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January 19, 2008

9th Circuit BAP Case on Vehicle Deduction in Chapter 13

Ransom v. MBNA America Bank (In re Ransom),  ---- B.R. ----  (9th Cir. BAP  December, 2007)

Issue:  Can an above-median chapter 13 debtor deduct “vehicle ownership expenses” for a vehicle owned free and clear when calculating his disposable income?                   

Holding:  No      

Judge Markell
Dunn, Baum, Montali
Opinion by Dunn

This over-median chapter 13 debtor had net I and J income of $504 per month.  His “B22C” or means test net income was $210 per month.  The B22C included a deduction of $471 for vehicle ownership expense even though the vehicle was paid off.  The debtor proposed a plan of $500 per month for 60 months which paid about 25% to unsecured creditors.  MBNA objected and the court denied confirmation.  The BAP granted leave to appeal the interlocutory order.

The BAP affirmed.  The opinion includes a nice summary of all of the cases on both sides of this issue.  The code says,  “[t]he debtor’s monthly expenses shall be the debtor’s applicable monthly expense amounts specified under . . . the Local Standards.”  “Applicable” modifies the meaning of “monthly expense amounts.” If we granted the debtor [a deduction for something he does not pay], we would be reading ‘applicable’ right out of the Bankruptcy Code.”

The debtor argued that a paid-off vehicle is going to require more maintenance and repairs and those expenses are not in the IRS tables otherwise.  The BAP rejected that. The BAP commented in a footnote, “Even the court in Wilson, which ultimately allowed the debtor the vehicle ownership expense deduction, admitted:
'The irony is palpable that Congress’[s] efforts to eliminate perceived abuses in the bankruptcy system by forcing debtors into Chapter 13 also diminishes payments to unsecured creditors by mandating the use of fictitious amounts of income and expenses.'”

 
    

January 19, 2008 in 9th Circuit Briefs | Permalink

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