Case Update: May Debtors Deduct Vehicle Ownership Expenses for Vehicles that are Owned Outright?
Since the enactment of BAPCPA, both bankruptcy and appellate courts have been split on the issue of whether debtors may deduct vehicle ownership expenses for vehicles that are not encumbered and for which debtors do not make an actual monthly loan or lease payment. To date, the Seventh Circuit Court of Appeals and four Bankruptcy Appellate Panels have ruled on this issue: Two hold that debtors may not take such deduction (Eighth and Ninth Circuits), and two panels, along with the Seventh Circuit Court of Appeals, hold that debtors may take such deduction (Sixth and Tenth Circuits). Six district courts have also published opinions on this issue, five of which deny debtors such deduction and one that allows such deduction.
Court of Appeals Opinion
- In re Ross-Tousey, No. 07-2503, Opinion (7th Cir. Dec.17, 2008): holds that a debtor who owns his car free and clear may take an ownership deduction for such vehicle.
Bankruptcy Appellate Panel Opinions
- In re Wilson, 383 B.R. 729, 734 (B.A.P. 8th Cir. 2008), holds that debtors are not “allowed a deduction for vehicle ownership expense if such expense [is] not in fact being incurred.”
- Ransom v. MBNA America Bank N.A. (In re Ransom), 380 B.R. 799 (B.A.P. 9th Cir. 2007), holds that such expenses are not applicable if debtors do not incur actual vehicle ownership expenses.
- In re Kimbro, 389 B.R. 518 (B.A.P. 6th Cir. 2008), holds that “debtor[s] may deduct an ownership expense for a vehicle regardless of whether the debtor has a debt or lease payment on that vehicle.”
- Pearson v. Stewart (In re Pearson), 390 B.R. 706 (B.A.P. 10th Cir. 2008), holds that debtor may “take the ownership expense deduction for their fully owned vehicle.”
District Court Opinions
- In re Armstrong, 395 B.R. 127 (E.D. Wash. 2008), allows the deduction of vehicle ownership expense for a vehicle that debtor owns outright.
- Grossman v. Sawdy, 384 B.R. 199 (E.D. Wis. 2008), holds that debtors must actually make ownership or lease payments for ownership expenses to be applicable.
- Wieland v. Thomas, 382 B.R. 793 (D. Kan. 2008), disallows transportation ownership deduction when debtors do not make any vehicle payments.
- U.S. Tr. v. Deadmond (In re Deadmond), No. CV 07-15-H-CCL, 2008 U.S. Dist. LEXIS 4426 (D. Mont. Jan. 21, 2008), holds that a statute allows deduction for vehicle ownership expenses for debtors who have loan or lease payments.
- Meade v. McVay (In re McVay), 384 B.R. 132 (W.D. Tex. 2008), holds that debtors must “qualify for a [vehicle ownership] deduction by having an existing ownership or lease payment.”
- Fokkena v. Hartwick (In re Hartwick), 373 B.R. 645 (D. Minn. 2007), holds that debtors must have a loan or lease obligation to deduct vehicle ownership expense.