U.S. High Court Hears Arguments On Vehicle Ownership Deduction Costs In Bankruptcy

U.S. High Court Hears Arguments On Vehicle Ownership Deduction Costs In Bankruptcy

WASHINGTON, D.C. -- A debtor who contends that the Bankruptcy Code provides for a deduction of vehicle ownership costs regardless of whether the debtor owns a vehicle and a creditor who objects to that deduction presented their arguments at the U.S. Supreme Court on Oct. 4, with both insisting that the language of the code supports their respective position (Jason M. Ransom v. MBNA America Bank, No. 09-907, Chapter 13, U.S. Sup.).

Jason M. Ransom filed for Chapter 13 bankruptcy in the U.S. Bankruptcy Court for the District of Nevada, listing as an asset a 2004 Toyota Camry, which he owned in full.  On his schedule for monthly disposable income, Ransom listed vehicle ownership costs as a deduction.

Creditor MBNA America objected to the confirmation of Ransom's plan, arguing that he should not be permitted to take a deduction for ownership expenses on the car.  The Bankruptcy Court sustained MBNA's objection, and the Ninth Circuit U.S. Court of Appeals affirmed.

Ransom then appealed to the U.S. Supreme Court.

Christopher P. Burke of Christopher P. Burke & Associates in Las Vegas, arguing for Ransom, told the Supreme Court that Congress, in enacting the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), created a formula that entails an aggregate set amount of expenses for an individual debtor, which includes vehicle ownership costs, irrespective of a debtor's actual ownership of a vehicle.

Justices Ruth Bader Ginsburg, Stephen G. Breyer, Antonin Scalia, Samuel Alito and Elena Kagan questioned Burke on his interpretation of the statute's wording.  Justice Ginsburg told Burke that it was unusual to allow a deduction for the purpose of calculating disposable income when a debtor does not have any actual expense.

Arguing for MBNA, Deanne E. Maynard of Morrison & Foerster in Washington said BAPCPA precludes Ransom from "shielding" his creditors from a monthly car payment for a vehicle he does not have.  Maynard contended that like other living expenses, such as food, clothing or housing, a debtor must have actual, legitimate expenses for those things to get the deductions available under BAPCPA.

[Editor's Note:  Full coverage will be in the Oct. 6 issue of the LexisNexis Bankruptcy Report.  In the meantime, the transcript is available at www.mealeysonline.com or by calling the Customer Support Department at 1-800-833-9844.  Document #80-101006-087T.  For all of your legal news needs, please visit www.lexisnexis.com/mealeys.]

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