Ownership Cost for Vehicles: United States Supreme Court Affirmed Ninth Circuits Judgment in Ransom

Ownership Cost for Vehicles: United States Supreme Court Affirmed Ninth Circuits Judgment in Ransom

The Means Test was created in an attempt to change a perceived problem with the bankruptcy system. The idea behind the Means Test was to take IRS standard deductions and compare them to the income of those in need of bankruptcy protection. The theory is that the Means Test would level the playing field and show if someone was spending too much money on housing, food, utilities, and if so, how much should they be spending to have money left over to pay their debts. The Means Test was designed to show that a person has disposable income to pay some of their debts back in a Chapter 13 bankruptcy rather than having all of the debts discharged in a Chapter 7 bankruptcy.

Since the creation of the Means Teses, many bankruptcy lawyers have included deductions in line 28 and 29 for "Ownership Deductions" even though the person filing for bankruptcy did not have a vehicle loan or lease for their vehicle. By taking this additional deduction a person filing bankruptcy can reduce their disposable income significantly and therefore have no disposable income available to pay their unsecured creditors.

On January 11, 2011, the United States Supreme Court upheld the Ninth Circuits judgment and held that the "Ownership Cost" in line 28 and line 29 of the Means Test may only be taken if the bankruptcy filer actually has a car loan or lease expense. If a person owns their car free and clear then they must not take the "Ownership Cost" deduction.

The issue in this case turns on the interpretation of the word "applicable." What a mess one simple word could create. The moral of the story is when Congress is considering the language of laws to pass, they must make their intent clear and analyze each word they use when drafting new legislation. One word could make a huge difference. Contact one of our San Jose bankruptcy lawyers or San Francisco bankruptcy lawyers for more information about the Means Test.

West Coast Bankruptcy Attorneys is a bay area and California consumer bankruptcy firm filing Chapter 7 and Chapter 13 bankruptcies for individuals in need. Visit West Coast Bankruptcy Attorneys online to find aOakland Bankruptcy Lawyer or aSan Jose Bankruptcy Lawyer committed to providing the best bankruptcy experience for a reasonable fee.

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