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9th Cir BAP Rules on CMI for Self-Employed

Posted: Thu May 01, 2008 12:28 pm
by Yahoo Bot

to
do so would lead to absurd results. Forcing self employed debtors into 5
year plans when well healed Johnny paychecks with the same income are
allowed a three year plan strikes me as absurd result.
Patrick T. Green, Esq.
Fitzgerald & Green
Attorneys at Law
1010 E. Union Street
Suite 206
Pasadena, CA 91106
Tel: 626-449-8433
Fax: 626-449-0565
pat@fitzgreenlaw.com

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9th Cir BAP Rules on CMI for Self-Employed

Posted: Thu May 01, 2008 9:38 am
by Yahoo Bot

Footnote 11:
Until Form 22C is changed, one possible solution is for below-median debtors
to subtract the business deductions allowed under 1325(b)(2)(B) on
Schedule J from their current income. Above-median debtors should fill out
the remainder of Form 22C and utilize the Internal Revenue Service standards
under 1325(b)(3) and 707(b)(2)(A)(ii)(I) for Other Necessary Expenses,
as specified in the Internal Revenue Service Financial Analysis Handbook.
Arnold, 376 B.R. at 654-55. We leave open the possibility that bankruptcy
courts may take other approaches to redress the consistency of Form 22C with
Code 101(10A) and 1325(b)(2)(B).
Hale
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9th Cir BAP Rules on CMI for Self-Employed

Posted: Thu May 01, 2008 9:31 am
by Yahoo Bot

Time for a new version of B22.

Perhaps the upside may be that where business expenses exceed gross income and are part of the expense side of the disposble income calculation the debtor may not be prohibited from including the full amount of actual expenses (currently B22 limits buiness income to zero or a positive number) and may pass the Means Test.
Jon Hayes wrote:
Drummond v. Weigand (In re Weigand), --- B.R. --- (9th Cir. BAP Apr, 2008) Issue: Is the "applicable commitment period" determined by a self-employed person's gross income, i.e., gross receipts, or net income, i.e., net business income?

Holding: Gross income

Judge Raplh Kirscher, Montana
Jury, Pappas, Dunn
Opinion by Jury

The debtor is self-employed. His gross income makes him an "above-median" debtor. When business expenses are deducted, he is below-median. He proposed a three year chapter 13 plan and the trustee objected. The bankruptcy court confirmed the plan over the objection.

The BAP reversed. The code "provides that business deductions are taken from the debtor's current monthly income to arrive at disposable income under 1325(b)(2)." CMI is defined as all income irrespective of whether it is taxable. Section 1325(b)(2)(B) permits the deduction of business expenses when computing disposable income. "We start with the plain meaning rule and examine the statutory language in 101(10A) and 1325(b)(2). If the statutory language is clear, we must apply it by its terms unless to do so would lead to absurd results." "If business expenses are deducted from gross receipts to determine a chapter 13 debtor's current monthly income, then there would be no need for 1325(b)(2)(B), which provides for the same deductions. We conclude that 1325(b)(2) plainly and unambiguously requires a debtor to deduct business expenses from current monthly income."
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Time for a new version of B22. Perhaps the upside may be that where business expenses exceed gross income and are part of the expense side of the disposble income calculation the debtor may not be prohibited from including the full amount of actual expenses (currently B22 limits buiness income to zero or a positive number) and may pass the Means Test.Jon Hayes <Jhayes@polarisnet.net> wrote: Drummond v. Weigand (In re Weigand), --- B.R. --- (9th Cir. BAP Apr, 2008) Issue: Is the "applicable commitment period" determined by a self-employed person's gross income, i.e., gross receipts, or net income, i.e., net business income? Holding: Gross income Judge Raplh Kirscher, MontanaJury, Pappas, Dunn Opinion by Jury The debtor is self-employed. His gross income makes him an "above-median" debtor. When business
expenses are deducted, he is below-median. He proposed a three year chapter 13 plan and the trustee objected. The bankruptcy court confirmed the plan over the objection. The BAP reversed. The code "provides that business deductions are taken from the debtor's current monthly income to arrive at disposable income under 1325(b)(2)." CMI is defined as all income irrespective of whether it is taxable. Section 1325(b)(2)(B) permits the deduction of business expenses when computing disposable income. "We start with the plain meaning rule and examine the statutory language in 101(10A) and 1325(b)(2). If the
statutory language is clear, we must apply it by its terms unless to do so would lead to absurd results." "If business expenses are deducted from gross receipts to determine a chapter 13 debtor's current monthly income, then there would be no need for 1325(b)(2)(B), which provides for the same deductions. We conclude that 1325(b)(2) plainly and unambiguously requires a debtor to deduct business expenses from current monthly income."
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know-it-all with Yahoo! Mobile. Try it now.

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9th Cir BAP Rules on CMI for Self-Employed

Posted: Thu May 01, 2008 9:28 am
by Yahoo Bot

"Form 22C ought to be changed to comply with the statute."
_____

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9th Cir BAP Rules on CMI for Self-Employed

Posted: Thu May 01, 2008 9:16 am
by Yahoo Bot

Drummond v. Weigand (In re Weigand), --- B.R. --- (9th Cir. BAP Apr,
2008)

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