Chapter 7 Car Expenses Without A Loan Allowed In Connecticut

by Eugene Melchionne, Esq.

November 27, 2009

A Connecticut Bankruptcy Judge has recognized that a person in Chapter 7 may deduct car expenses on the Means Test even if there is no car loan without triggering a presumption of abuse in Bankruptcy.  Now there’s a mouthful, but what does it mean?

The Means Test was devised by the credit industry to ‘catch’ consumers filing Chapter 7 bankruptcy when they could otherwise ‘pay’ at least some of their debts in a Chapter 13 case. Congress adopted the process of keeping consumers as slaves to their debt.  One long-standing assumption of that means test calculation was that car expenses could only be deducted from income if there was a car loan.  That is no longer the case in Connecticut.

Judge Albert Dabrowski has ruled that there are really three ways of acquiring a car.  The first two have been accepted by the credit industry and foisted on Congress; one, by car loan (borrow the money) and two, by car lease (or ‘fleece’ as some call it).  The third way is the time-honored method long forgotten by those in power – by saving up for it.  (Surprise!)  This was previously recognized in Chapter 13 cases.

So now, if you are filing for bankruptcy in Connecticut, you may deduct vehicle expenses even if you do not have a car loan or lease because you could be budgeting for it by saving up.  How cool would it be to pay for your next car IN CASH!

“ConnecticutGene Melchionne is a bankruptcy lawyer covering the entire State of Connecticut. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.

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Last modified: November 19, 2013