Editor:Scottie Sue Kleypas, EsquireJim Cole, EsquireRansom v. FIA Card Services, N.A., No. 09-907 (U.S. January 11, 2011), Kagan, J.
The U. S. Supreme Court held 8-1 that if a chapter 13 debtor wants to
take the standard automobile "ownership cost" as a deduction from
income in computing the disposable income that must be devoted to
repayment of creditors in a chapter 13 plan, he or she must owe money
for the purchase or lease of the vehicle(s) involved at the time the
case is filed. In its 2005 amendments to the Bankruptcy Code, Congress
directed that when computing disposable income, debtors must use
certain IRS tables for to determine the amountof "debtor's applicable
monthly expense amounts." "Applicable" was the key term that required
interpretation in this case. The IRS splits vehicle expenses into
separate categories of "ownership" and "operating" costs. The standard
amount for "ownership costs" is determined by the IRS from data on
monthly loan and lease payments. A separate standard amount for
"operating costs" is derived from all other vehicle expenses (e.g.,
maintenance). The circuits had split on how to interpret "applicable"
in this context. Some had ruled that "applicable" meant that the
ownership expense must actually exist; others, that "applicable" merely
directed use of the amount that corresponded to the debtor's situation
in the IRS table (e.g., ownership of 1 car, 2 cars, etc.). The
Supreme Court ruled that the first reading of "applicable" comported
better with the text and purpose of the statute than the second. The
Eighth Circuit had ruled the other way, connecting "applicable" with
the proper category of the IRS table rather than with the existence of
loan or leasing obligations. The Supreme Court's ruling prevented Mr.
Ransom from "sheltering" (the Court's term) approximately $28,000 of his
income from creditors over the life of his plan.
The Missouri Bar Courts Bulletin, 11-Feb