Notice: Due to COVID-19, we will be conducting all consultations via video, phone, or email. We are open and here to help people in these trying times. Please don’t hesitate to call us if you have any questions!

Recent U.S Supreme Court Decision

In the recent case of Ransom vs. FIA Card Services, N.A., the U.S. Supreme Court ruled that a consumer may not use the IRS "ownership expense" deduction for a vehicle when the consumer owns the vehicle but is not obligated, at the time of filing, to make any payments on the vehicle. In the 8-1 decision, the majority reasoned that such a deduction does not constitute an "applicable" expense under the Bankruptcy Code.

This decision will affect individuals wishing to file under both Chapter 7 and Chapter 13 who own their vehicle free-and-clear of any loan or lease obligation. In the context of Chapter 7, such individuals may now have more difficulty passing the "means test" because their "disposable income," a figure used to determine Chapter 7 eligibility, will now be higher as a result of the deduction being disallowed. In the context of Chapter 13, individuals may now be required to pay a larger amount to creditors in their repayment plan.

Categories: