Do I Own This Car? the Supreme Court Creates a Standard for BAPCPA Car Ownership

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I. Introduction

On Monday, October 4, 2010, reporters and other observers packed the red upholstered benches and filled the white marble courtroom of the United States Supreme Court. (1) They came to witness a newsworthy event--the first day of the Court's new Term and, more importantly, Justice Elena Kagan's first day on the job. (2) The Court opened the Term with a fairly routine case, the type of "workaday dispute that makes up far more of the docket than the constitutional barnburners the [J]ustices occasionally entertain." (3) This first case of the Term would be the subject matter of Justice Kagan's first opinion. (4)

The case was Ransom v. FIA Card Services, N.A., and the dispute was whether, under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), Appellant Jason Ransom should be able to claim a vehicle ownership expense for purposes of Chapter 13 bankruptcy for the unencumbered car that he owned. (5) Practitioners in the bankruptcy field had been watching the progression of this case and were eager to learn the Court's resolution of the issue. (6) The interest was due to two reasons. First, the outcome of the case would affect approximately 250,000 Chapter 13 petitioners. (7) Second, the case would resolve an issue on which the lower courts had not been able to reach a consensus. (8)

BAPCPA was "poorly crafted" and "hastily designed," leaving one bankruptcy judge to lament that

"those responsible for ... passing [BAPCPA] ... did all in their power to avoid the proffered input from sitting United States Bankruptcy Judges, various professors of bankruptcy law at distinguished universities, and many professional associations filled with the ... bankruptcy lawyers in the country as to the perceived flaws in the Act." (9)

Another bankruptcy judge complained that the law was "[u]nquestionably ... the most poorly written piece of legislation that I or anyone else has ever seen. ... No one has ever seen a piece of garbage like this. ... There's going to be the most fantastic anarchy in bankruptcy courts for years." (10)

When the Court issued its opinion, holding that Ransom could not claim a vehicle ownership expense if he owned an unencumbered car, Justice Kagan created a tidy framework through which to interpret all future BAPCPA provisions: to determine the meaning of the statute, one must look at the text, context, and purpose of BAPCPA. (11)

But Justice Antonin Scalia refused to overlook the manifest problems with BAPCPA's construction, and thus, he dissented. (12) In his dissent, he contended that Justice Kagan's opinion was simplistic and that it glossed over BAPCPA's real issues. (13) He argued that the Court's opinion in Ransom created more questions than it answered. (14)

II. Facts and Holding

On July 5, 2006, Jason Ransom filed for Chapter 13 bankruptcy relief in the United States Bankruptcy Court for the District of Nevada. (15) Ransom had accrued $82,542.93 in unsecured debt, including $32,896.73 that Ransom owed to MBNA American Bank (MBNA). (16) During the process of filing for bankruptcy, Ransom completed Form B22C, which is the Debtor's Statement of Current Monthly Income and Calculation of Commitment Period and Disposable Income. (17) On this form, Ransom reported his monthly income of $4248.56 and his annual income of $50,982.72. (18) At the time, the median income for a single-family household in Nevada was $38,506. (19) Because Ransom's income exceeded the median income for Nevada, the bankruptcy code required Ransom to create a five-year payment plan. (20)

The bankruptcy code instructs debtors such as Ransom to deduct reported monthly expenses from the debtors' reported monthly income to determine the amount which will be repaid to creditors. (21) The bankruptcy code allows several categories of potential expenses, including household expenses, car expenses, and utility expenses. …