The Supreme Court's Holding in Ransom v. FIA Card Services, N.A., 2011 U.S. LEXIS 608 (2011)

In this Emerging Issues analysis, Professor Kenneth N. Klee examines the Supreme Court's Holding in Ransom v. FIA Card Services, N.A., concluding that if a statute contains a definition of a term or concept that can have more than one interpretation, the Court may construe the statute in light of its text, context, and purpose, even if doing so undermines the debtor's fresh start.

Excerpt:

If a statute contains a definition of a term or concept that can have more than one interpretation, the Court may construe the statute in light of its text, context, and purpose, even if doing so undermines the debtor's fresh start.

Legal Background:

The Bankruptcy Code functionally requires that an individual chapter 13 debtor pay all projected disposable income to unsecured creditors under the chapter 13 plan. "Disposable income" is calculated by deducting from certain monthly income items certain monthly expense items in "amounts reasonably necessary to be expended." For a debtor whose current income is above the state median, the statute requires that "[t]he debtor's monthly expenses shall be the debtor's applicable monthly amounts specified under the National Standards and Local Standards, and the debtor's actual monthly expenses for categories specified as Other Necessary Expenses issued by the Internal Revenue Service for the area in which the debtor resides . . . ." The Local Standards are tables listing standardized expense amounts, including vehicle "ownership costs." The question presented in Ransom is whether a debtor who owns a car that is not subject to a loan or a lease may nevertheless deduct from projected disposable income the vehicle "ownership costs" specified in the Local Standards, thereby reducing the amount payable to unsecured creditors under the chapter 13 plan.

Facts and Proceedings Below:

Petitioner Jason M. Ransom ("Ransom") is a debtor residing in Nevada. Ransom filed for chapter 13 bankruptcy protection on July 5, 2006, listing $82,542.93 in unsecured debt which included a $32,893.76 claim with FIA Card Services, N.A. ("FIA Card Services"). Ransom reported net monthly income of $504.15, based on a monthly income of $2,806.84 (after payroll deductions) and net expenses of $2,302.69. Ransom also reported a total monthly income of $4,248.56, and total monthly deductions of $4,038.01, resulting in a projected $210.55 of monthly disposable income. Ransom's deductions included a $471 deduction for "vehicle ownership expenses." Ransom owned a 2004 Toyota Camry free and clear of any liens. [footnotes omitted]

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