We have the first decision out of the Western District of Oklahoma addressing the deduction of secured debt that the debtor intends to surrender in the Bankruptcy. The case is In re: Galyon, decided by Judge Weaver March 22, 2007. (Judge Weaver got it right, by the way, he ruled for the Debtor.)
Like several of the cases before it Galyon flirts with the idea of examining the debtor’s financial position (income and expenses) retrospectively and prospectively. So far, though, none of the opinions has used this issue to make sense of the intersection of the Means Test and I and J.
When BAPCPA was first passed it appeared that the Means Test should be completely retrospective. After all, it defines income in terms of all income received by the debtor in the six complete months prior to the time the Bankruptcy was filed. It doesn’t say, if those six months are typical or if the Debtor still has that income. It is a carved in stone formula, and it doesn’t make sense to say that you use pre-petition income and expenses from a different time period when income might be completely different. (Yea, yea, I know trying to make sense out of BAPCPA is a 0% argument. I keep trying.)
Ok, so the Means Test is retrospective and I and J is prospective. Got it. This makes sense. The Means Test determines whether the Debtor should have been making payments prior to filing, and I and J determines whether or not the Debtor has the capacity after filing to pay his debts.
Except it didn’t seem to work that way. To date, there have been at least a half dozen opinions on this very issue. Most have come down on the Debtor’s side. None of them have taken the position which seems very supportable by the Statute that the Means Test is retrospective and I and J prospective. It is simple. It is easy. It makes sense — It can’t possibly have anything to do with the new BK Code.
Instead, Judge Weaver relied on the plain language of the Statute. Of course, most of the courts to decide the issue have said that. Some of them, have done a better job of torturing the plain language than others. Judge Weaver, siding with the emerging majority, found that “scheduled as contractually due” means that if the Debtor was contractually obligated to pay the debt — its deductible.
Ok, so now who is going to be the first person to try to deduct the full amount of an accelerated mortgage?