Ransom v. F.I.A. Card Services, N.A. (09-907)
The U.S. Supreme Court held in Ransom v. F.I.A. Card Services, N.A. that a chapter 13 debtor who owns a car outright may not take a means testing ownership deduction. The 8-1 opinion by Justice Elena Kagan, with only Justice Antonin Scalia dissenting, focused on the statute's "text, context, and purpose." Jason Ransom attempted to take a standard $471 monthly car ownership deduction despite having no car payment. The Court upheld the decision of the U.S. Court of Appeals for the Ninth Circuit affirming the bankruptcy court's refusal to confirm Ransom's chapter 13 plan. The high court explicitly stated that it was not deciding whether a debtor who has a lower actual payment could deduct the full means testing allowance, only that a debtor with no payment could not take the deduction. In the wake of Ransom, lower courts will have to decide whether debtors with old, paid-off cars can buy new ones on credit before filing, thus gaining a means testing deduction. The Court did not explicitly state that its analysis applies in chapter 7, but it suggested that it did, in part by its "compare" citation of Fifth and Seventh Circuit decisions to the contrary in chapter 7 cases. However, the Court also relied on the "statutory context" that in chapter 13, means-testing deductions fill in "amounts reasonably necessary to be expended" by above-median-income debtors. The opinion noted that bankruptcy law has a "core purpose of ensuring that debtors devote their full disposable income to repaying creditors." Read the Supreme Court opinion.