SW Legal studies in Business

All Bankrupts Eligible for Vehicle Deduction Regardless of Existence of Loan or Not
Description

Appeals court held that a couple that filed for Chapter 7 bankruptcy, and were above the state-median income, when calculating their allowable expenses could take the standard vehicle deduction expense despite not having loan payments to make on the vehicles.

Topic Bankruptcy
Key Words

Chapter 7; Above-Median Income; Vehicle Ownership Expense

C A S E   S U M M A R Y
Facts

The Touseys filed a Chapter 7 bankruptcy proceeding. They reported household income above the state median income. That made them subject to a means test to determine their ability to repay at least a part of their debts. In performing the test, they claimed the standard IRS vehicle operating allowance of $385 as well as the IRS vehicle ownership allowance of $803 for two vehicles. With these expenses, and others, subtracted from their current monthly income, they had no disposable income. That meant there was no presumption of abuse by the bankrupts and that they should be able to discharge their debts under Chapter 7. The trustee filed a motion claiming abuse. Since the Touseys owned their vehicles and there were no payments on them, he claimed they should not be allowed the vehicle deduction that they would be allowed if they had payments to make on the cars. The bankruptcy court denied the trustee’s motion. The district court reversed. The Touseys appealed.

Decision

Reversed. An above-median income Chapter 7 debtor who has no monthly vehicle loan expense may still claim a vehicle ownership expense deduction when calculating his disposable income under the means test. The Touseys are entitled to the vehicle deduction and have not abused the process.

Citation

In re Ross-Tousey, 549 F.3d 1148 (7th Cir., 2008)

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