FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

In the Matter of: JASON M. 

RANSOM,

Debtor,

No. 08-15066

JASON M. RANSOM,

BAP No. Appellant,  NV-07-01254-

v. DBaMo

MBNA, AMERICA BANK, N.A., OPINION

Appellee,

EXECUTIVE OFFICE OF UNITED STATES

TRUSTEE,

Trustee. 

Appeal from the Ninth Circuit

Bankruptcy Appellate Panel

Baum, Montali, and Dunn, Bankruptcy Judges, Presiding

Argued and Submitted

June 9, 2009—San Francisco, California

Filed August 14, 2009

Before: Stephen S. Trott, M. Margaret McKeown and

Sandra S. Ikuta, Circuit Judges.

Opinion by Judge Trott

11125
COUNSEL

Christopher P. Burke, Chris P. Burke & Associates, Las

Vegas, Nevada, for the appellant.

Jeremy T. Bergstrom, Miles, Bauer, Bergstrom & Winters

LLP, Henderson, Nevada; and William Andrew McNeal,

Becket & Lee LLP, Malvern, Pennsylvania, for appellee

MBNA, America Bank, N.A.

Catherine Bentley Sevcenko, Executive Office for the United

States Trustees, for amicus curiae United States of America.

IN THE MATTER OF RANSOM 11127
Tara Twomey, San Jose, California, for amicus curiae

National Association of Consumer Bankruptcy Attorneys.

OPINION

TROTT, Judge:

Does an above-median income debtor seeking bankruptcy

relief under chapter 13 get to deduct from his projected disposable income (that otherwise would be available to unsecured creditors) a vehicle “ownership cost” for a vehicle he

owns free and clear? Based upon our interpretation of the controlling statute, 11 U.S.C. § 707(b)(2)(A)(ii)(I), our answer is

“no.” Thus, we agree with the decision of our Bankruptcy

Appellate Panel (“BAP”), see Ransom v. MBNA Am. Bank,

N.A. (In re Ransom), 380 B.R. 799 (B.A.P. 9th Cir. 2007),

and affirm the decision of the bankruptcy court.

I.

The facts in this case are undisputed and are taken from our

BAP’s decision. The debtor, Jason Ransom, filed for chapter

13 bankruptcy relief. Among his assets, he scheduled a 2004

Toyota Camry he owns free and clear of any loans or other

encumbrances. In his liabilities, he scheduled a total of

$82,542.93 in general unsecured claims, including a claim

held by MBNA America Bank (“MBNA”) in the amount of

$32,896.73.

On his Statement of Current Monthly Income (“Form

B22C”), Ransom reported a current monthly income of

$4,248.56, and an annualized income of $50,982.72, which

put him above the median income for his household size in

his state of residence, Nevada. He claimed monthly expense

deductions—including the vehicle “ownership cost” deduction at issue in this case—in the amount of $4,038.01, and a

resulting monthly disposable income of $210.55. 

11128 IN THE MATTER OF RANSOM
In his chapter 13 plan, Ransom proposed paying $500.00

per month over sixty months, providing approximately a 25%

distribution on general unsecured claims. MBNA objected to

confirmation of the plan, arguing Ransom was not devoting

all of his projected disposable income to fund the plan as

required under 11 U.S.C. § 1325(b)(1)(B). Specifically,

MBNA argued that Ransom could deduct a vehicle ownership

cost only if he actually was making lease or loan payments on

the vehicle and, because Ransom owned his vehicle free and

clear of encumbrances and lease obligations, he was not entitled to the vehicle ownership cost deduction. Thus, MBNA

argued, Ransom’s projected disposable income should be

$681.55 (the $210.55 he reported in disposable income plus

$471.00, the amount of the vehicle ownership cost deduction

to which MBNA objected). 

The bankruptcy court agreed with MBNA, holding that

Ransom could deduct a vehicle ownership cost only if he currently was making loan or lease payments on the vehicle. The

bankruptcy court therefore entered an order denying without

prejudice confirmation of the plan. 

Ransom sought and obtained leave to appeal the bankruptcy court’s interlocutory order to our BAP. BAP affirmed

the bankruptcy court. See Ransom, 380 B.R. at 808-09. Concurrently with its opinion affirming the bankruptcy court,

BAP certified its disposition of the case to this circuit for possible review of a non-final order. See id. at 809 n.21. This circuit authorized this interlocutory appeal to go forward.

II.

