When a debtor is considering whether to file bankruptcy, one of the first issues she faces is the means test used to determine if she can file for Chapter 7 bankruptcy protection or must file for chapter 13 bankruptcy protection, instead. Follow this link for an explanation of the difference between chapter 13 and chapter 7 bankruptcy.
The means test is designed to show what the debtor's actual disposable income is, so a bankruptcy court can determine how much, if anything, she has available to reimburse creditors. If her actual disposable income falls below a certain point, then the debtor is entitled to file Chapter 7 bankruptcy. When calculating disposable income, debtor's are allowed to reduce their available income by applying certain deductions that attempt paint a more accurate picture of the amount of money a debtor actually has at her disposal on a monthly basis. Earlier this year, the United States Supreme Court issued an opinion in which it held that a debtor who does not make loan or lease payments on her car may not take one of those deductions, the "car-ownership deduction." (See Ransom v. FIA Card Services (2011)).
This case is probably more interesting to attorneys than to consumers. In fact, debtor's can still take a deduction for the actual cost of owning and maintaining a car that is paid off, but will have to use a different deduction. The Court said: "Maintenance expenses are the province of the separate “Operating Costs” deduction. A person who owns a car free and clear is entitled to the “Operating Costs” deduction for all driving-related expenses. But such a person may not claim the “Ownership Costs”deduction, because that allowance is for the separate costs of a car loan or lease."