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U.S. Supreme Court

Kagan’s First Opinion Rejects Consumer’s Bankruptcy Argument; Scalia Is Dissenter

Posted Jan 11, 2011 11:26 AM CDT
By Debra Cassens Weiss

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Justice Elena Kagan ruled against a consumer seeking to shield some income from creditors in her first decision for the U.S. Supreme Court.

There was only one dissenter: Justice Antonin Scalia, according to the Associated Press, Bloomberg News and SCOTUSblog.

Kagan wrote that debtor Jason Ransom can’t shield $471 in monthly income from creditors by claiming an allowance for a Toyota Camry he owns outright.

Ransom was paying a portion of his income to creditors under the bankruptcy provisions of Chapter 13. A formula allows him to deduct car-ownership costs and other expenses from his monthly income, with the rest representing his disposable income available to reimburse creditors. A standardized table prepared by the Internal Revenue Service had set $471 as the ownership costs of a first car.

Kagan said Ransom can’t claim the $471 as an expense under a provision that says a debtor may claim “applicable” expense amounts. Under a contrary reading, Ransom could purchase a “junkyard car” and claim the allowance, she wrote.

Scalia claims the majority gives a "strained interpretation" to the law and says the junkyard car hypothetical can be matched with this one: Under the court's new interpretation, a debtor could buy a junkyard car for a song and a $10 promissory note, payable over several years, that would entitle him to the allowance.

The decision (PDF) is Ransom v. FIA Card Services.

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