## Facts

- Greg C. and Ka Sandra S. Scott filed a Chapter 7 bankruptcy case and were required to calculate expenses under the means-test framework in 11 U.S.C. § 707(b)(2).
- The Scotts had secured-debt payments on their vehicles, but those monthly payments were less than the Internal Revenue Service (IRS) Local Standard amount for “transportation ownership/lease expense” in their district.
- In completing their means-test calculation, the Scotts sought to deduct the full IRS standard ownership amount rather than limiting the deduction to the smaller amount of their actual vehicle payments.
- The Chapter 7 trustee objected, arguing that the Scotts could deduct only what they actually paid on their vehicle loans (not the higher standardized ownership amount).

## Issues

1. Under the means test in 11 U.S.C. § 707(b)(2), may Chapter 7 debtors with vehicle loan payments claim the full IRS Local Standard “transportation ownership/lease expense” deduction when their actual payments are less than the standard amount?

## Decision

- The court ruled for the debtors and allowed the Scotts to claim the full IRS Local Standard vehicle ownership deduction despite having actual vehicle payments below the standard amount.
- The court rejected the trustee’s attempt to cap the ownership deduction at the debtors’ actual loan payments.
- The trustee’s objection was denied.

## Legal Principles

- For Chapter 7 debtors, the means test in § 707(b)(2) uses IRS National and Local Standards to calculate certain expense deductions.
- The IRS Local Standard “transportation ownership/lease expense” functions as a standardized allowance for debtors who have a qualifying vehicle loan or lease obligation.
- A debtor must actually have an ownership/lease expense to take the ownership deduction category (a debtor with a car owned free and clear cannot take it), but the deduction is not reduced simply because the debtor’s actual payment is below the IRS standard amount.
- Courts applying § 707(b)(2) generally follow the statute’s formula-driven structure rather than replacing standardized amounts with case-by-case “actual expense” limits when the statute calls for standards.

## Conclusion

In *In re Scott*, the bankruptcy court held that Chapter 7 debtors who have vehicle loan payments may take the full IRS Local Standard transportation ownership deduction in their means-test calculation even when their actual monthly payments are lower, and it denied the trustee’s effort to limit the deduction to the debtors’ actual payment amounts.


In re Scott, 457 B.R. 740 (2011)