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Ransom v. MBNA Bank (9th Cir. - Aug. 14, 2009)

By Shaun Martin

When you file for bankruptcy under Chapter 13, you get to deduct from your projected disposable income the "ownership costs" of a vehicle; e.g., lease or loan payments. But do those costs also include the costs of owning a vehicle you own free and clear?

This is an issue that's beguiled courts for several years, and on which the various circuits are intractably split. The Ninth Circuit joins the fray today, holding that the answer is "no".

Judge Trott ends his opinion in an interesting way, which I thought had some validity and which I'll share. He says:

"The 'correct' answer to the question before us, which the courts have been struggling with for years?at the unnecessary cost of thousands of hours of valuable judicial time?depends ultimately not upon our interpretation of the statute, but upon what Congress wants the answer to be. We would hope, in this regard, that we the judiciary would be relieved of this Sisyphean adventure by legislation clearly answering a straightforward policy question: shall an above-median income debtor in chapter 13 be allowed to shelter from unsecured creditors a standardized vehicle ownership cost for a vehicle owned free and clear, or not? Because resolution of this issue rests with Congress, we have taken the unusual step of directing the Clerk of the Court to forward a copy of this opinion to the Senate and House Judiciary Committees."

I liked this out-of-the-box thinking, and there's definitely no downside to it. Though I also had the following two brief thoughts. First, as far as I can tell, the dispute on this point has only existed for years, not decades, so I'm not sure it's as desperate (or unusual) as Judge Trott's conclusion might make it appear.

Second, as I was reading the opinion, I actually had a slightly different reaction than Judge Trott. My reaction was: "Even though this is a piddling dispute, it seems common enough, and the circuits are surely split, so this looks like a case the Supreme Court should take up." Which seems both more likely than Congress taking it up and perhaps the usual course. What I traditionally expect in cases like this is that the matter percolates for a while, the circuits either reach a consensus or solidify the split, and then the Supreme Court steps in to resolve the matter -- at which point Congress can act to change the result if it doesn't like it.

There's no reason, of course, that Congress couldn't step in earlier. And I agree that doing so would be a good idea; assuming, of course, there's no tradeoff with something more important (e.g., getting out of a recession, dealing with multiple ongoing wars, etc.). So, again, I'm not at all against what Judge Trott's done here. But if it were me, I might also have added something like: "Barring prompt Congressional disposition, we would also suggest that this matter is worthy of prompt resolution by the Supreme Court; moreover, that the present case would be an appropriate vehicle in which to do so."

If Congress wants to pass a statute after the Court has granted certiorari, all the better. But at least this way we'd know that, one way or another, we'll get an answer.

Just a suggestion. Again: I like Judge Trott's creativity here.

Full post as published by California Appellate Report on August 14, 2009 (boomark / email).