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Supreme Court Rules On Chapter 13 Vehicle Expense

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An issue confronted by Chapter 13 debtors with above median income and no loan or lease payment on their vehicle has finally been answered by the United States Supreme Court.

In In Ransom v. FIA Card Services, N.A., No. 09-907, 562 U.S. _____ (2011), the issue was “whether a debtor like petitioner Jason Ransom who owns his car outright, and so does not make loan or lease payments, may claim an allowance for car-ownership costs (thereby reducing the amount he will repay creditors).”

Justice Elena Kagan delivered the opinion of the Court finding that Chapter 13 debtors who do not have car loans or leases may not claim the ownership expense allowance under the means test.

This case is a loss for potential Chapter 13 debtors because it means that they cannot claim the ownership expense any longer and, therefore, must pay their creditors a larger portion of their income. Although some Trustees and courts were already following this rule, the law is now settled on a national basis.  Full text of the opinion is available here.

If you are filing Chapter 13, you should consult with your attorney about whether or not you can claim the Chapter 13 vehicle expense for ownership.


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Hamid Jabbar

Hamid Jabbar

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