On January 11, 2011, the U.S. Supreme court ruled that the Means Test (used in bankruptcy to determine a person’s ability to pay) allows the owner of a vehicle without a loan against it to claim an “operating expense” but not an “ownership expense.” That same person would be entitled to both expenses if there was a monthly payment attached to the car. The impact of the decision is to make the Means Test stricter thereby forcing more people to propose payments plan under chapter 13.
On June 10, 2010, the U.S. Supreme Court decided the case of Hamilton v. Lanning. The court’s ruling interpreted the Means Test (used in bankruptcy to determine ability to pay) to be a mechanical test relying on a person’s average income for the 6 months prior to filing. The court also held that a bankruptcy judge may consider changes in a person’s income or expenses that are certain or virtually certain to occur in determining ability to pay.