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Bankruptcy Court Allows Debtor To Deduct Ownership Expense On Debt-Free Car

Posted By admin || 10-Apr-2009

This Chapter 13 bankruptcy (Burbank, Edward J. and Donna M.; In re) which allowed debtors to deduct ownership expenses on a vehicle they owned clear and free of a car loan, may be good news for other above-median income debtors filing bankruptcy.

The details of the Chapter 13 Bankruptcy case:

The Chapter 13 trustee objected to confirma¬tion of the above-median income debtors' plan on the basis that the debtors improperly calculated their disposable income on Form 22C. According to the trustee, the debtors were not entitled to take an ownership expense for vehicles that they owned free and clear, and were not entitled to take a secured debt deduction for mortgage payments on two parcels of real estate that the debtors intended to sur¬render. The court disagreed. The Means Test allows debtors to deduct "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 for the area in which the debtor resides." Denying the debtors' vehicle ownership expense, as established by the Local Standards, would lose the distinction between "applicable" and "actual" expenses, the court said.

This would allow above-median income debtors in Chapter 13 bankruptcy to claim the ownership expense in vehicles that they not only own free and clear; but that they plan to surrender during the bankruptcy. It is twists in the bankruptcy rules such as this that drive home the need for a professional bankruptcy attorney. Unless a debtor is a bankruptcy expert, there is no way possible for him/her to be aware of all the changes and intricacies of the law. It is those intricacies that can save debtors thousands of dollars in bankruptcy.

Categories: Chapter 13 Bankruptcy
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