Massachusetts Decision: Car Ownership Allowance without a Loan or Lease

15 Jun Massachusetts Decision: Car Ownership Allowance without a Loan or Lease

This is the second of two posts addressing the decision of Massachusetts Bankruptcy Judge Feeney in re Mati, 2008 WL 2389234 (Bkrtcy.D.Mass.2008). After addressing the first issue in the case concerning 401(k) deductions and bad faith, the Court moved on to the dispute over whether the debtor was entitled to the car “ownership” deduction on his B22C “mean test” form.

The applicable monthly car ownership allowance was $471. The trustee argued that this allowance should only available to debtors who have a car loan or lease payment. The Court disagreed noting that the car ownership allowance appears in “applicable” and not the “actual” expense part of Section 707.

The Court stated (quoting another court) that: “The use of fixed expense allowances levels the playing field for debtors. It is far less defensible from a policy perspective for a debtor with one car payment remaining at the time of filing to get the full standard deduction for the 60-month term of the Chapter 13 plan, while a debtor who paid off the secured debt before filing gets no deduction whatsoever.”

There is a split of authority throughout the nation on this BAPCPA provision. I believe the Court applied the law according to its terms. Other courts appear to have strained to reach a result, what some believe is a better policy end. This is not a role for the courts when faced with a statutory mandate to equalize certain expenses for consumer debtors–even when these provisions actually benefit debtors.

The bottom line is that going forward debtors in Judge Feeney’s session will be permitted to take the car ownership allowance even if they own their car outright.

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