page_title: Ransom v. FIA Card Services, N.A.
section_title: The Chapter 13 means test
hierarchical_section_title: Ransom v. FIA Card Services, N.A. / Background of the case / The Chapter 13 means test
caption_attribution_description: English: President George W. Bush signs into law S.256, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Wednesday, April 20, 2005, at the Eisenhower Executive Office Building. Watching on, from left are: Senator Tom Carper, D-Del.; Congressman Steve Chabot, R-Ohio; House Speaker Dennis Hastert, R-Ill.; Congressman Jim Sensenbrenner, Jr., R-Wis., Chairman of the Judiciary Committee; Senator Chuck Grassley, R-Iowa, chairman of the Finance Committee; Senator Mitch McConnell, R-Ky.; Majority Whip Senator Orrin Hatch, R-Utah, and Congressman Rick Boucher, D-Va. White House photo by Paul Morse.
context_page_description: Ransom v. FIA Card Services, N. A., 562 U.S. 61, is a decision by the Supreme Court of the United States involving the means test in Chapter 13 of the United States Bankruptcy Code. The means test had been adopted by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, and Ransom is one of several cases in which the Supreme Court addressed provisions of that act.
  The means test determines how much disposable income debtors have to pay back their creditors, and permits debtors to shield some income from creditors for expenses based on cost tables prepared by the Internal Revenue Service. The Court ruled in Ransom, primarily in reliance on supplemental commentary authored by the IRS, that a car-ownership cost allowance was available only to debtors who made loan or lease payments on a vehicle. This judgment resolved a circuit split regarding the allowance between the Ninth Circuit, which the Supreme Court affirmed in this case, and three other circuits that had all ruled the allowance applied even to debtors who owned their cars outright.
  The Court's opinion was delivered by Justice Elena Kagan, who was confirmed to the Court on August 7, 2010.
context_section_description: Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) to address perceived abuses of the bankruptcy system.  One of the biggest changes, called the "heart" of the Act's "bankruptcy reforms," was the adoption of the means test for use in Chapter 13 bankruptcy proceedings.  Chapter 13 requires debtors to submit a repayment plan for court approval to obtain a discharge of their debts.  The means test is a statutory formula that determines how much income the debtor can use for debt repayment, to ensure that debtors pay back as much as feasible.  It permits debtors to shield a portion of their income from creditors based on "reasonably necessary" living expenses, which are calculated from claimed allowances for defined living expenses.  This replaced the prior practice of bankruptcy courts having to make case-by-case determinations of a debtor's expenses to calculate available income.
  The statute provides, in relevant part:
  The 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."
  The National Standards and Local Standards referred to by the statute are tables that the Internal Revenue Service prepares for determining taxpayers' ability to pay overdue taxes.  These tables list standardized expense amounts for basic necessities.  As incorporated in Chapter 13, the tables, therefore, determine the categories of expenses for which debtors can receive income allowances and the dollar amounts of those allowances.  The IRS also prepares the Collection Financial Standards, which are supplemental guidelines that describe how to use the National and Local Standards tables and what the amounts listed in them mean.
  Included in the National Standards at the time the case was brought were allowances for transportation costs, divided for car owners into tables labeled "Ownership Costs" and "Operating Costs."  The Collection Financial Standards explained that "Ownership Costs" represented "nationwide figures for monthly loan or lease payments," "base[d] . . . on the five-year average of new and used car financing data compiled by the Federal Reserve Board."  The Collection Financial Standards further instructed that, in the tax-collection context, "[i]f a taxpayer has no car payment, . . . only the operating costs portion of the transportation standard is used to come up with the allowable transportation expense."
caption: President George W. Bush signs into law the Bankruptcy Abuse Prevention and Consumer Protection Act on April 20, 2005.
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