RANSOM v. FIA CARD SERVICES, N. A., FKA MBNA AMERICA BANK, N. A.
No. 09-907
Supreme Court of the United States
Argued October 4, 2010—Decided January 11, 2011
562 U.S. 61
Deanne E. Maynard argued the cause for respondent. With her on the brief were Seth M. Galanter, Marc A. Hearron, Mark P. Ladner, Larren M. Nashelsky, Gilbert B. Weisman, John D. Sheehan, and William Andrew McNeal.
Nicole A. Saharsky argued the cause for the United States as amicus curiae in support of respondent. With her on the brief were Acting Solicitor General Katyal, Acting Assistant Attorney General Hertz, Deputy Solicitor General Stewart, William Kanter, Jeffrica Jenkins Lee, Ramona D. Elliott, and P. Matthew Sutko.*
*A brief of amicus curiae urging reversal was filed for the National Association of Consumer Bankruptcy Attorneys by Jonathan S. Massey and Tara Twomey.
A brief of amicus curiae urging affirmance was filed for G. Eric Brunstad, Jr., by Mr. Brunstad, pro se, and Collin O‘Connor Udell.
Chapter 13 of the Bankruptcy Code enables an individual to obtain a discharge of his debts if he pays his creditors a portion of his monthly income in accordance with a court-approved plan.
This case concerns the specified expense for vehicle-ownership costs. We must determine whether a debtor like petitioner Jason Ransom who owns his car outright, and so does not make loan or lease payments, may claim an allowance for car-ownership costs (thereby reducing the amount he will repay creditors). We hold that the text, context, and purpose of the statutory provision at issue preclude this result. A debtor who does not make loan or lease payments may not take the car-ownership deduction.
I
A
“Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA or Act) to correct perceived abuses of the bankruptcy system.” Milavetz, Gallop & Milavetz, P. A. v. United States, 559 U. S. 229, 231-232 (2010). In particular, Congress adopted the means test—“[t]he heart of [BAPCPA‘s] consumer bankruptcy reforms,” H. R. Rep. No. 109-31, pt. 1, p. 2 (2005) (hereinafter H. R. Rep.), and the home of the statutory language at issue here—to help ensure that debtors who can pay creditors do pay them. See, e. g., ibid. (under BAPCPA, “debtors [will] repay creditors the maximum they can afford“).
Under the means test, a debtor calculating his “reasonably necessary” expenses is directed to claim allowances for defined living expenses, as well as for secured and priority debt.
“The debtor‘s monthly expenses shall be the debtor‘s applicable monthly expense amounts specified under the National Standards and Local Standards, and the debtor‘s actual monthly expenses for the categories specified as Other Necessary Expenses issued by the Internal
Revenue Service [IRS] for the area in which the debtor resides.”
§ 707(b)(2)(A)(ii)(I) .
These are the principal amounts that the debtor can claim as his reasonable living expenses and thereby shield from creditors.
The National and Local Standards referenced in this provision are tables that the IRS prepares listing standardized expense amounts for basic necessities.2 The IRS uses the Standards to help calculate taxpayers’ ability to pay overdue taxes. See
The Local Standards include an allowance for transportation expenses, divided into vehicle “Ownership Costs” and vehicle “Operating Costs.”3 At the time Ransom filed for bankruptcy, the “Ownership Costs” table appeared as follows:
| National | Ownership Costs | |
|---|---|---|
| First Car | Second Car | |
| $471 | $332 | |
App. to Brief for Respondent 5a. The Collection Financial Standards explain that these ownership costs represent “na-
B
Ransom filed for Chapter 13 bankruptcy relief in July 2006. App. 1, 54. Among his liabilities, Ransom itemized over $82,500 in unsecured debt, including a claim held by respondent FIA Card Services, N. A. (FIA). Id., at 41. Among his assets, Ransom listed a 2004 Toyota Camry, valued at $14,000, which he owns free of any debt. Id., at 38, 49, 52.
For purposes of the means test, Ransom reported income of $4,248.56 per month. Id., at 46. He also listed monthly expenses totaling $4,038.01. Id., at 53. In determining those expenses, Ransom claimed a car-ownership deduction of $471 for the Camry, the full amount specified in the IRS‘s “Ownership Costs” table. Id., at 49. Ransom listed a separate deduction of $338 for car-operating costs. Ibid. Based on these figures, Ransom had disposable income of $210.55 per month. Id., at 53.
