## Facts

- Jason M. Ransom filed for Chapter 13 bankruptcy and listed FIA Card Services, N.A. as an unsecured creditor.
- Ransom owned a Toyota Camry outright and had no loan or lease payment obligation on the vehicle.
- In calculating expenses under the Chapter 13 means test (incorporating 11 U.S.C. § 707(b)(2)(A)(ii)(I)), Ransom claimed:
  - the full IRS Local Standards vehicle “Ownership Costs” allowance ($471), and
  - a separate vehicle “Operating Costs” allowance.
- Using these deductions, Ransom’s proposed plan would have repaid about 25% of his unsecured debt.
- FIA objected to confirmation, arguing that the ownership-cost allowance is unavailable when the debtor has no auto loan or lease payment.
- The bankruptcy court denied confirmation; the Bankruptcy Appellate Panel and the Ninth Circuit affirmed.

## Issues

1. Whether, under 11 U.S.C. § 707(b)(2)(A)(ii)(I) as used in Chapter 13, a debtor who owns a vehicle free and clear may claim the IRS Local Standards vehicle “Ownership Costs” deduction despite having no loan or lease payment.

## Decision

- The Supreme Court affirmed the Ninth Circuit.
- A debtor who does not make loan or lease payments on a vehicle may not take the Local Standards vehicle ownership deduction when calculating disposable income under the means test.
- The Court read “applicable” expense amounts to mean amounts that correspond to the debtor’s actual financial circumstances; the ownership-cost table applies only when the debtor has an ownership-payment obligation.
- IRS explanatory materials supported that “Ownership Costs” represent loan/lease payments and are not claimed when there is no car payment.
- Allowing the deduction without a corresponding payment would reduce disposable income and permit retention of funds not needed for loan or lease obligations, contrary to the means test’s function of directing repayment capacity to creditors.
- Justice Scalia dissented, arguing that Congress incorporated only the IRS tables and that standardized amounts should be available based on category membership rather than actual payments.

## Legal Principles

- Under 11 U.S.C. § 707(b)(2)(A)(ii)(I), an expense amount from the IRS Local Standards is “applicable” only if the debtor has the type of expense the standard is designed to cover.
- The IRS Local Standards vehicle “Ownership Costs” deduction is permitted only when the debtor has a vehicle loan or lease payment.
- A debtor who owns a vehicle outright may still claim the Local Standards vehicle “Operating Costs” deduction, but not the ownership-cost amount.

## Conclusion

The Court held that the means test does not allow a standardized vehicle ownership deduction for a debtor who has no loan or lease payment, because the ownership-cost allowance is “applicable” only when the debtor actually incurs that category of expense.


Ransom v. FIA Card Servs., N.A., 562 U.S. 61 (2011)