Question regarding SCOTUS Ransom v FIA decision

[rjsdsu]

In order to get both ownerhsip & operating expense on the means test, I understand that under the recent Ransom decision, I need to have secured debt on the vehicle. I am considering getting a title loan, but would rather not work with a third party. It would seem to me that if I contract with a friend for a loan and a note that secures the property, that should be enough for purposes of the means test and that I do not necessarily need the loan perfected by recording.

Comments & advise much appreciated.

RJ

[tobee43]

"whereas he majority opinion held that an over-median income debtor in chapter 13 is not entitled to the "ownership costs" deduction (approx. $471.00) in the computation of the means test (used to determine "disposable income") for a vehicle that is not encumbered by debt. the debtor is though is entitled to a deduction for the "operating costs" deduction (approx. $388.00) for an unencumbered vehicle????"

well, that could be risky, but may work, i would still run it by your atty, just to make certain.

here's the decision in it's entity for those who'd like to peek.

http://www.supremecourt.gov/opinions/10pdf/09-907.pdf

[SMinGA2]

My concern if I were in your shoes: if the lien is NOT perfected then you actually own the vehicle outright. Can you exempt all that equity? If not your risk/gamble could cost you the vehicle.

[tobee43]

My concern if I were in your shoes: if the lien is NOT perfected then you actually own the vehicle outright. Can you exempt all that equity? If not your risk/gamble could cost you the vehicle.

that's also an excellent question, but i would not think the equity would be an issue as long as it was not a substantial amount?

[SMinGA2]

But if its not a 'substantial amount' then I doubt a monthly payment to a 'friend' would be enough to impact the means test?

that's also an excellent question, but i would not think the equity would be an issue as long as it was not a substantial amount?

[tobee43]

But if its not a 'substantial amount' then I doubt a monthly payment to a 'friend' would be enough to impact the means test?

i hope not. however, the "friend" part may be an issue as well. unless the question never comes up as to who exactly is this third party and what type of relationship is there between you.

[frogger]

A perfected lien is your friend. In bankruptcy, your friends are not something that you want involved.

Remember the term "arms length"........

[tobee43]

A perfected lien is your friend. In bankruptcy, your friends are not something that you want involved.

Remember the term "arms length"........

wise words, at least that is the way i view it, no friends or family in my business.

[rjsdsu]

"The Local Standards include an allowance for transportation expenses, divided into vehicle “Ownership Costs” and vehicle “Oper-ating Costs.” The Collection Financial Standards explain that “Own-ership Costs” cover monthly loan or lease payments on an automo-bile; the expense amounts listed are based on nationwide car financing data."

In my zip, California, the ownership cost deduction is $496. X2, I am looking at a $992 deduction on the means test. I am close enough already, and can say with certainty I need every bit of that $992 deduction. It is my understanding that as long as there is debt secured by the vehicle, you get the full amount. Even if only $1 as questioned by Scalia in oral arguments.

I meet with my attorney next week and will keep you posted. I agree it is a risk. I think the risk is that a judge could "develop" the local law to require perfection to prevent abuse. It would seem to me that the chances of a judge inquiring further than a Yes/No response on whether there is debt is minimal. And even further remote that they would learn its a friend, or at least in my case, a SMLLC owned by a friend.

I suppose the title loan is the way to go, I just wanted something a much simpler way to do this. FWIW, my cars equity is about 3k and 4k.

Thanks again!

[LadyInTheRed]

If you perfect the lien, have a valid executed promissory note and document an actual tranfer of funds from your friend to you, I think it would work after the trustee takes a very close look at everything. But, check with your attorney first.

If you don't perfect the lien, whether it's a friend or stranger, I think you might as well not bother.

I don't think you should get your friend involved. It's a good way to ruin a friendship. Go get a loan from a neutral 3rd party. You won't jeopardize your friendship and wont be as likely to invite the close scrutiny of the trustee.

[SMinGA2]

Out of curiosity, since the means test is merely one step (and more useful in determining if you are eligible for a 36 mo ch. 13, in my opinion, than guaranteeing a ch. 7) how do you look on schedules I & J when you compare income to actual expenses?

[tobee43]

that's a good question for lady! (one of the premiere authorities on chapter 13's).

this is very interesting to follow with respect to the new ruling and how it's going to be applied by the courts in the future.

[LadyInTheRed]

"The Local Standards include an allowance for transportation expenses, divided into vehicle “Ownership Costs” and vehicle “Oper-ating Costs.” The Collection Financial Standards explain that “Own-ership Costs” cover monthly loan or lease payments on an automo-bile; the expense amounts listed are based on nationwide car financing data."

In my zip, California, the ownership cost deduction is $496. X2, I am looking at a $992 deduction on the means test. I am close enough already, and can say with certainty I need every bit of that $992 deduction. It is my understanding that as long as there is debt secured by the vehicle, you get the full amount. Even if only $1 as questioned by Scalia in oral arguments.

I don't know where you are getting your info, but it seems to be outdated. Here are the current means test standards for automobiles: http://www.justice.gov/ust/eo/bapcpa...xp_Stds_WE.htm
The ownership costs is a National Standard.

I meet with my attorney next week and will keep you posted. I agree it is a risk. I think the risk is that a judge could "develop" the local law to require perfection to prevent abuse. It would seem to me that the chances of a judge inquiring further than a Yes/No response on whether there is debt is minimal. And even further remote that they would learn its a friend, or at least in my case, a SMLLC owned by a friend.

Judges do not develop law. They apply the law to the facts. If the law is unclear, they interpret it as it appies to the facts. Your petition will have to list secured debt. If you do not perfect a lien, the debt is not secured in the eyes of the BK court (at least that is my understanding). If the secured debt is not listed on your petition, but you claim the ownership on the means test, the trustee will probably object. Regardless of what is on the means test, your Schedule J must show your actual expenses. If your actual expenses leave you with enough disposible income to fund a Chap 13, the trustee will probably object to a Chap 7 discharge based on the totality of circumstances.

I suppose the title loan is the way to go, I just wanted something a much simpler way to do this.

The simple option is not always the best option.

[LadyInTheRed]

Out of curiosity, since the means test is merely one step (and more useful in determining if you are eligible for a 36 mo ch. 13, in my opinion, than guaranteeing a ch. 7) how do you look on schedules I & J when you compare income to actual expenses?

that's a good question for lady! (one of the premiere authorities on chapter 13's).

this is very interesting to follow with respect to the new ruling and how it's going to be applied by the courts in the future.

LOL. I was answering the question while it was being asked.

[tobee43]

LOL. I was answering the question while it was being asked.

LOL!! not surprising