On January 11, 2011, the United States Supreme Court decided the case of Ransom v. FIA Card Services. In this case, the debtor, Jason Ransom, filed for Chapter 13 bankruptcy (largely because under the means test, he was ineligible to file under Chapter 7). Because Chapter 13 requires the debtor to make payments to unsecured creditors – the amounts of which are determined by the means test – Ransom proposed that he would make monthly payments of $500 over five years.
The means test determines what payments are appropriate by measuring the debtor’s disposable income and deducting certain expenses. Here, Ransom sought to deduct a “vehicle ownership expense” of $471 against his disposable income. The trustee objected to this deduction.
The Court ruled in favor of the trustee, finding that a debtor may not invoke the car-ownership deduction when he is not making loan or lease payments on the vehicle in question. Additionally, it found that the car-ownership deduction only encompasses the costs of a car loan or lease. It does not include any other cost of owning a car.
Because at the time of his petition, Ransom owned his car outright, and therefore was not making any loan or lease payments, he was not entitled to take the vehicle ownership expense deduction.
Source: Ransom v. FIA Card Services, 131 S.Ct. 716 (2011).