A potential client contacted me for a second opinion regarding her eligibility to obtain a Chapter 7 discharge. Her income was high enough to create an issue under what is known as the means test.

The means test is a mathematical calculation based on a debtor’s income for the six full calendar months prior to the month a bankruptcy is filed. The means test is designed to restrict the number of people who can obtain discharge of debt under Chapter 7.

The means test calculations involve both income and the application of various deductions.  One of those deductions is for the cost of vehicle ownership. It applies only if the debtor has a vehicle loan. The potential client had two vehicle loans, but her lawyer told her she could only use the deduction for one vehicle.

Much of the means test is based upon IRS standards and guidelines. Those IRS guidelines would generally limit a single debtor to a single vehicle. Despite those guidelines, and contrary to the advice she had received from her lawyer, I told her she had a strong case for being able to take the deduction for ownership of the second vehicle.

I based my advice on several factors. First, the statute itself, 11 U.S.C. § 707(b), makes no mention of IRS guidelines and does not direct the court to follow those guidelines.  The means test form itself, Form 122A-2, does not limit a single debtor to only one vehicle deduction. In fact, it has space for listing a second vehicle.

Finally, specific facts and equities of the situation could factor into any court’s decision on this issue.

We have clients who must be able to get to work and have four-wheel drive vehicles which have poor fuel efficiency. They use those vehicles during the winter but switch to a high-gas mileage motorcycle when the weather permits. Or, perhaps, she has dependent children of driving age who need transportation to school or work. In our society, one vehicle is often not enough for a family, even a family with only one adult.

With these considerations in mind, we then did a bit of legal research. We were able to find that there are bankruptcy courts which have held that a Chapter 7 debtor may deduct expenses to allow two vehicles for purposes of the means test.

There is almost never a problem that cannot be solved, with enough thought and effort.