September 6, 2008
10th Circuit BAP Rules That Debtor May Deduct Vehicle Ownership Table Even Though Vehicle is Owned Free and Clear
In re Pearson, --- B.R. ---, 2008 WL ----------- (10th Cir BAP, July, 2008)
Issue: May a debtor take the ownership deduction for a vehicle even though the vehicle is owned free and clear?
These are above-median chapter 13 debtors who are appealing the confirmation of their Third Amended chapter 13 Plan. On the B22, the debtors claimed ownership deductions for two vehicles. They intended to surrender one of the vehicles; the other vehicle was “fully paid.” When the trustee objected, the debtors decided to keep the vehicle they were paying on. The bankruptcy court ruled that they could not take an ownership deduction for the fully owned vehicle. They amended their plan to comply with this ruling. The amended plan proposed 54% to unsecured creditors. The amended plan was confirmed and the debtors appealed the denial of confirmation of the previous plan.
The BAP reversed. “The Debtors argue that the bankruptcy court erred because the wording of the statute specifically differentiates between ‘applicable’ and ‘actual’ monthly expenses and therefore, applicable expenses are all those that could apply regardless of whether such expenses are actual.” Applicable refers to the table which applies even though the IRS manual would not permit the deduction outside of bankruptcy. “We conclude that the Plain Language View is better reasoned.” “The means test refers to both ‘applicable expenses’ and ‘actual expenses.’” Congress knew what it was saying. The BAP said the IRS does not consider the bankruptcy code when it fashions its rules and Congress did not indicate that the IRS manual is to be followed when determining what may be deducted. Since Congress did not say “actual,” the “applicable” table may be used.
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