Practice Area: Bankruptcy & Debt
Outcome: Case of First Impression
Description: See case No. 09-32592, United States Bankruptcy Court, Northern District of California, San Francisco Division. United States Trustee moved to dismiss case on grounds that client was not entitled to deduct mortgage on means test when surrendering the property. UST relied on 9th Circuit BAP decisions In re Smith and In re Martinez that found such a deduction was not permitted in Chapter 13. UST attempted to extend this to Chapter 7 in In re Hazen. Court ruled in client's favor. UST also moved to dismiss case for excessive disposable income, due to retirement contributions and repayments. UST relied on 9th Circuit In re Egebjerg. Court ruled in client's favor, finding the retirement contributions and repayments were permitted. This was the first post In re Smith in the Ninth Circuit case to permit deducting such a mortgage and helps many debtors qualify for chapter 7 bankruptcy.