655 B.R. 101
Bankr. W.D. La.2023Background
- Debtors Jason and Jennifer Litton filed a Chapter 13 petition on February 28, 2023; their only asset at issue is a 2006 Ford F-150 valued at $5,000 and encumbered by a nonpurchase-money lien.
- Thirteen months before filing they borrowed $4,621.50 from a credit union, granted a security interest in the truck (nonpurchase-money), and owed $3,750 on the loan at filing.
- Debtors are above the state median income and used Official Form 122C-2 (means test) to calculate disposable income.
- On Form 122C-2 Debtors claimed three vehicle-related deductions: (1) actual monthly secured debt payment, (2) IRS standardized Operating Costs, and (3) IRS standardized Ownership Costs; the trustee only challenged the Ownership Costs deduction.
- The trustee argued Ownership Costs apply only to purchase-money loans or leases (acquisition financing) and that deducting the IRS Ownership amount for a nonpurchase-money (equity) loan improperly reduced payments to unsecured creditors; the court sustained the trustee’s objection and refused confirmation of the plan.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the IRS "Ownership Costs" deduction in the means test is "applicable" when a debtor's vehicle secures a nonpurchase-money (equity/cash) loan | Trustee: Ownership Costs reflect average monthly payments for acquisition loans/leases; nonpurchase-money loans are not acquisition financing and thus the Ownership deduction is not applicable | Debtors: Form 122C-2 permits claiming the standardized Ownership amount if the debtor makes loan payments; they complied with the official form instructions | Court: Ownership Costs apply only to lease or purchase-money loan payments; a nonpurchase-money security interest does not qualify, so the deduction is improper |
Key Cases Cited
- Hamilton v. Lanning, 560 U.S. 505 (2010) (discusses definition and treatment of projected disposable income under the Code)
- Ransom v. FIA Card Servs., N.A., 562 U.S. 61 (2011) (Ownership Costs correspond to car loan or lease payments only; deduction only if debtor will incur that kind of expense)
- In re Beaty, 306 F.3d 914 (9th Cir. 2002) (bankruptcy forms and rules cannot alter substantive Code provisions)
- In re Traylor, 595 B.R. 419 (Bankr. D. Utah 2019) (holds nonpurchase-money loans are not an applicable Ownership deduction)
- Feagan v. Townson, 572 B.R. 785 (N.D. Ga. 2016) (payments on nonpurchase-money security interests do not fall within Ownership Costs)
- In re King, 497 B.R. 161 (Bankr. N.D. Ga. 2013) (Ownership expense tied to acquisition financing, not all automobile-secured loans)