A court may not approve a chapter 13 plan if the holder of

an allowed unsecured claim (here, MBNA) objects to confirmation of the plan unless the debtor demonstrates (1) “the

value of the property to be distributed under the plan on

account of such claim is not less than the amount of such

claim”; or (2) “the plan provides that all of the debtor’s proIN THE MATTER OF RANSOM 11129
jected disposable income to be received in the applicable

commitment period . . . will be applied to make payments to

unsecured creditors under the plan.” 11 U.S.C.

§ 1325(b)(1)(A), (B). Ransom seeks to defeat MBNA’s objection to his plan under the second option by demonstrating that

his plan provides that all of his projected “disposable income”

will be applied to make payments to unsecured creditors. 

[1] “Disposable income” is defined as “current monthly

income received by the debtor . . . less amounts reasonably

necessary to be expended . . . for the maintenance and support

of the debtor . . . .” 11 U.S.C. § 1325(b)(2)(A)(i). Because

Ransom is an above-median income debtor, the “amounts reasonably necessary to be expended,” is to be determined “in

accordance with” the means test set forth in 11 U.S.C.

§ 707(b)(2). See 11 U.S.C. § 1325(b)(3).

[2] Under the “means test” in § 707(b)(2), a debtor’s

monthly expenses 

shall be the debtor’s applicable monthly expense

amounts specified under the National Standards and

Local Standards, and the debtor’s actual monthly

expenses for the categories specified as Other Necessary Expenses issued by the Internal Revenue Service for the area in which the debtor resides . . . .

Notwithstanding any other provision of this clause,

the monthly expenses of the debtor shall not include

any payments for debts.

11 U.S.C. § 707(b)(2)(A)(ii)(I) (emphasis added). 

The National Standards and Local Standards referenced in

§ 707(b)(2)(A)(ii)(I) are located in the Internal Revenue Service’s (“IRS”) Financial Analysis Handbook, which is, in

turn, contained in the IRS’s Internal Revenue Manual

(“IRM”). The IRS uses the IRM in determining a taxpayer’s

11130 IN THE MATTER OF RANSOM
ability to pay a delinquent tax liability. See In re Fowler, 349

B.R. 414, 416 (Bankr. D. Del. 2006).

[3] The IRS’s Local Standards include allowable transportation expenses. These transportation expenses are broken

down into two categories: (1) operating costs and public

transportation costs, and (2) “ownership costs.”

1

 It is the

“ownership cost” deduction that is at issue here. Specifically,

at issue is whether the ownership cost deduction is “applicable” under § 707(b)(2)(A)(ii)(I), and therefore allowed, to a

debtor who owns his vehicle free and clear and thus does not

have any loan or lease payments on his vehicle.

As described by our BAP, there exists “a significant split

in authority” on this issue. See Ransom, 380 B.R. at 803-06.

Some courts have allowed the deduction of an “ownership

cost” for a vehicle that is subject to neither secured debt nor

a lease; other courts have not. Most recently, two of our sister

circuits have joined the camp allowing the deduction, which

puts us in the uncomfortable position of disagreeing with

them. See Tate v. Bolen (In re Tate), 571 F.3d 423 (5th Cir.

2009); Ross-Tousey v. Neary (In re Ross-Tousey), 549 F.3d

1148 (7th Cir. 2008).

In Ross-Tousey, the Seventh Circuit adopted what has been

referred to as the “plain language approach,” and held that a

vehicle not encumbered by a debt or lease qualified nonetheless for the “ownership cost” deduction. Ross-Tousey, 549

F.3d at 1157-58. The court was persuaded that

§ 707(b)(2)(A)(ii)(I)’s use of the adjective “applicable”—

rather than “actual”—in relation to the “ownership cost”

deduction refers “to the selection of an expense amount corresponding to the appropriate geographic region and number of

1The Local Standards for Transportation for the West Census Region

(which includes Nevada), in effect when Ransom filed, can be found on

the U.S. Trustee’s website at: http://www.usdoj.gov/ust/eo/bapcpa/

20051017/bci_data/IRS_Trans_Exp_Stds_WE.htm. 

IN THE MATTER OF RANSOM 11131
vehicles owned by the debtor.” Id. at 1157. “In other words,

under [this] approach, the Local Standard vehicle ownership

deduction ‘applies’ to the debtor by virtue of his geographic

region and number of cars, regardless of whether that deduction is an actual expense[ ].” Id. at 1157-58.

In Tate, the Fifth Circuit found the “plain language

approach,” as set forth by the Seventh Circuit in Ross-Tousey,

to provide the “best reading of § 707(b)(2)(A)(ii)(I),” and

therefore also adopted that approach. Tate, 571 F.3d at 427.

