Means Test and Attorney Fees

I wrote about attorney fees as a means test deduction some time ago.  BAPCPA's provision, codified at section 707(a)(2)(A)(iv) of the Bankruptcy Code, says that priority claims are deducted from income.  Priority claims include a Chapter 13 debtor's counsel's fees.  See sections 507(2), 503(b)(2), and 330(a)(4)(B).  Therefore, our attorney fees are a means test deduction. 

Oddly, the Means Test form B22C does not have a line for deducting our fees.  TheOfficial Forms Committee, at Page 17 of its report on its new forms, said that none was needed.

"The Chapter 13 form does not provide a deduction from disposable income for the
Chapter 13 debtor's anticipated attorney fees. No specific statutory allowance for such a
deduction exists, and none appears necessary. Section 1325(b)(1)(B) requires that disposable income contributed to a Chapter 13 plan be used to pay "unsecured creditors." A debtor's attorney who has not taken a security interest in the debtor's property is an unsecured creditor who may be paid from disposable income."

Thus the form has no place to deduct attorney fees.  See the means test form for Chapter 13, B22C, at Line 49 which is limited to prepetition priority claims, and also at Line 50 which limits deductible administrative expenses only to the Chapter 13 trustee's commission.  I question whether the form complies with section 707(a)(2)(A)(iv), but perhaps it makes no difference.  The fees get paid from B22C's bottom line, the projected disposable monthly income.

Some attorneys shoe-horn in a deduction for their Chapter 13 fees onto B22C.  This will comply with section 707(a)(2)(A)(iv) even if it violates the form.  Then, an argument would go, the fees are still unsecured claims which share in the resulting projected disposable monthly income under section 1325(b)(1)(B).

Astute readers will see that this is double-dipping a deduction for attorney fees, although it is a sound conclusion from the clear statutory text. 

It won't fly.  At least, it hasn't flown in the two cases I've seen.  In re Wilbur, 344 B.R. 650 (Bankr. D. Utah 2006); In re Alexander, 344 B.R. 742 (Bankr. E.D. N.C. 2006).  This plain reading would reach an absurd result contrary to Congress' manifest intent.

In the Chapter 7 context for above median debtors, I believe that the shoe-horn approach to insert priority anticipated Chapter 13 attorney fees in the Chapter 7 means test form B22A  is not only lawful but it can be an important benefit to the debtor if it leads to zero disposable income and the absence of a presumption of abuse. 

(Lines 44 and 45 of the Chapter 7 means test form B22A parallels Lines 49 and 50 of theChapter 13 means text form, B22C.   I believe that neither form comply with the required deduction for priority claims of 707(a)(2)(A)(iv) . )

By, L. Jed Berliner

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