New Bankruptcy Rules on Vehicle Ownership Expense

Utah Bankruptcy Law Firm – Salcido Law Firm

A few days ago, the United States Supreme Court effectively changed the “ownership expense” rules regarding the standard ownership expense for a vehicle in a Chapter 13 bankruptcy and the qualifications under the means test. The recent decision favors creditors and Utah bankruptcy lawyers and their clients should be aware of exactly how the law has been effected.

Ransom v. Fia Card Services

The recent Supreme Court case was titled Ransom v. Fia Card Services. At issues was the element of the means test known as the “ownership expense.” In this case, the debtor, Mr. Ransom, claimed both an operating expense for his vehicle as well as an ownership expense. The issue before the court was whether or not the ownership expense was proper to take in his case because he owned his vehicle free and clear. The court ruled 8-1 with the new appointee Elena Kagen writing the opinion that, Mr. Ransom could only claim the vehicle operating expense and not an ownership expense since he did not owe anything on his car. Justice Scalia was the only justice who disagreed and authored the lone dissent.

The Effect of the Opinion

At first, this opinion may seem logical, after all, why should a debtor be entitled to claim an ownership expense on a vehicle he is not actually paying for. As we know, vehicles that are not owed are older and tend to have more problems than newer loaned vehicles. Chapter 13 bankruptcies can go for 5 years. So what happens if Mr. Ransom’s car breaks down or wrecked or otherwise inoperable during that 5 years and he has to get a new one. This new decision makes it tougher for debtors under these circumstances. The recent court decision ignores the realities many individuals in a Chapter 13 bankruptcy may confront. It does not allow for flexibility which means more debtors will inevitably default on their Chapter 13 trustee payments.

Considering Bankruptcy? Call us today.

If you or someone you know is considering filing for bankruptcy whether in a Chapter 7 or Chapter 13, we can help. Salcido Law Firm has helped many individuals and families get the fresh start they desperately need. A Utah bankruptcy attorney at our office can guide you through the process from start to finish and help ensure you bankruptcy and financial matters go smoothly. Call anytime at 801.413.1753.

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