Ransom v. FIA Card Servs., N.A.

Decision Date11 January 2011
Docket NumberNo. 09–907.,09–907.
Citation562 U.S. 61,178 L.Ed.2d 603,131 S.Ct. 716
Parties Jason M. RANSOM, Petitioner v. FIA CARD SERVICES, N.A., fka MBNA America Bank, N.A.
CourtU.S. Supreme Court

Christopher P. Burke, Las Vegas, NV, Daniel Lucid, Santa Monica, CA, for Petitioner.

Deanne E. Maynard, Seth M. Galanter, Marc A. Hearron, Morrison & Foerster LLP, Washington, DC, Mark P. Ladner, Larren M. Nashelsky, Morrison & Foerster LLP, New York City, Gilbert B. Weisman. John D. Sheehan, William Andrew McNeal, Becket & Lee LLP, Malvern, PA, for Respondent.

Nicole A. Saharsky, Washington, DC, for United States as amicus curiae, by special leave of the Court, supporting the respondent.

Justice KAGAN delivered the opinion of the Court.

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. 11 U.S.C. § 1301 et seq . To determine how much income the debtor is capable of paying, Chapter 13 uses a statutory formula known as the "means test." §§ 707(b) (2) (2006 ed. and Supp. III), 1325(b)(3)(A) (2006 ed.). The means test instructs a debtor to deduct specified expenses from his current monthly income. The result is his "disposable income"—the amount he has available to reimburse creditors. § 1325(b)(2).

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, 130 S.Ct. 1324, 1329, 176 L.Ed.2d 79 (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").

In Chapter 13 proceedings, the means test provides a formula to calculate a debtor's disposable income, which the debtor must devote to reimbursing creditors under a court-approved plan generally lasting from three to five years. §§ 1325(b)(1)(B) and (b)(4).1 the statute defines "disposable income" as "currENT MONTHLY INCOME" less "amounts reasonably necessary to be expended" for "maintenance or support," business expenditures, and certain charitable contributions. §§ 1325(b)(2)(A)(i) and (ii). For a debtor whose income is above the median for his State, the means test identifies which expenses qualify as "amounts reasonably necessary to be expended." The test supplants the pre-BAPCPA practice of calculating debtors' reasonable expenses on a case-by-case basis, which led to varying and often inconsistent determinations. See, e.g., In re Slusher, 359 B.R. 290, 294 (Bkrtcy.Ct.Nev.2007).

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. §§ 707(b)(2)(A)(ii)-(iv). As relevant here, the statute provides:

"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 26 U.S.C. § 7122(d)(2). The IRS also prepares supplemental guidelines known as the Collection Financial Standards, which describe how to use the tables and what the amounts listed in them mean.

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:

Ownership Costs
First Car Second Car
National $471 $332

App. to Brief for Respondent 5a. The Collection Financial Standards explain that these ownership costs represent "nationwide figures for monthly loan or lease payments," id., at 2a; the numerical amounts listed are " base[d] ... on the five-year average of new and used car financing data compiled by the Federal Reserve Board," id., at 3a. The Collection Financial Standards further instruct that, in the tax-collection context, "[i]f a taxpayer has no car payment, ... only the operating costs portion of the transportation standard is used to come up with the allowable transportation expense." Ibid.

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.

C

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, 130 S.Ct. 2097, 176 L.Ed.2d 721 (2010).4 We now affirm the Ninth Circuit's judgment.

II

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, 109 S.Ct. 1026, 103 L.Ed.2d 290 (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–, 130 S.Ct. 2464, 2471, 177 L.Ed.2d 23 (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...

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