Wednesday, January 12, 2011

U.S. Supreme Court Decides Ransom

The U.S. Supreme Court just decided an important bankruptcy controversy. The question was whether you could take an "ownership" deduction for a paid-off car on the bankruptcy means test. The answer is now, no.

The case is Ransom v. MBNA et al (link opens .pdf version of opinion).

This decision means a slightly higher Chapter 13 payment for some consumers and more consumers having to file Chapter 13 instead of Chapter 7. However, like most things, it will not affect the bottom line for the overwhelming majority of people who need bankruptcy relief. That bottom line is this: If you cannot afford to pay dischargeable debts (like credit cards), you will not have to if you file bankruptcy. If you can afford to pay some, you will have to in an orderly Chapter 13 partial repayment plan.