Car Ownership Deduction Allowed for Fully Paid Car

16 Aug Car Ownership Deduction Allowed for Fully Paid Car

Massachusetts Bankruptcy Judge Hillman in the case of In re Young , 2008 WL 3274425 (Bkrtcy.D.Mass.2008) decided the important issue of whether the means test deduction for car ownership could be taken by a debtor with no car loan or lease payment. The trustee and a creditor had taken the position that the car ownership deduction was not applicable to a debtor with no loan or lease payment because it was meant to represent an average car payment.

In a well-reasoned opinion the court held that the debtor could take the deduction. The court rejected policy arguments and focused on the language of the statute, holding that as long as a debtor had some car ownership expense (maintenance, insurance, etc.), he could take the entire deduction. This decision will positively affect above-median income debtors who are subject to the means test in both Chapter 7 and Chapter 13 bankruptcies in Massachusetts.

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