However, roughly half of the courts to address the issue,

including our BAP and the Eighth Circuit BAP, have found

a debtor is entitled to the ownership cost deduction only if the

debtor actually has loan or lease payments on a vehicle. See,

e.g., Ransom, 380 B.R. at 809; Babin v. Wilson (In re Wilson),

383 B.R. 729, 734 (B.A.P. 8th Cir. 2008); In re Coffin, 396

B.R. 804, 809 (Bankr. D. Me. 2008); Grossman v. Sawdy, 384

B.R. 199, 203, 205 (E.D. Wis. 2008); In re Slusher, 359 B.R.

290, 308-09 (Bankr. D. Nev. 2007). These courts reason that

the ownership cost deduction is “applicable” only if the

debtor is in fact incurring such an expense in the form of a

loan or lease payment on a vehicle, i.e., that “applicable”

means that a debtor actually is making a loan or lease payment. See, e.g., Wilson, 383 B.R. at 732-33 (“[A] vehicle

ownership expense is only applicable if a debtor is in fact

incurring such an expense.”); Grossman, 384 B.R. at 204

(“[T]he word ‘applicable’ is meant to modify the term

‘monthly expenses.’ Therefore, the deduction is to be used if

and only if the debtor actually has the monthly expense of an

actual car payment.” (citation omitted)). In other words, these

courts equate “ownership cost” with “loan or lease payments.”

In reaching the conclusion that a debtor is entitled to the

ownership cost deduction only if the debtor actually has loan

or lease payments on a vehicle, some courts have adopted

what has been referred to as the “IRM approach,” which relies

11132 IN THE MATTER OF RANSOM
on the IRS’s interpretation of “applicable” contained in the

IRM. The courts employing the IRM approach reason that

because Congress incorporated the IRS National and Local

Standards into § 707(b)(2)(A)(ii)(I), it must have intended

“courts to look at how the IRS defines these categories, and

how the IRS calculates those expenses.” Slusher, 359 B.R. at

309; see Grossman, 384 B.R. at 204 (relying on the IRS’s

interpretation of the Local and National Standards in concluding that a debtor must have a car payment to take the ownership cost deduction); Wilson, 383 B.R. at 733 (same).

Under this reading, “actual” and “applicable” do

mean two different things—one is a limitless deduction within the specified categories of Other Necessary Expenses, and the other is a deduction limited

to the amount and type specified by the IRS. Had

Congress intended to indiscriminately allow all

expense amounts specified in the National and Local

Standards, it would have written 707(b)(2)(A)(ii)(I)

to read, “The debtor’s monthly expenses shall be the

monthly expense amounts specified under the

National Standards and Local Standards . . . ” rather

than “The debtor’s monthly expenses shall be the

debtor’s applicable monthly expense amounts specified under the National and Local Standards . . . .”

This distinction may not appear from the dictionary

definitions of both terms, but it did, and does, belong

to the IRS’ historical and practical use of those standards at the time Congress adopted BAPCPA. In

referring to such specialized standards, it would be

quite odd if Congress intended to preclude courts

from examining the context in which the authoring

agency, the IRS, used and employed those standards.

Slusher, 359 B.R. at 308-09 (citation omitted) (emphasis in

original). 

IN THE MATTER OF RANSOM 11133
The IRS Collection Financial Standards, which are used in

calculating repayment of delinquent taxes, provide: “If a taxpayer has a car, but no car payment, only the operating costs

portion of the transportation standard is used to figure the

allowable transportation expense.” See IRS Collection Financial Standards (March 1, 2009).2

 The IRM similarly requires

a taxpayer to have a loan or lease payment to qualify for the

ownership cost deduction. See Internal Revenue Service Manual, Financial Analysis Handbook, Pt. 5, ch. 15, § 5.15.1.9

(1.B) (May 29, 2008).3

This approach also is arguably supported by Congress’s

intent in implementing the means testing as part of BAPCPA

—”to ensure that debtors repay creditors the maximum they

can afford.” H.R. Rep. 109-31(I), at 1, reprinted in 2005

U.S.C.C.A.N. 88, 89.

III.

[4] As did our BAP, we decide this issue not on the IRS’s

manual, but instead on the “statutory language, plainly read,”

Ransom, 380 B.R. at 806 n.18, which we believe does not

allow a debtor to deduct an “ownership cost” (as distinct from

an “operating cost”) that the debtor does not have. An “ownership cost” is not an “expense”—either actual or applicable

—if it does not exist, period. Ironic it would be indeed to

diminish payments to unsecured creditors in this context on

the basis of a fictitious expense not incurred by a debtor. 

