Cengage Advantage Books: Business Law Today, The Essentials 10th Edition by Roger LeRoy Miller

تمرين 18

Ransom v. FIA Card Services, N.A.
FACTS Jason Ransom filed a petition in a federal bankruptcy court to declare bankruptcy under Chapter 13. Among his assets, Ransom reported a Toyota Camry that he owned free of any debt. In listing monthly expenses for the means test, he claimed a deduction of $471 for car ownership and a separate deduction of $388 for car-operating costs. Based on his means-test calculations, Ransom proposed a five-year plan that would repay about 25 percent of his unsecured debt. He listed FIA Card Services, N.A., as an unsecured creditor. FIA objected to Ransom's plan, arguing that he should not have claimed the car-ownership allowance because he did not make payments on his car. The court agreed with FIA and issued a decision in its favor. A Bankruptcy Appellate Panel and the U.S. Court of Appeals for the Ninth Circuit affirmed the decision. Ransom appealed to the United States Supreme Court.
ISSUE Can a debtor in bankruptcy claim the car-ownership deduction even though the debtor owns the car outright and does not make payments on it?
DECISION No. The United States Supreme Court affirmed the lower court's decision.
REASON The Supreme Court referred to tables of standardized expense amounts that a debtor could claim as reasonable living expenses and shield from creditors. The Bankruptcy Code limits a debtor's expense amounts to those that are "applicable," or appropriate. A deduction is appropriate only if the debtor will incur that expense during the life of the Chapter 13 plan. Because Ransom owned the car free and clear, the "Ownership Costs" category was not "applicable" to him, and he could not claim such an expense. The ultimate result was that confirmation of his repayment plan was denied. (Confirmation of repayment plans is discussed below.)
CRITICAL THINKING-Economic Consideration Should debtors with older vehicles be allowed to take an additional deduction for operating expenses? Explain.