense if the debtor does not have a secured loan or a lease on the vehicle”.

So Mr. Simons asks the debtor if he actually makes a car payment and if he does not, then Trustee Simons asks the debtor to delete the expense taken at lines 23 & 24 of the means test. Without a $400 to $500 expense taken at this line, then most debtors would fail the means test and the presumption of abuse would arise. So this mistake on the attorney’s part may push the client into Chapter 13 or dismissal instead of Chapter 7.

Practice Pointer:

Ask your client if he is making a car payment, do not assume that there is an expense.  This is an easy thing for the Trustee and US Trustee to check, so make sure that lines 23 & 24 are filled out correctly.

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