Ransom proposed a 5-year plan that would result in repayment of approximately 25% of his unsecured debt. Id., at 55. FIA objected to confirmation of the plan on the ground that it did not direct all of Ransom‘s disposable income to unsecured creditors. Id., at 64. In particular, FIA argued that Ransom should not have claimed the car-ownership allowance because he does not make loan or lease payments on his car. Id., at 67. FIA noted that without this allowance, Ransom‘s disposable income would be $681.55—the $210.55 he reported plus the $471 he deducted for vehicle ownership. Id., at 71. The difference over the 60 months of the plan amounts to about $28,000.
The Bankruptcy Court denied confirmation of Ransom‘s plan. App. to Pet. for Cert. 48. The court held that Ransom could deduct a vehicle-ownership expense only “if he is currently making loan or lease payments on that vehicle.” Id., at 41.
Ransom appealed to the Ninth Circuit Bankruptcy Appellate Panel, which affirmed. In re Ransom, 380 B. R. 799, 808-809 (2007). The panel reasoned that an “expense [amount] becomes relevant to the debtor (i. e., appropriate or applicable to the debtor) when he or she in fact has such an expense.” Id., at 807. “[W]hat is important,” the panel noted, “is the payments that debtors actually make, not how many cars they own, because [those] payments . . . are what actually affect their ability to” reimburse unsecured creditors. Ibid.
The United States Court of Appeals for the Ninth Circuit affirmed. In re Ransom, 577 F. 3d 1026, 1027 (2009). The plain language of the statute, the court held, “does not allow a debtor to deduct an ‘ownership cost’ . . . that the debtor does not have.” Id., at 1030. The court observed that “[a]n ‘ownership cost’ is not an ‘expense‘—either actual or applicable—if it does not exist, period.” Ibid.
We granted a writ of certiorari to resolve a split of authority over whether a debtor who does not make loan or lease payments on his car may claim the deduction for vehicle-ownership costs. 559 U. S. 1066 (2010).4 We now affirm the Ninth Circuit‘s judgment.
Our interpretation of the Bankruptcy Code starts “where all such inquiries must begin; with the language of the statute itself.” United States v. Ron Pair Enterprises, Inc., 489 U. S. 235, 241 (1989). As noted, the provision of the Code central to the decision of this case states:
“The debtor‘s monthly expenses shall be the debtor‘s applicable monthly expense amounts specified under the National Standards and Local Standards, and the debtor‘s actual monthly expenses for the categories specified as Other Necessary Expenses issued by the [IRS] for the area in which the debtor resides.”
§ 707(b)(2)(A)(ii)(I) .
The key word in this provision is “applicable“: A debtor may claim not all, but only “applicable” expense amounts listed in the Standards. Whether Ransom may claim the $471 car-ownership deduction accordingly turns on whether that expense amount is “applicable” to him.
Because the Code does not define “applicable,” we look to the ordinary meaning of the term. See, e. g., Hamilton v. Lanning, 560 U. S. 505, 513 (2010). “Applicable” means “capable of being applied: having relevance” or “fit, suitable, or right to be applied: appropriate.” Webster‘s Third New International Dictionary 105 (2002). See also New Oxford American Dictionary 74 (2d ed. 2005) (“relevant or appropriate“); 1 Oxford English Dictionary 575 (2d ed. 1989) (“[c]apable of being applied” or “[f]it or suitable for its purpose, appropriate“). So an expense amount is “applicable” within the plain meaning of the statute when it is appropriate, relevant, suitable, or fit.
What makes an expense amount “applicable” in this sense (appropriate, relevant, suitable, or fit) is most naturally understood to be its correspondence to an individual debtor‘s financial circumstances. Rather than authorizing all debtors to take deductions in all listed categories, Congress es-
If Congress had not wanted to separate in this way debtors who qualify for an allowance from those who do not, it could have omitted the term “applicable” altogether. Without that word, all debtors would be eligible to claim a deduction for each category listed in the Standards. Congress presumably included “applicable” to achieve a different result. See Leocal v. Ashcroft, 543 U. S. 1, 12 (2004) (“[W]e must give effect to every word of a statute wherever possible“). Interpreting the statute to require a threshold determination of eligibility ensures that the term “applicable” carries meaning, as each word in a statute should.
