Means Test Car Allowance for Old Cars

As discussed in a previous post, the United States Supreme Court in the Ransom case held that a debtor could not use the car ownership allowance when the debtor did not have a car payment.

However, based on the Internal Revenue Service Collection Financial Standards, a taxpayer can use an additional operating allowance for vehicles older than 6 years old or with more than 75,000 miles. This allowance is $200.00. Though Ransom hedged and said the standards are not incorporated into the bankruptcy code, the Supreme Court observed that the IRS guidelines are persuasive.

As a Broward County bankruptcy attorney representing debtors in the Fort Lauderdale area and surrounding counties, I can tell you that the United States Trustee does not object to claiming additional old car allowance in the means test, nor does the chapter 13 trustee.

A recent case reiterated the applicability of this additional exemption. In re Baker, 2011 Bankr. Lexis 490(Bankr. M. D. Montana Feb. 9, 2011), (citing prior consistent authority).

The additional operating allowance for cars that are older than 6 years or have more than 75,000 miles can mitigate the harm to debtors from the Ransom decision.

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