ADJUSTMENTS TO PERMISSIBLE EXPENSES FOR MEANS TEST, CALCULATION OF DISPOSABLE INCOME

Where the means test or the disposable income calculation, as determined by the IRS standards and the § 707(b) permissible expenses pursuant to Official Forms B22C or B22A (see Folder 2 on CD), comes out substantially larger than the debtor’s actual ability to pay as shown by the actual income and expenses on schedules “I” and “J,” in some cases it is because the debtor is actually spending more than the IRS standards or 707(b) expense guidelines allow. In that case, how much discretion does the court have to allow the excess spending? An argument can be made that, for good cause, the court can vary from the limitations of the IRS standards and the 707(b) expense guidelines. Code § 1325(b)(2)(A)(i) provides that the plan may provide for such expenditures as may be necessary “for the maintenance or support of the debtor or a dependent of the debtor …” . Code § 1325(b)(3) provides that, where the debtor’s current monthly income is greater than the state median, the “Amount reasonably necessary to be expended under paragraph (2) shall be determined in accordance with subparagraphs (A) and (B) of section 707(b)(2)…” Turning to subparagraphs (A) and (B) of § 707(b)(2), we read at § 707(b)(2)(B), “In any proceeding brought under this subsection, the presumption of abuse may only be rebutted by demonstrating special circumstances …” The “special circumstances” may be “such as” a serious medical condition, or a call to active duty. Note that the language does not explicitly list medical condition or active military duty as the only two circumstances that may constitute special circumstances, but anything “such as” these to examples. Another element of discretion is found at § 707(b)(2)(A)(ii) which provides for a 5% adjustment upward for food and clothing if reasonable and necessary. Finally, Code § 707(b)(2)(A)(ii) provides that the expenses may include the IRS standards for a category called “Other Necessary Expenses.” The U.S. Trustee’s web site for IRS Guidelines has a link to a special page of the IRS web site containing expense guidelines for use in bankruptcy cases. However, neither the Trustee’s page nor the IRS page appears to make reference to, or have a link to, the “other necessary expenses.” To find the other necessary expenses, refer to IRM § 5.15.1.10. The IRS “Other necessary expenses” may be found at the following link: http://www.irs.gov/irm/part5/ch15s01.html#d0e175066