Whether you are working on a Chapter 13 or Chapter 7, there is a distinct benefit to claiming the older vehicle expense on the means test. Depending on your jurisdiction, if a debtor has a vehicle that is either more than 6 years old or has more than 75,000 miles on it, a deduction of $200 per vehicle may be claimed on the means test. Being able to apply the deduction can bring a Chapter 13 payment down considerably or help other clients qualify for Chapter 7.
Not every jurisdiction allows the deduction and each jurisdiction has differing expectations about how to make the claim on the means test. The reference point for this expense is found in the Internal Revenue Manual, Financial Analysis Handbook in Part 5, Chapter 8, § 5.8.5.5.2(3).
Vehicles present two expenses that can be claimed, ownership and operating. The operating expense is claimed on line 27a and the ownership expense is claimed on line 28 (first vehicle) and line 29 (second vehicle). The ownership expense takes into consideration the monthly lease or installment payments made by a debtor on a financed vehicle.
Until early 2011, about half of the jurisdictions across the country allowed debtors to claim this deduction even if the vehicle was not financed or leased. In January 2011 the US Supreme Court ruled, however, that this expense can only be claimed if the vehicle is indeed financed or leased. Ransom v. FIA Card Services, 131 S.Ct. 716 (2011). After this decision, debtor’s access to the older vehicle expense became very important.
PRACTICE TIP: For those debtors who own their vehicle outright, the older vehicle expense can usually be claimed on line 27a. The $200 would be added to the operating expense already appearing on that line. You will want to research your jurisdiction to be certain whether the claim is available in your jurisdiction and how to present it in the means test. For example, in Utah, the claim is available, but it must be made on Line 60 as a special expense with a description of the vehicle appearing on that line. In Montana, for example, the expense is claimed on line 27a.
For those of you who enjoy compelling reading, here is some of the current case law addressing the older vehicle expense including the case we argued in Utah establishing access to the expense.
In re Carlin, 348 B.R. 795 (Bankr. D. Or. 2006), In re Byrn, Bankr. D. Montana, 08-60513-13, In re McGuire, 342 BR 608 – Bankr. Court, WD Missouri (2006) (acknowledged expense was available but not used by debtor), In re Wilson, 383 BR 729 – Bankr. Appellate Panel, 8th Circuit (2008) (recognized US Trustee had supported expense in Amicus Brief, See Footnote 4.). In re May, 390 BR 338 – Bankr. Court, SD Ohio (2008) (recognized the US Trustee had supported expense for the case at bar. See Footnote 13.), In re Wieland, 382 BR at 798-99, In re Slusher, 359 BR 290, 310 Bankr. D. Nev. (2007), Fokkena v. Hartwick, 373 BR 645 – Dist. Court, Minnesota (2007), In re Hargis, 10-36861 (Utah).
For help determining whether the expense is available in your jurisdiction and how to enter it in the means test, feel free to contact us and we’ll get you on the right track.
Sincerely,
The 713 Training Team
www.713Training.com
Disclaimer: We at 713Training.com are not attorneys and any information provided by 713 Training should not be considered legal advice. The information in this article, and any other materials provided by 713 Training, whether delivered verbally, written or via any other means, including electronic/digital delivery and storage, is for training purposes only, and is intended for individuals who work under the direction of a licensed attorney.
