## Facts

- Gabriel and Monte Jackson filed a Chapter 7 petition in the Eastern District of North Carolina.
- Because their income exceeded the state median for a family of four, they completed the Chapter 7 means test (Official Form 22A).
- On the means test, the Jacksons claimed the full IRS National and Local Standards amounts for certain expense categories even though their actual expenses in those categories were lower.
- The Bankruptcy Administrator, Marjorie K. Lynch, moved to dismiss the case as abusive under 11 U.S.C. § 707(b), arguing standardized deductions cannot exceed actual expenses and that Form 22A’s contrary instructions were wrong.
- The bankruptcy court denied the motion, concluding the deductions were permitted by the text of 11 U.S.C. § 707(b)(2)(A)(ii)(I).
- The parties obtained certification for a direct appeal to the Fourth Circuit under 28 U.S.C. § 158(d)(2).

## Issues

1. Whether 11 U.S.C. § 707(b)(2)(A)(ii)(I) allows an above-median-income Chapter 7 debtor to claim the full IRS National and Local Standards amounts for expense categories when the debtor’s actual expenses are lower, so long as the debtor incurs an expense in the category.

## Decision

- The Fourth Circuit affirmed the bankruptcy court’s denial of the motion to dismiss.
- The court held that debtors may claim the full National and Local Standard amount for an expense category if they incur an expense in that category.
- The court reasoned that the statute’s use of “applicable” for National/Local Standards, contrasted with “actual” for Other Necessary Expenses, shows Congress did not require matching standardized deductions to a debtor’s real spending.
- The court rejected the argument that a case is abusive under § 707(b) merely because standardized allowances exceed actual expenditures when the means test is completed according to the statute.

## Legal Principles

- Under 11 U.S.C. § 707(b)(2)(A)(ii)(I), “applicable” monthly expense amounts specified under the IRS National and Local Standards are fixed allowances keyed to debtor characteristics (such as household size and location), not the debtor’s actual spending level.
- When Congress requires expense deductions to be based on real expenditures, it does so expressly by using “actual monthly expenses” (as with “Other Necessary Expenses”).
- A debtor may take the full IRS National/Local Standard deduction for a category only if the debtor incurs some expense in that category; the deduction is not available for a category with no expense.
- Compliance with the statutory means test framework controls the presumptive abuse inquiry under § 707(b)(2), even if standardized amounts sometimes exceed actual costs.

## Conclusion

The Fourth Circuit held that above-median Chapter 7 debtors who incur expenses in a National or Local Standards category may deduct the full standardized amount on the means test, and a case is not abusive under § 707(b) solely because those standardized deductions exceed the debtor’s actual expenses.


Lynch v. Jackson, 853 F.3d 116 (4th Cir. 2017)