This reading of “applicable” also draws support from the statutory context. The Code initially defines a debtor‘s disposable income as his “current monthly income . . . less amounts reasonably necessary to be expended.”
Finally, consideration of BAPCPA‘s purpose strengthens our reading of the term “applicable.” Congress designed the means test to measure debtors’ disposable income and, in that way, “to ensure that [they] repay creditors the maximum they can afford.” H. R. Rep., at 2. This purpose is best achieved by interpreting the means test, consistent with the statutory text, to reflect a debtor‘s ability to afford repayment. Cf. Hamilton, 560 U. S., at 520 (rejecting an interpretation of the Bankruptcy Code that “would produce [the] senseless resul[t]” of “deny[ing] creditors payments that the debtor could easily make“). Requiring a debtor to incur the kind of expenses for which he claims a means-test deduction thus advances BAPCPA‘s objectives.
Because we conclude that a person cannot claim an allowance for vehicle-ownership costs unless he has some expense falling within that category, the question in this case becomes: What expenses does the vehicle-ownership category cover? If it covers loan and lease payments alone, Ransom does not qualify, because he has no such expense. Only if that category also covers other costs associated with having a car would Ransom be entitled to this deduction.
The less inclusive understanding is the right one: The ownership category encompasses the costs of a car loan or lease and nothing more. As noted earlier, the numerical amounts listed in the “Ownership Costs” table are “base[d] . . . on the five-year average of new and used car financing data compiled by the Federal Reserve Board.” App. to Brief for Re-
The Collection Financial Standards—the IRS‘s explanatory guidelines to the National and Local Standards—explicitly recognize this distinction between ownership and operating costs, making clear that individuals who have a car but make no loan or lease payments may claim only the operating allowance. App. to Brief for Respondent 3a; see supra, at 66-67. Although the statute does not incorporate the IRS‘s guidelines, courts may consult this material in interpreting the National and Local Standards; after all, the IRS uses those tables for a similar purpose—to determine how much money a delinquent taxpayer can afford to pay the Government. The guidelines of course cannot control if they are at odds with the statutory language. But here, the Collection
Because Ransom owns his vehicle free and clear of any encumbrance, he incurs no expense in the “Ownership Costs” category of the Local Standards. Accordingly, the car-ownership expense amount is not “applicable” to him, and the Ninth Circuit correctly denied that deduction.
III
Ransom‘s argument to the contrary relies on a different interpretation of the key word “applicable,” an objection to our view of the scope of the “Ownership Costs” category, and a criticism of the policy implications of our approach. We do not think these claims persuasive.
A
Ransom first offers another understanding of the term “applicable.” A debtor, he says, determines his “applicable” deductions by locating the box in each National or Local Standard table that corresponds to his geographic location, income, family size, or number of cars. Under this approach, a debtor “consult[s] the table[s] alone” to determine his appropriate expense amounts. Reply Brief for Petitioner 16. Because he has one car, Ransom argues that his “applicable” allowance is the sum listed in the first column of the “Owner-
This alternative reading of “applicable” fails to comport with the statute‘s text, context, or purpose. As intimated earlier, supra, at 70, Ransom‘s interpretation would render the term “applicable” superfluous. Assume Congress had omitted that word and simply authorized a deduction of “the debtor‘s monthly expense amounts” specified in the Standards. That language, most naturally read, would direct each debtor to locate the box in every table corresponding to his location, income, family size, or number of cars and to deduct the amount stated. In other words, the language would instruct the debtor to use the exact approach Ransom urges. The word “applicable” is not necessary to accomplish that result; it is necessary only for the different purpose of dividing debtors eligible to make use of the tables from those who are not. Further, Ransom‘s reading of “applicable” would sever the connection between the means test and the statutory provision it is meant to implement—the authorization of an allowance for (but only for) “reasonably necessary” expenses. Expenses that are wholly fictional are not easily thought of as reasonably necessary. And finally, Ransom‘s interpretation would run counter to the statute‘s overall purpose of ensuring that debtors repay creditors to the extent they can—here, by shielding some $28,000 that he does not in fact need for loan or lease payments.
