Kagan Issues Bankruptcy Ruling in First Supreme Court Opinion

This week, in her first ruling of her new judicial career, Supreme Court Justice Elena Kagan delivered the opinion on the bankruptcy case of Ransom v. FIA, stating that the case boiled down to a simple, clear interpretation of the United States bankruptcy code. Kagan wrote a detailed opinion, speaking for seven other Supreme Court justices, with a lone dissenter in Justice Antonin Scalia.

The case, which was brought by a man named Jason Ransom, was primarily concerned with the deductions that are allowed by the bankruptcy code while a filer is under bankruptcy protection. Under the code, a filer is allowed to keep portions of their incomes from creditors in order to pay for living expenses. Deductions are allowed for food, housing, and car payments, and those predetermined amounts will not be considered when establishing the amounts filers must pay to their creditors to resolve debts.

Ransom filed for consumer bankruptcy in order to resolve approximately $80,000 of unsecured debt. After filing his bankruptcy petition, Ransom sought to take advantage of the $471 monthly deduction for car payments. However, one of the credit card companies to which Ransom owed a debt objected, claiming that he was not entitled to the deduction because his vehicle was fully paid off.

Ransom filed a lawsuit, seeking to keep the car payment deduction. Lower courts ruled against him, and Justice Kagan upheld those rulings. “In short, Ransom may not deduct loan or lease expenses when he does not have any,” she said, adding that such a deduction would allow Ransom to shield almost $30,000 from creditors over the life of the repayment plan, which would be improper in that “he does not in fact need for loan or lease payments,” she said.

Source: The Washington Post, “Kagan delivers her first judicial opinion, in bankruptcy case“, Robert Barnes, 12 January 2011