The amount of paperwork involved in bankruptcy can be daunting, and it is so easy to make a mistake. The court in Morris v. Quigley shows us that it is extremely important to report all of your finances correctly in your bankruptcy documents.
Our experienced Los Angeles bankruptcy attorneys know the law and can help your prepare your bankruptcy paperwork the right way.
Morris v. Quigley is a case arising out of a bankruptcy filing in West Virginia. The main issue in question was whether it is reasonable for the debtor to deduct monthly payments in the calculating of disposable income where she will not actually be making the future payments. Disposable income is defined as the amount of income available after taxes are deducted.
The facts of this case begin when Debtor filed for Chapter 13 bankruptcy. When deciding to file for bankruptcy in Los Angeles, the decision of what to file under can be very confusing. Chapter 13 is a type of bankruptcy that allows the individual to financially reorganize under the guidance and supervision of a trustee. This is only available to individuals who have regular income and have a certain fixed amount of unsecured and secured debts. Through the bankruptcy process the debtor is responsible for making a plan where the debtor agrees to pay the trustee a portion of their future earnings to be used in paying back their creditors.
A trustee is a bankruptcy court appointed representative responsible for administering to the estate that is involved in the bankruptcy proceeding. The trustee must distribute the future earnings received from the debtor proportionally to the debtor's creditors. Additionally, they are responsible for managing negotiations to ensure the compliance with the law and the bankruptcy court ruling. In this case, the trustee is suing the Debtor for misrepresenting her projected disposable income.
Morris ("Debtor") completed her bankruptcy paperwork and appropriately listed all of her personal property on her Schedule B form. She included her two all-terrain vehicles ("ATVs") and a vehicle she owned with her ex-boyfriend. She consequently listed these three vehicles in her Schedule D, where the debtor is responsible for listing all secured debts. Debtor listed the two ATV's and the vehicle as debts that she would be responsible for making future monthly payments on.
Through an appropriate investigation, the trustee found that the vehicle listed on the Debtor's Schedule B and D was in the possession of the Debtor's ex-boyfriend, and he was making payments on the vehicle. Furthermore, the ATV's Debtor owned were being surrendered as part of her bankruptcy. Because of this surrender, Debtor would not be required to continue payments on them. Therefore, Debtor misrepresented these facts when she indicated that she would be held responsible for making these monthly payments. This substantially lowered Debtor's projected future income that was represented in her bankruptcy filing.
Debtor argued that this was a minor mistake in reporting that would not lead to a "senseless result" yet this court disagreed. Conversely, the Trustee argued that the Debtor did not accurately portray her proposed disposable income.
The main question in this case was whether the projected disposable income must equal the debtor's disposable income or if it is acceptable for this projected disposable income to reflect any changes that will occur. This Fourth Circuit court held that the phrase "projected disposable income" takes into account the past events but allows for future adjustments in Debtor's income or expenses that will affect to the final outcome.
In this case, it was held that the Debtor is required to accurately report all payments she puts on her schedule B. Morris instructs that in the Fourth Circuit, a debtor cannot deduct monthly payments from her projected disposable income where she will not in fact be required to make the payments, regardless how minor the payments may seem.
Although every circuit analyzes and applies the law a little differently, this case shows the problems that can be created in your Los Angeles bankruptcy when you do not have an experienced and knowledgeable bankruptcy attorney fighting for your rights.