Homeowners no longer can included mortgage payments for properties they have surrendered in order to qualify under the Means Test. In a Chapter 7 bankruptcy, there is a limit to the income level an individual can have in order to qualify for this chapter of bankruptcy. If a person's income goes above this median income limit, your Chapter 7 Bankruptcy attorney can deduct various monthly expenses in order to determine if you qualify under the Means Test.
The most common (and helpful) deduction is a mortgage payment. Many homeowners, including those who walked away from their homes, would deduct their mortgage payment to qualify for a Chapter 7. The Middle District of Florida has called this practice into question. In a new Order, the bankruptcy court ruled that a homeowner who elects to surrender his property and has moved on and lives in a new home is not intending to actually make these payments, so he cannot use them to qualify under the Means Test.
The debtor argued that his mortgage payment is still a valid deduction because he has an enforceable contract with the bank. The Court ruled, however, that a debtors cannot claim an expense that they will not actually make to qualify under Chapter 7. The Order leaves some room for interpretation and says the ruling is fact specific. This debtor declared that he intended to surrender the property. He was also already living in a rental property. The Order does not address the issue of homeowners still living in their properties that may file for bankruptcy to open up the opportunity of entering into a loan modification or reaffirmation agreement that they can afford. The case in question is the following: 6:11-01403 . Hopefully, the Court's ruling won't impact homeowners that turn to bankruptcy in hopes of getting back on track on a mortgage that has started to fall behind.