Ransom v. FIA Card Services, N. A.
562 U.S. ___ (2011)

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SYLLABUS
OCTOBER TERM, 2010
RANSOM V. FIA CARD SERVICES, N. A.


SUPREME COURT OF THE UNITED STATES

RANSOM v. FIA CARD SERVICES, N. A., fka MBNA AMERICA BANK, N. A.

certiorari to the united states court of appeals for the ninth circuit

No. 09–907. Argued October 4, 2010—Decided January 11, 2011

Chapter 13 of the Bankruptcy Code uses a statutory formula known as the “means test” to help ensure that debtors who can pay creditors do pay them. The means test instructs a debtor to determine his “disposable income”—the amount he has available to reimburse creditors—by deducting from his current monthly income “amounts reasonably necessary to be expended” for, inter alia, “maintenance or support.” 11 U. S. C. §1325(b)(2)(A)(i). For a debtor whose income is above the median for his State, the means test indentifies which expenses qualify as “amounts reasonably necessary to be expended.” As relevant here, the statute provides that “[t]he debtor’s monthly expenses shall be the debtor’s 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 [IRS] for the area in which the debtor resides.” §707(b)(2)(A)(ii)(I).

      The Standards are tables listing standardized expense amounts for basic necessities, which the IRS prepares to help calculate taxpayers’ ability to pay overdue taxes. The IRS also creates supplemental guidelines known as the “Collection Financial Standards,” which describe how to use the tables and what the amounts listed in them mean. The Local Standards include an allowance for transportation expenses, divided into vehicle “Ownership Costs” and vehicle “Operating Costs.” The Collection Financial Standards explain that “Ownership Costs” cover monthly loan or lease payments on an automobile; the expense amounts listed are based on nationwide car financing data. The Collection Financial Standards further state that a taxpayer who has no car payment may not claim an allowance for ownership costs.

      When petitioner Ransom filed for Chapter 13 bankruptcy relief, he listed respondent (FIA) as an unsecured creditor. Among his assets, Ransom reported a car that he owns free of any debt. In determining his monthly expenses, he nonetheless claimed a car-ownership deduction of $471, the full amount specified in the “Ownership Costs” table, as well as a separate $388 deduction for car-operating costs. Based on his means-test calculations, Ransom proposed a bankruptcy plan that would result in repayment of approximately 25% of his unsecured debt. FIA objected on the ground that the plan did not direct all of Ransom’s disposable income to unsecured creditors. FIA contended that Ransom should not have claimed the car-ownership allowance because he does not make loan or lease payments on his car. Agreeing, the Bankruptcy Court denied confirmation of the plan. The Ninth Circuit Bankruptcy Appellate Panel and the Ninth Circuit affirmed.

Held: A debtor who does not make loan or lease payments may not take the car-ownership deduction. Pp. 6–18.

   (a) This Court’s interpretation begins with the language of the Bankruptcy Code, which provides that a debtor may claim only “applicable” expense amounts listed in the Standards. Because the Code does not define the key word “applicable,” the term carries its ordinary meaning of appropriate, relevant, suitable, or fit. What makes an expense amount “applicable” in this sense is most naturally understood to be its correspondence to an individual debtor’s financial circumstances. Congress established a filter, permitting a debtor to claim a deduction from a National or Local Standard table only if that deduction is appropriate for him. And a deduction is so appropriate only if the debtor will incur the kind of expense covered by the table during the life of the plan. Had Congress not wanted to separate debtors who qualify for an allowance from those who do not, it could have omitted the term “applicable” altogether. Without that word, all debtors would be eligible to claim a deduction for each category listed in the Standards. Interpreting the statute to require a threshold eligibility determination thus ensures that “applicable” carries meaning, as each word in a statute should.

   This reading draws support from the statute’s context and purpose. The Code initially defines a debtor’s disposable income as his “current monthly income … less amounts reasonably necessary to be expended.” §1325(b)(2). It then instructs that such reasonably necessary amounts “shall be determined in accordance with” the means test. §1325(b)(3). Because Congress intended the means test to approximate the debtor’s reasonable expenditures on essential items, a debtor should be required to qualify for a deduction by actually incurring an expense in the relevant category. Further, the statute’s purpose—to ensure that debtors pay creditors the maximum they can afford—is best achieved by interpreting the means test, consistent with the statutory text, to reflect a debtor’s ability to afford repayment. Pp. 6–9.

   (b) The vehicle-ownership category covers only the costs of a car loan or lease. The expense amount listed ($471) is the average monthly payment for loans and leases nationwide; it is not intended to estimate other conceivable expenses associated with maintaining a car. Maintenance expenses are the province of the separate “Operating Costs” deduction. A person who owns a car free and clear is entitled to the “Operating Costs” deduction for all driving-related expenses. But such a person may not claim the “Ownership Costs” deduction, because that allowance is for the separate costs of a car loan or lease. The IRS’ Collection Financial Standards reinforce this conclusion by making clear that individuals who have a car but make no loan or lease payments may take only the operating-costs deduction. Because Ransom owns his vehicle outright, he incurs no expense in the “Ownership Costs” category, and that expense amount is therefore not “applicable” to him. Pp. 9–11.

   (c) Ransom’s arguments to the contrary—an alternative interpretation of the key word “applicable,” an objection to the Court’s view of the scope of the “Ownership Costs” category, and a criticism of the policy implications of the Court’s approach—are unpersuasive. Pp. 11–18.

577 F. 3d 1026, affirmed.

   Kagan, J., delivered the opinion of the Court, in which Roberts, C. J., and Kennedy, Thomas, Ginsburg, Breyer, Alito, and Sotomayor, JJ., joined. Scalia, J., filed a dissenting opinion.

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