Bankruptcy Case Review

THE MEANS TEST JUST GOT MEANER

by Mark S. Zuckerberg

On January 11, 2011 the Supreme Court of the United States ruled in an 8 to 1 decision that the vehicle ownership deduction contained on the MEANS Test is only available to those Debtors actually paying for an automobile.  When Jason Ransom filed for Chapter 13 relief he owed more than $82,500 in unsecured debt.  He also owned a 2004 Toyota Camry valued at $14,000 free and clear.  For MEANS Test purposes, Mr. Ransom reported a monthly income of $4,248 and expenses $4,038.  In arriving at his monthly expenses, Mr. Ransom claimed a car ownership deduction of $471 based upon the allowable IRS standards for his geographical area.

The issue presented was whether the ownership deduction is “Applicable” under 707(b)(2)(A)(ii)(I) when a Debtor does not actually have a car or lease payment.  Ransom argued he should be allowed the ownership deduction regardless of whether he was making car payments.

The Supreme Court interpreted “Applicable” to mean those expenses actually being paid by the debtor.

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