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Ransom v. FIA Card Servs. NA

Jason M. Ransom, Petitioner.


FIA Card Services, N.A., fka MBNA America Bank, N.A., Respondent.

Supreme Court of the United States

131 S.Ct. 719

Factual Background

This case concerns the specified expense for vehicle-ownership costs.  When petitioner Ransom filed for Chapter 13 bankruptcy relief, he listed respondent (FIA) as an unsecured creditor.  Among his assets, Ransom reported a car that he owns free of any debt.  In determining his monthly expenses, he nonetheless claimed a car-ownership deduction of $471, the full amount specified in the “Ownership Costs” table, as well as a separate $388 deduction for car-operating costs.  Based on his means-test calculations, Ransom proposed a bankruptcy plan that would result in repayment of approximately 25% of his unsecured debt.  FIA objected on the ground that the plan did not direct all of Ransom’s disposable income to unsecured creditors.  FIA contended that Ransom should not have claimed the car-ownership allowance because he does not make loan or lease payments on his car.  Agreeing this, the Bankruptcy Court denied confirmation of the plan.  The Ninth Circuit Bankruptcy Appellate Panel and the Ninth Circuit affirmed.


The court determined whether a debtor who owns his car outright and so does not make loan or lease payments, may claim an allowance for car-ownership costs and thereby reduce the amount he will repay creditors.


The court observed that Chapter 13 of the Bankruptcy Code uses a statutory formula known as the means test to help ensure that debtors who can pay creditors do pay them.  The means test instructs a debtor to determine his disposable income, the amount he has available to reimburse creditors, by deducting from his current monthly income amounts reasonably necessary to be expended for, inter alia, maintenance or support.  For a debtor whose income is above the median for his State, the means test indentifies which expenses qualify as amounts reasonably necessary to be expended.  The bankruptcy code provides that the debtor’s monthly expenses shall be the debtor’s applicable monthly expense amounts specified under the National Standards and Local Standards, and the debtor’s actual monthly expenses for the categories specified as Other Necessary Expenses issued by the Internal Revenue Service [IRS] for the area in which the debtor resides.

The court further observed that the vehicle-ownership category covers only the costs of a car loan or lease.  The expense amount listed is the average monthly payment for loans and leases nationwide; it is not intended to estimate other conceivable expenses associated with maintaining a car.  Maintenance expenses are the province of the separate Operating Costs deduction.  A person who owns a car free and clear is entitled to the Operating Costs deduction for all driving-related expenses.  But such a person may not claim the Ownership Costs deduction, because that allowance is for the separate costs of a car loan or lease.  The court substantiated that IRS’ Collection Financial Standards reinforce this conclusion by making clear that individuals who have a car but make no loan or lease payments may take only the operating-costs deduction.  The court declared that since Ransom owns his vehicle outright, he incurs no expense in the Ownership Costs category, and that expense amount is therefore not applicable to him.

The court declared that Ransom could deduct a vehicle-ownership expense only if he is currently making loan or lease payments on that vehicle.  An expense becomes relevant to the debtor (i.e., appropriate or applicable to the debtor) when s/he in fact has such an expense.  What is important is the payments that debtors actually make, not how many cars they own, because those payments are what actually affect their ability to reimburse unsecured creditors.  The plain language of the statute, the court held, does not allow a debtor to deduct an ownership cost that the debtor does not have.  The court examined that an ownership cost is not an expense either actual or applicable if it does not exist, period.


The court granted a writ of certiorari to resolve a split of authority over whether a debtor who does not make loan or lease payments on his car may claim the deduction for vehicle ownership costs.  Affirming the Ninth Circuit’s judgment the court held that a debtor who does not make loan or lease payments may not take the vehicle ownership deduction.

Inside Ransom v. FIA Card Servs. NA