Supreme Court Opens Term with Bankruptcy Case

The Supreme Court delved into bankruptcy law on Monday to determine whether a man filing for Chapter 13 bankruptcy could bring down his payment to creditors by claiming an expense for automobile “ownership costs” for a car that he already paid for.  In Ransom v. FIA Card Services NA, 09-907, the question presented was “whether, in calculating the debtor’s ‘projected disposable income’ during the plan period, the bankruptcy court may allow an ownership cost deduction for vehicles only if the debtor is actually making payments on the vehicles.”

FIA Card Services, formerly MBNA America Bank, objected to the debtor Peter Ransom’s plan, saying he could not claim ownership costs because the IRS defined such costs as lease or loan payments, which Ransom did not have. The bankruptcy court, bankruptcy appellate panel and 9th Circuit agreed with FIA, and Ransom appealed to the Supreme Court.  Were the Supreme Court to reverse to lower courts, Ransom would essentially shield $28,000.00 from his creditors that he would otherwise be required to pay his creditors as part of his Chapter 13 plan.

The Supreme Court granted certiori on April 14, 2010 from a decision of the 9th Circuit, which may be found at 577 F.3d 1026 (9th Cir. 2009).  The transcript of Monday’s oral argument may be found here.  The briefs submitted to the Supreme Court may be found here on the American Bankruptcy Institute’s website.

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