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Access to Utility Service: 13.1.1 Importance and Definition of Manufactured Homes

Manufactured homes are an important source of housing for low-income Americans. There are currently over eight million manufactured homes in the United States, almost seven million of which are occupied.1 Many people choose these units because they seek the security and privacy of homeownership at a fraction of a conventional home’s upfront cost.2 Many others do so because they have few other affordable housing options.

Access to Utility Service: 13.1.2 Unique Utility Issues Generally Apply to Homes Sited on Rented Land

The ownership arrangements of manufactured housing often differ from that of other residential structures. Both the manufactured home and the land on which it is sited may be owned by the resident or each may be rented, sometimes from one party and sometimes from two different owners. Often the home is owned by the resident but the land on which it is sited is owned by another, and the resident homeowner rents the lot where the home sits. When manufactured homes are sited on land owned by the homeowner, utility issues are generally the same as those applying to site-built homes.

Consumer Bankruptcy Law and Practice: 13.4.5.3.7 Deduction for administrative expenses

If a debtor is eligible to file chapter 13, the debtor may deduct administrative expenses that would be incurred in a chapter 13 case in the district where the debtor resides, subject to a cap on such expenses of ten percent of projected plan payments.222 This amount should include payments for attorney fees to debtor’s counsel. If the debtor is not eligible to file a chapter 13 case, the debtor can argue that chapter 11 administrative expenses should be deducted as a special circumstance.

Consumer Bankruptcy Law and Practice: 13.4.5.3.8 Deduction for education expenses

The debtor may deduct actual public or private school educational expenses of up to $2275 per each child under eighteen years of age.224 The debtor must provide documentation of such expenses and a detailed explanation of why such expenses are reasonable and necessary, and why such expenses are not already accounted for in the IRS national standards, local standards, or other necessary expenses.

Consumer Bankruptcy Law and Practice: 13.4.6.1 Presumption of Abuse

A presumption of abuse arises under the means test if the debtor’s current monthly income after all monthly allowed expenses are deducted, multiplied by 60, is the lesser of $15,150 or 25% of non-priority unsecured debt, as long as that 25% is at least $9075.227 For debtors with $60,600 or more in general unsecured debt, a presumption of abuse arises if the amount is $15,150 ($252.50 per month) or more.

Consumer Bankruptcy Law and Practice: 13.4.6.2 Rebutting the Presumption of Abuse

To rebut the presumption of abuse if a motion to dismiss or convert is filed, section 707(b)(2)(B)(i) states that the debtor must demonstrate that “special circumstances” exist that would cause the debtor to fall below the presumed abuse tolerances set by the means test formula. The special circumstances must “justify additional expenses or adjustments of current monthly income for which there is no reasonable alternative.”228 This standard is essentially a reasonableness test and significant discretion is vested in the court.

Consumer Bankruptcy Law and Practice: 13.4.6.3 Discretionary Dismissal

Section 707(b) states that the court “may” dismiss a case if it finds that the granting of relief would be an abuse. The discretionary language of section 707(b) means that a case will not necessarily be dismissed even for a debtor who has triggered the presumption of abuse and has not rebutted that presumption through special circumstances. For example, courts have refused to dismiss a debtor’s chapter 7 case when conversion to chapter 13 would not result in any payments to creditors.245

Consumer Bankruptcy Law and Practice: 13.4.7.1 No Challenges Based on Ability to Pay for Debtors with Incomes Below Median Income

With the new specific means testing provisions, debtors should not be subjected to section 707(b) motions based on ability to pay if their incomes fall below the median income threshold. There are numerous statements in the legislative history that means testing applies only for debtors with incomes above the median income.246 Congress has now set specific guidelines for who should be determined able to pay debts.

Consumer Bankruptcy Law and Practice: 13.4.7.2 Substantial Abuse Standard Changed to Abuse Standard

A case may now be dismissed under section 707(b) of the Code for “abuse,” rather than for “substantial abuse.”248 This change is not likely to affect the result of section 707(b) motions, because few courts placed much weight on the requirement that the abuse be “substantial.” The term “abuse” denotes conduct sufficiently deplorable that a court would not accept it; no court had held under prior law that a debtor’s petition was an abuse but could nonetheless be permitted because it was not a substantial abuse.

Consumer Bankruptcy Law and Practice: 13.4.7.3 Elimination of Explicit Presumption Favoring the Debtor

The 2005 amendments also eliminated the language in former section 707(b) that established a presumption in favor of granting a discharge to the debtor.249 Congress had intended this presumption to limit the use of section 707(b) challenges only to egregious cases, but courts had largely ignored this presumption. It is not clear what the elimination of the language does, except in cases in which a presumption of abuse under the means test arises. In other cases, the moving party will still have the burden of proof.

Consumer Bankruptcy Law and Practice: 13.4.7.5 Dismissal for an Abusive Rejection of an Executory Contract

Section 707(b)(3) adds a new provision providing for dismissal based on a rejection of an executory personal services contract. Dismissal based on these grounds was a compromise reached by Congress on an issue related to music recording contracts rejected by debtors. A case may be abusive if a contract is rejected for reasons other than the financial need of the debtor. This provision only applies in chapter 7, because section 103(a) of the Code limits the applicability of provisions in chapter 7 to chapter 7 cases.

Consumer Bankruptcy Law and Practice: 13.4.8 Procedures for Means Testing Under Section 707(b)

The bankruptcy clerk must provide written notice to creditors within ten days after the filing of the petition when the case is presumed to be abusive.265 This notice is based on the Statement of Current Monthly Income and Means Test Calculation, which requires the debtor to indicate whether a presumption of abuse arises.266 This statement may be amended if an initial calculation proves to be incorrect.

Consumer Bankruptcy Law and Practice: 13.7.1 Conversion from Chapter 7 to Chapter 13

Chapter 13 relief may be sought through conversion from a chapter 7 case. Any debtor who has begun a chapter 7 case may convert it to a chapter 13 case at any time during the case, provided the debtor is eligible for relief under chapter 13.296 The procedure for obtaining conversion requires a motion to convert, and the conversion is not effectuated until the motion is granted.297

Consumer Bankruptcy Law and Practice: 13.7.2 Conversion from Chapter 13 to Chapter 7

The debtor has an absolute right to convert a chapter 13 case to chapter 7,309 without any showing of hardship, and in many respects such a conversion provides the same relief as the chapter 13 hardship discharge.310 If only one of two joint debtors wishes to convert to chapter 7, the case can be converted for that debtor and can continue under chapter 13 for the debtor who does not wish to convert.311 The Bankruptcy Rules provide that the debtor n

Consumer Bankruptcy Law and Practice: 15.1 Introduction

Ultimately, the principal goal of most bankruptcies is the discharge, which frees the debtor from personal liability on almost all debts. It is this clean slate that normally gives debtors the fresh start that bankruptcy is meant to provide. The Bankruptcy Code expanded the protections of the discharge in an effort to help debtors further and to prevent creditors and others from vitiating its benefits.

Consumer Bankruptcy Law and Practice: 15.2.2.3 Unjustified Failure to Keep Books or Records As to Finances—11 U.S.C. § 727(a)(3)

The Code provides for denial of discharge if the debtor has “concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information” concerning their finances, but only if such act or failure to act was not justified under the circumstances.57 The exception to the general rule, which excuses the failure to keep records if it was “justified,” has prevented the application of this subsection in most consumer cases.