Accordingly, we adopt the cogent reasoning of our BAP, as

follows:

2The current IRS Collection Financial Standards for Local Transportation can be found at: http://www.irs.gov/businesses/small/article/

0,,id=104623,00.html. 

3The portion of the current Internal Revenue Service Manual, Financial

Analysis Handbook, discussing transportation cost deductions can be

found at: http://www.irs.gov/irm/part5/irm_05-015-001.html#d0e1005. 

11134 IN THE MATTER OF RANSOM
Congress has deemed the expense of owning a car

to be a basic expense that debtors can deduct in calculating what they can afford to pay to their creditors. However, in making that calculation, what is

important is the payments that debtors actually

make, not how many cars they own, because the

payments that debtors make are what actually affect

their ability to make payments to their creditors.

The statute is only concerned about protecting the

debtor’s ability to continue owning a car, and if the

debtor already owns the car, the debtor is adequately

protected . . . . When the debtor has no monthly

ownership expenses, it makes no sense to deduct an

ownership expense to shield it from creditors.

Section 707(b)(2)(A)(ii)(I) provides, in relevant

part, that “[t]he debtor’s monthly expenses shall be

the debtor’s applicable monthly expense amounts

specified under . . . the Local Standards.” As set

forth in the statute, the adjective “applicable” modifies the meaning of the noun “monthly expense

amounts;” it indicates that the deduction of the

monthly expense amount specified under the Local

Standard for the expense becomes relevant to the

debtor (i.e., appropriate or applicable to the debtor)

when he or she in fact has such an expense.

The ordinary, common meaning of “applicable”

further impels us to this conclusion. “Applicable,” in

its ordinary sense, means “capable of or suitable for

being applied.” Merriam-Webster’s Collegiate Dictionary 60 (11th ed. 2005). Given the ordinary sense

of the term “applicable,” how is the vehicle ownership expense allowance capable of being applied to

the debtor if he does not make any lease or loan payments on the vehicle? In other words, how can the

debtor assert a deduction for an expense he does not

IN THE MATTER OF RANSOM 11135
have? If we granted the debtor such an allowance,

we would be reading “applicable” right out of the

Bankruptcy Code.

The debtor also argues for allowance of the vehicle ownership expense deduction on equitable

grounds. He claims that, due to the age of the car, the

likelihood of major repairs and the costs of such

repairs will increase. He further contends that the

allowable operating costs under the Local Standards

do not take into account the costs of major repairs.

However, as the court in [In re Carlin, 348 B.R. 795

(Bankr. D. Or. 2006)] noted:

Numerous safeguards are in place to protect

both debtors and creditors. Debtors who

own old or high mileage cars “free and

clear,” are entitled to an extra $200 per

month operating expense. Also, a “free and

clear” owner is not “stuck” with the vehicle

operating expenses allowed under the IRS

Standards. Section 707(b)(2)(B) is also

available for “above the median” Chapter

13 debtors. Section 707(b)(2)(B), allows

additional expenses based on “special circumstances.”

348 B.R. at 798 (citations omitted). We agree with

the court in Carlin and conclude that the debtor’s

appeal to equity is unavailing.

Further, our interpretation of § 707(b)(2)(A)(ii)(I)

has a substantive effect that is consistent with the

underlying goals of BAPCPA. Cf. [United Sav. Ass’n

v. Timbers of Inwood Forest Assocs., 484 U.S. 365,

371 (1988)]. To interpret the statute otherwise is

counterintuitive to one of the main objectives of

11136 IN THE MATTER OF RANSOM
BAPCPA: to ensure that debtors repay as much of

their debt as reasonably possible. When viewed

within the larger context of BAPCPA, we believe the

statute can only be interpreted to “apply” expense

standards in cases where debtors in fact pay such

expenses.

Ransom, 380 B.R. at 807-08 (footnote and some citations

omitted).

IV.

[5] The “correct” answer to the question before us, which

the courts have been struggling with for years—at the unnecessary cost of thousands of hours of valuable judicial time—

depends ultimately not upon our interpretation of the statute,

but upon what Congress wants the answer to be. We would

hope, in this regard, that we the judiciary would be relieved

of this Sisyphean adventure by legislation clearly answering

a straightforward policy question: shall an above-median

income debtor in chapter 13 be allowed to shelter from unsecured creditors a standardized vehicle ownership cost for a

vehicle owned free and clear, or not? Because resolution of

this issue rests with Congress, we have taken the unusual step

of directing the Clerk of the Court to forward a copy of this

opinion to the Senate and House Judiciary Committees.

AFFIRMED.

IN THE MATTER OF RANSOM 11137