Bankruptcy

Recent Supreme Court Case

By mcbride

The Supreme Court handed down it?s decision in Ransom v. F.I.A. Card Services, N.A. dealing with calculation of the means test in a Chapter 13 case and, more particularly, the distinction between “Ownership Costs” deductions and “Operating Costs” deduction. The Debtor sought to take an “Ownership Costs” deduction for a car he owned free and clear in the amount of $471.00, which is the nationwide average of monthly loan and lease payments for vehicles. The Supreme Court held that in order to take an “Ownership Costs” deduction in a Chapter 13 case the Debtor must actually have a car loan or lease payment. Thus, the debtor?s plan could not be confirmed. From the Syllabus:

“Among his assets, Ransom reported a car that he owns free of any debt. In determining his monthly expenses, he nonetheless claimed a car-ownership deduction of $471, the full amount specified in the ?Ownership Costs? table, as well as a separate $388 deduction for car-operating costs. Based on his means-test calculations, Ransom proposed a bankruptcy plan that would result in repayment of approximately 25% of his unsecured debt. FIA objected on the ground that the plan did not directall of Ransom?s disposable income to unsecured creditors. FIA contended that Ransom should not have claimed the car-ownership allowance because he does not make loan or lease payments on his car. Agreeing, the Bankruptcy Court denied confirmation of the plan.The Ninth Circuit Bankruptcy Appellate Panel and the Ninth Circuit affirmed.”

The complete text to the Supreme Court?s opinion can be found at http://www.supremecourt.gov/opinions/10pdf/09-907.pdf.

Also of interest, this is the first judicial opinion of Justice Kagan.

Jeffrey A. Stewart

Full post as published by Texas Lawyer Blog on January 13, 2011 (boomark / email).