Vehicle Deduction Means Test

[markinmo]

I am filing chapter 7 bankruptcy just me not my wife had a few questions about vehicle deductions. I have an older vehicle 14 years old and paid for so I don’t get the $496.00 deduction but my wife has a newer vehicle (in her name only so I can't claim ownership) and a payment of $575.00 per month. Would the following be an accurate deduction for the means test. My attorney was not sure said she would look into it.

MY VEHICLE
$210.00----OPERATIONAL EXPENSE (IRS STANDARDS)
$200.00----AGE/MILEAGE EXPENSE (OVER 6 YEARS AND 75,000 MILES)

TOTAL FOR MY VEHICLE
$410.00

WIFE'S CAR
$575.00----PAYMENT PER MONTH
$210.00----OPERATIONAL EXPENSE (IRS STANDARDS)

TOTAL FOR WIFE’S CAR
$785.00

TOTAL DEDUCTION
$1195.00

[debee]

The $200 expense isn't available everywhere. At the time the UST posted its position paper online here: http://www.justice.gov/ust/eo/bapcpa...ne_by_line.pdf the deduction was only available (depending on local court rulings,etc) outside the 5th, 7th & 8th circuits. I believe you are in the 8th circuit. If that is correct, I don't think you can take it. Circuit map is here: http://www.uscourts.gov/court_locator.aspx

[markinmo]

I'm in the 8th circuit so that means that I can't claim the additional $200 per month due to age and mileage but it states:

"in the Fifth, Seventh, and Eighth circuits debtor my claim the is expense if the debtor owns a vehicle regardless of whether the debtor has a loan or lease payment. However, if the debtor owns a vehicle free and clear the USTP position is that the lack of any actual ownership expense may be considered in determining whether the case constitutes an abuse under the totality of the debtor's financial circumstances pursuant to section 707(b)(3)(B)."

Does this mean that if I have documented expenses pertaining to my vehicle showing it has costly repairs as it does it has 187,000 miles on it, I would be able to claim ownership of vehicle or would it be considered "abuse"? If I was able to claim ownership would I also get the operating expense of the vehicle as well?

My Vehicle:

$496.00-----Ownership Expense
$210.00-----Operating Expense

Wife's Vehicle:

$575.00-----Car Payment
$210.00------Operating Expense

Total Includes Wife's Operating Expense: $1491.00
Total Without Wife's Operating Expense: $1281.00

Thank you for the advice!

[debee]

If your vehicle is paid-off, you can't claim the ownership expense anymore. The Supreme Court recently ruled on that and it is now disallowed everywhere. Sorry.

You can read about it here: http://www.bkforum.com/showthread.ph...ghlight=ransom

[markinmo]

So I only get operating expense and nothing else that does not seem fair I use more than $50 in gas a week, oh well would I be able to deduct the wife's operating expense and her car payment?

[debee]

I agree, it isn't fair. It seems debtors who go out and buy a new car with payments before filing get rewarded and debtors who still drive the old beater get punished. Many lawyers recommend that their clients do go out and buy a new car before filing. Not only because it solves the problem of unexpected car problems/bills post-bk when there is no credit card or ready-cash for payment, but also because there is the side-benefit of taking a big bite out income.

Not sure about the spouse. Seems ok to me, but others with more background on that aspect may yet pipe up.

[markinmo]

If I was to purchase a used car with payments before I file am I only entitled to the ownership deduction minus the payments If my payments are $300.00 per month my ownership expense of $496.00 would really only be $196.00 due to payments correct?

Thanks again for the information.

[debee]

Your means test deduction would be the full "standard" amount, but you would use your actual payment on Schedule J.

[markinmo]

Great thank you very much!

[tcreegan]

Hi all, Hi markinmo,

You always get actual expenses (as long as you can document it)

Whatever you spend on gas, oil, tires, tune-ups, etc ...for each car.

Ownership expense is the car payment. No payment, no expense

You know what is going to start happening? Refinance the paid-off car for whatever is left in vehicle exemption. Get the ownership expense, use the $$ for legit pre-BK expenses.

...just a thought

Tom in Colo

[BKIN2010]

The document referenced is talking about a chapter 13 (I understand chap. 13 cases borrows chap 7 means test) but does it apply to a chapter 7 also?

[debee]

Yes, it applies to chapter 7 filers as well. Ransom was in a 13, but the real issue was how to interpret the relevant sections of the bankruptcy code as it applies to all debtors.

[markinmo]

If one was to take out a small high interest loan on their used paid for vehicle prior to filing to gain ownership expenses would this raise a red flag, seems like it would be considered "abuse"?

[olivies]

Hi all, Hi markinmo,

You always get actual expenses (as long as you can document it)

Whatever you spend on gas, oil, tires, tune-ups, etc ...for each car.

Ownership expense is the car payment. No payment, no expense

You know what is going to start happening? Refinance the paid-off car for whatever is left in vehicle exemption. Get the ownership expense, use the $$ for legit pre-BK expenses.

...just a thought

Tom in Colo

To clarify Tom, you mean we can get the actual expense (oil, gas, repairs, etc.) on the schedule but not the means test- that's a standard amount? Did I understand that correctly? How about forward looking expenses- like if you know you'll need a new timing belt in the next month, tires within the next year, etc. (because I'm going to go run and look at my schedules, if that's the case!)

[olivies]

If one was to take out a small high interest loan on their used paid for vehicle prior to filing to gain ownership expenses would this raise a red flag, seems like it would be considered "abuse"?

Not sure it's any more abusive than someone buying a new/newer car just prior to filing to make sure they have a vehicle that survives the bankruptcy and have the ownership expense. That's a strategy that's been used all along by many.