508 B.R. 408
9th Cir. BAP2014Background
- Debtors Michael and Katherine Luedtke filed Chapter 13 and proposed $150/month payments for 60 months. Trustee objected that they understated disposable income by claiming a $200 "older vehicle operating expense" in addition to the IRS vehicle operating allowance.
- One of the debtors' cars was a 1993 Ford Taurus with ~118,000 miles; debtors relied on IRM Part 5, Chapter 8 (compromise procedures) which authorizes a $200 extra allowance for cars >6 years or >75,000 miles.
- BAPCPA ties above‑median debtors' allowable expenses to the IRS National and Local Standards (IRM Part 5, Chapter 15) and certain "Other Necessary Expenses"; courts must use those standards to compute disposable income.
- The older vehicle allowance appears only in IRM Chapter 8 (compromise guidance), not in the Financial Analysis Handbook (IRM Part 5, Chapter 15) that defines the National and Local Standards.
- Bankruptcy court allowed the $200 expense, reasoning IRM Chapter 8 is incorporated into the Collection Financial Standards and citing Ransom and other decisions. Trustee appealed.
Issues
| Issue | Plaintiff's Argument (Trustee) | Defendant's Argument (Luedtke) | Held |
|---|---|---|---|
| Whether the $200 "older vehicle operating expense" is part of the IRS National/Local Standards for §707(b)(2)(A)(ii)(I) purposes | Not part of the IRS National/Local Standards; therefore above‑median debtors cannot claim it | IRM Chapter 8 permits the $200 allowance for older/high‑mileage cars and should be read into the IRS Collection Financial Standards | Reversed: the $200 allowance is not in the National/Local Standards or the Financial Analysis Handbook and cannot be used to reduce disposable income for above‑median debtors |
| Whether Ransom and other authorities support allowing the expense | Ransom does not authorize looking beyond the Financial Analysis Handbook; its citations to IRM Part 15 are interpretive only | Ransom and the Panel’s prior discussion suggest courts may allow the extra $200 | Ransom does not support expanding the standards to include IRM Chapter 8; prior Panel comments were non‑binding dicta |
| Whether Hamilton v. Lanning permits projecting the $200 as a known or virtually certain change | No—debtors presented no evidence of actual or virtually certain increased operating costs; allowance was not a projection of actual change | The age/mileage of the car justifies the allowance as a predictable expense | Hamilton does not support adding the fixed $200 allowance absent evidence of a known or virtually certain change in expenses |
Key Cases Cited
- Ransom v. FIA Card Servs., N.A., 131 S. Ct. 716 (2011) (Supreme Court interpreting "applicable" IRS standards and treating IRM Part 15 as interpretive guidance)
- Hamilton v. Lanning, 560 U.S. 505 (2010) (courts may consider known or virtually certain changes when projecting disposable income)
- Drummond v. Welsh (In re Welsh), 711 F.3d 1120 (9th Cir. 2013) (discussing limits on court discretion post‑BAPCPA and application of IRS standards)
- Ransom (In re Ransom), 380 B.R. 799 (9th Cir. BAP 2007) (Panel discussion mentioning older vehicle allowance was dicta and not controlling)