As against all this, Ransom argues that his reading is necessary to account for the means test‘s distinction between “applicable” and “actual” expenses—more fully stated, between the phrase “applicable monthly expense
Our interpretation of the statute, however, equally avoids conflating “applicable” with “actual” costs. Although the expense amounts in the Standards apply only if the debtor incurs the relevant expense, the debtor‘s out-of-pocket cost may well not control the amount of the deduction. If a debtor‘s actual expenses exceed the amounts listed in the tables, for example, the debtor may claim an allowance only for the specified sum, rather than for his real expenditures.8 For the Other Necessary Expense categories, by contrast, the debtor may deduct his actual expenses, no matter how high
Finally, Ransom‘s reading of “applicable” may not even answer the essential question: whether a debtor may claim a deduction. “[C]onsult[ing] the table[s] alone” to determine a debtor‘s deduction, as Ransom urges us to do, Reply Brief for Petitioner 16, often will not be sufficient because the tables are not self-defining. This case provides a prime example. The “Ownership Costs” table features two columns labeled “First Car” and “Second Car.” See supra, at 66. Standing alone, the table does not specify whether it refers to the first and second cars owned (as Ransom avers), or the first and second cars for which the debtor incurs ownership costs (as FIA maintains)—and so the table does not resolve the issue in dispute.10 See In re Kimbro, 389 B. R. 518, 533 (Bkrtcy. App. Panel CA6 2008)
B
Ransom next argues that viewing the car-ownership deduction as covering no more than loan and lease payments is inconsistent with a separate sentence of the means test that provides: “Notwithstanding any other provision of this clause, the monthly expenses of the debtor shall not include any payments for debts.”
Ransom ignores that the “notwithstanding” sentence governs the full panoply of deductions under the National and Local Standards and the Other Necessary Expense categories. We hesitate to rely on that general provision to interpret the content of the car-ownership deduction because Congress did not draft the former with the latter specially in mind; any friction between the two likely reflects only a lack of attention to how an across-the-board exclusion of debt payments would correspond to a particular IRS allowance.11
C
Ransom finally contends that his view of the means test is necessary to avoid senseless results not intended by Congress. At the outset, we note that the policy concerns Ransom emphasizes pale beside one his reading creates: His interpretation, as we have explained, would frustrate BAPCPA‘s core purpose of ensuring that debtors devote their full disposable income to repaying creditors. See supra, at 71. We nonetheless address each of Ransom‘s policy arguments in turn.
Ransom first points out a troubling anomaly: Under our interpretation, “[d]ebtors can time their bankruptcy filing to take place while they still have a few car payments left, thus retaining an ownership deduction which they would lose if they filed just after making their last payment.” Brief for Petitioner 54. Indeed, a debtor with only a single car payment remaining, Ransom notes, is eligible to claim a monthly ownership deduction. Id., at 15, 52.
But this kind of oddity is the inevitable result of a standardized formula like the means test, even more under Ransom‘s reading than under ours. Such formulas are by their nature over- and under-inclusive. In eliminating the pre-BAPCPA case-by-case adjudication of above-median-income debtors’ expenses, on the ground that it leant itself to abuse, Congress chose to tolerate the occasional peculiarity that a brighter-line test produces. And Ransom‘s alternative reading of the statute would spawn its own anomalies—even placing to one side the fundamental strangeness of giving a debtor an allowance for loan or lease payments when he has
Ransom next contends that denying the ownership allowance to debtors in his position “sends entirely the wrong message, namely, that it is advantageous to be deeply in debt on motor vehicle loans, rather than to pay them off.” Brief for Petitioner 55. But the choice here is not between thrifty savers and profligate borrowers, as Ransom would have it. Money is fungible: The $14,000 that Ransom spent to purchase his Camry outright was money he did not devote to paying down his credit card debt, and Congress did not express a preference for one use of these funds over the other. Further, Ransom‘s argument mistakes what the deductions in the means test are meant to accomplish. Rather than effecting any broad federal policy as to saving or borrowing, the deductions serve merely to ensure that debtors in bankruptcy can afford essential items. The car-ownership allowance thus safeguards a debtor‘s ability to retain a car throughout the plan period. If the debtor already owns a car outright, he has no need for this protection.
Ransom finally argues that a debtor who owns his car free and clear may need to replace it during the life of the plan; “[g]ranting the ownership cost deduction to a vehicle that is owned outright,” he states, “accords best with economic reality.” Id., at 52. In essence, Ransom seeks an emer-
IV
Based on BAPCPA‘s text, context, and purpose, we hold that the Local Standard expense amount for transportation “Ownership Costs” is not “applicable” to a debtor who will not incur any such costs during his bankruptcy plan. Because the “Ownership Costs” category covers only loan and lease payments and because Ransom owns his car free from any debt or obligation, he may not claim the allowance. In short, Ransom may not deduct loan or lease expenses when he does not have any. We therefore affirm the judgment of the Ninth Circuit.
