Ransom Case Further Whittles Away at Debtors' Rights

In Justice Elena Kagan's first opinion, the United States Supreme Court settled the matter of a Las Vegas resident - Jason Ransom - who had filed a Chapter 13 bankruptcy petition. Mr. Ransom, the debtor, sought Chapter 13 protection after finding himself with more than $82,000 in credit card and other debt.

Pursuant to the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) passed by Congress in 2005, Mr. Ransom filed a debt repayment plan with several income exceptions. The bankruptcy trustee assigned to his case refused to allow an exception for vehicle ownership costs since Mr. Ransom owned his vehicle outright. In denying that exemption, the trustee dramatically changed the amount of income Mr. Ransom had available each month to pay down his reorganized debt.

Mr. Ransom and his attorneys disagreed - as did Justice Antonin Scalia, in a scathing dissenting opinion - arguing that the BAPCPA's failure to specifically enumerate that a debtor with no monthly loan or lease payments was disqualified from claiming the ownership exemption meant that it should be available to all filers seeking it.

Justice Kagan, ignoring the fact that Congress could have easily added in a specific provision or statement of intent to disallow the exemption for debtors who outright own their vehicles, employed a very literal approach to interpret the law against Mr. Ransom. Her majority opinion makes the seemingly blasé statement that if a person has no monthly ownership payment for the vehicle, he is not eligible for the deduction, and should instead have the full amount of the exemption made available for debt repayment. She makes no mention of the fact that Congress failed to detail the exact circumstances in which the exemption should be available.

Since the Supreme Court has now spoken on this issue, the precedent has been set that car owners filing for bankruptcy are at a disadvantage if they do not make monthly payments. Only time will tell the true impact of this decision, though. Regardless of whether you own your vehicle outright or not, if you are thinking about filing for Chapter 13 bankruptcy protection, seek the advice of an experienced bankruptcy attorney in your area to learn more about your legal rights and options.