In the first opinion authored by Justice Elena Kagan, the
Supreme Court ruled that a Chapter 13 debtor may not deduct the
"ownership costs" of a vehicle under the means test when
he owes no further payments on the vehicle, affirming a decision of
the Ninth Circuit Court of Appeals. The 8-1 opinion featured a
pro-debtor dissent by Justice Scalia.
The case involved the calculation of how much disposable income a
Chapter 13 debtor has in which to pay off creditors. Ransom argued
that he should be allowed to take a $471/month deduction for the
ownership costs of his vehicle, despite the fact that he had paid
the vehicle off. His credit card company disagreed: they stated
that Ransom should have been unable to take the deduction and the
$471 should have gone towards his creditors.
The Supreme Court sided with the credit card company. The majority
opinion ruled that the statutory language that "[t]he
debtor's monthly expenses shall be the debtor's
applicable monthly expense amounts specified under the National
Standards and Local Standards" uses the word
"applicable" as a filter, and that the debtor may only
take the deduction if "it is appropriate for him." Using
IRS guidelines on the National and Local Standards, the Court held
that the deduction is only appropriate where the debtor has not
fully paid off the vehicle.
Justice Scalia disagreed: he argued that the term
"applicable" meant that the debtor should be able to take
the deduction based on the number of cars the debtor owns. Focusing
on the language of the Bankruptcy Code itself, Justice Scalia
argued that the debtor's interpretation of the statute was
reasonable, and that there are other deductions in the Bankruptcy
Code that are only to be taken if "reasonable and
necessary." Justice Scalia stated that he found it
"strange" that Congress would have intended to so
narrowly limit the vehicle ownership deduction merely by using the
word "applicable."
While this case is mainly of interest to bankruptcy practitioners,
it does suggest a new dynamic on the Court. A new Justice's
first opinion is typically a unanimous opinion on an
uncontroversial topic. But Justice Scalia's spirited
dissent suggests that there may be some significant disagreement
between the ends of the ideological spectrum on the Court.
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