It is so ordered.
JUSTICE SCALIA, dissenting.
I would reverse the judgment of the Ninth Circuit. I agree with the conclusion of the three other Courts of Appeals to address the question: that a debtor who owns a car free and clear is entitled to the car-ownership allowance. See In re Washburn, 579 F. 3d 934 (CA8 2009); In re Tate, 571 F. 3d 423 (CA5 2009); In re Ross-Tousey, 549 F. 3d 1148 (CA7 2008).
The statutory text at issue is the phrase enacted in the Bankruptcy Abuse Prevention and Consumer Protection Act
That directive forms no part of the Local Standards to which the statute refers; and the fact that portions of the Local Standards are to be disregarded for revenue-collection purposes says nothing about whether they are to be disregarded for purposes of Chapter 13 of the Bankruptcy Code. The Court believes, however, that unless the IRS‘s Collection Financial Standards are imported into the Local Standards, the word “applicable” would do no work, violating the principle that “[w]e must give effect to every word of a statute wherever possible.” Ante, at 70 (quoting Leocal v. Ashcroft, 543 U. S. 1, 12 (2004)). I disagree. The canon against superfluity is not a canon against verbosity. When a thought could have been expressed more concisely, one does not always have to cast about for some additional meaning to the word or phrase that could have been dispensed with. This has always been understood. A House of Lords opinion holds, for example, that in the phrase “‘in addition to and not in derogation of‘” the last part adds nothing but emphasis. Davies v. Powell Duffryn Associated Collieries, Ltd., [1942] A. C. 601, 607.
It seems to me that is the situation here. To be sure, one can say “according to the attached table“; but it is acceptable (and indeed I think more common) to say “according to the applicable provisions of the attached table.” That seems to me the fairest reading of “applicable monthly expense
If the meaning attributed to the word by the Court were intended, it would have been most precise to say “monthly expense amounts specified under the National Standards and Local Standards, if applicable for IRS collection purposes.” And even if utter precision was too much to expect, it would at least have been more natural to say “monthly expense amounts specified under the National Standards and Local Standards, if applicable.” That would make it clear that amounts specified under those Standards may nonetheless not be applicable, justifying (perhaps) resort to some source other than the Standards themselves to give meaning to the condition. The very next paragraph of the Bankruptcy Code uses that formulation (“if applicable“) to limit to actual expenses the deduction for care of an elderly or chronically
Elsewhere as well, the Code makes it very clear when prescribed deductions are limited to actual expenditures. Section
I do not find the normal meaning of the text undermined by the fact that it produces a situation in which a debtor who
*The Court protests that I misunderstand its use of the Collection Financial Standards. Its opinion does not, it says, find them to be incorporated by the Bankruptcy Code; they simply “reinforc[e] our conclusion that . . . a debtor seeking to claim this deduction must make some loan or lease payments.” Ante, at 73. True enough, the opinion says that the Bankruptcy Code “does not incorporate the IRS‘s guidelines,” but it immediately continues that “courts may consult this material in interpreting the National and Local Standards” so long as it is not “at odds with the statutory language.” Ante, at 72. In the present context, the real-world difference between finding the guidelines incorporated and finding it appropriate to consult them escapes me, since I can imagine no basis for consulting them unless Congress meant them to be consulted, which would mean they are incorporated. And without incorporation, they are at odds with the statutory language, which otherwise contains no hint that eligibility for a car-ownership deduction requires anything other than ownership of a car.
Thus, the Court‘s interpretation does not, as promised, maintain “the connection between the means test and the statutory provision it is meant to implement—the authorization of an allowance for (but only for) ‘reasonably necessary’ expenses,” ante, at 74. Nor do I think this difficulty is eliminated by the deus ex machina of
The reality is, to describe it in the Court‘s own terms, that occasional overallowance (or, for that matter, underallowance) “is the inevitable result of a standardized formula like the means test . . . . Congress chose to tolerate the occasional peculiarity that a brighter-line test produces.” Ibid. Our job, it seems to me, is not to eliminate or reduce those “oddit[ies],” ibid., but to give the formula Congress