Deduct vehicle ownership expense for car just paid off?

[appleae]

We are filing Ch13 in the Chicago area, soon. On the means test, it allows the debtor to deduct for vehicle ownership expense. The debtor receives the IRS standard deduction per vehicle (up to 2 vehicles) plus whatever extra, if the car payments are greater than the standard deduction.

We have two vehicles, one paid off and the other we still owe on.

There are varying opinions on when this deduction can be applied:

(1) Some courts have ruled that you may only deduct a vehicle ownership expense if you're still making payments on the vehicle.

(2) Other courts have ruled that it does not matter if the debtor is still making a car payment on the vehicle - that they are entitled to the IRS standard deduction (which is close to $500/vehicle).

I could go on and on about why I believe opinion #2 is the more logical, but at the end of the day, MY opinion really does not matter.

Does anyone in the Chicago area have recent personal experience with this issue?

[t160out]

I think this varies by state. I am on the east coast and I was able to deduct both the ownership AND operational costs for 2 cars that we owned outright. your lawyer should know though unless this is his/her first 13, in which case, RUN!!

I can't stress enough on how much a good lawyer makes all the difference.

[appleae]

deduct ownership expense (in Illinois) for a car paid off?

Does anyone in Illinois, better yet Northern Illinois have experience with this?

I think this varies by state. I am on the east coast and I was able to deduct both the ownership AND operational costs for 2 cars that we owned outright. your lawyer should know though unless this is his/her first 13, in which case, RUN!!

I can't stress enough on how much a good lawyer makes all the difference.

[justbroke]

(1) Some courts have ruled that you may only deduct a vehicle ownership expense if you're still making payments on the vehicle.

True.

(2) Other courts have ruled that it does not matter if the debtor is still making a car payment on the vehicle - that they are entitled to the IRS standard deduction (which is close to $500/vehicle).

It is conflicting even in Illinois. Recently in Moorman (In re Moorman, 2007 Bankr. LEXIS 3269 (Bankr. C.D. Illinois, September 28, 2007)) the Court found that Congress didn't explicitly exclude the deduction.

However, in 2006, Judge Barbosa in Wiggs (In Re Wiggs, 06 B 70203, Northern District of Illinois Western Division) found the opposite. Interestingly, the Lisle Trustee has the same opinion on their website http://www.lisle13.com/Wiggs.pdf.

The Southern District found similarly in United States Trustee vs. Herbord & Wilson (Herbord & Wilson, Case No. 07-60311) in 2008.

I'm not in Illinois, so I don't know the specifics of your Trustee, Division, or District. Do you not have an attorney?

[LimpDisc]

Vehicle ownership expenses deductions not only vary by state, but they also vary by district. Our attorney in Colorado said it will remain that way until someone wants to pay the money for their lawyer to challenge it in court. We just purchased another car to qualify for CH7.

[appleae]

True.

However, in 2006, Judge Barbosa in Wiggs (In Re Wiggs, 06 B 70203, Northern District of Illinois Western Division) found the opposite. Interestingly, the Lisle Trustee has the same opinion on their website http://www.lisle13.com/Wiggs.pdf.

I'm not in Illinois, so I don't know the specifics of your Trustee, Division, or District. Do you not have an attorney?

We have an attorney but they haven't been very communicative lately. Btw, Barbosa will be our judge. Yay!

I did see a PowerPoint presentation by the United States Trustee stating that, if the debtor has title to a high-mileage vehicle, they may be entitled to receiving an additional $200 operating expense. Heard of this anybody?

[justbroke]

We have an attorney but they haven't been very communicative lately. Btw, Barbosa will be our judge. Yay!

Ummm... Barbosa is the one (In Re Wiggs) that states that you can't take the ownership deduction for an unencumbered vehicle.

I did see a PowerPoint presentation by the United States Trustee stating that, if the debtor has title to a high-mileage vehicle, they may be entitled to receiving an additional $200 operating expense. Heard of this anybody?

Many Trustees allow this. In my Florida District, they allow $200 for any vehicle that has at least 75,000 miles or is older than 5 years old.

[DeadManCrawling]

Ummm... Barbosa is the one (In Re Wiggs) that states that you can't take the ownership deduction for an unencumbered vehicle.

Many Trustees allow this. In my Florida District, they allow $200 for any vehicle that has at least 75,000 miles or is older than 5 years old.

JB,

which FL district? We are Middle, and filing tomorrow. All of our ducks line up and it is CH 7, but was curious.

Makes sense that older vehicles, in many cases, will have higher operating and maintenance expenses.

[justbroke]

which FL district? We are Middle, and filing tomorrow. All of our ducks line up and it is CH 7, but was curious.

Middle. Most people in Florida are in the Middle and it's one of the largest Bankruptcy Districts in the nation by volume and just sheer coverage area! (It's the 5th largest in the nation.)