Reducing the current monthly income (CMI) by secured debt and priority claimsStep 4 in the means test is to determine the debtor’s monthly payments for secured debts and priority claims. It also includes any arrearages you (the debtor) may have on a secured debt to bring the debt current. Also included is the cost of administrative expenses in a Chapter 13 case. These calculations are included in Subpart C of Part V of Form B22A and Subpart C of Part IV of Form B22C. This monthly average is calculated by determining the total debt for 60 months and then dividing the total by 60. For each secured debt, divide the total obligation by 60 to determine the monthly amount. For debts with a term longer than 60 months, like a mortgage, the monthly payment is used. (The monthly payment X60/60 = monthly payment.) If an obligation has a term of less than 60 months, the total amount of the secured loan must still be divided by 60, regardless of the actual term. Be sure to include interest costs for the total debt. When entering payments on secured claims:
- In the case of a variable rate loan, use the loan rate in effect on the petition date.
- In the case of a balloon payment due within 60 months, use the full amount of the balloon to calculate the average payment.
- Include debts for luxury items. (Caveat: debts for luxury items may demonstrate a lack of good faith that could prevent confirmation or support dismissal.)
- Do not include payments on secured items that the debtor intends to surrender the collateral.