Lori Ann Schneider

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re
LORI ANN SCHNEIDER, No. 06-10188
Debtor(s).
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Memorandum re Ownership Costs of Second Car
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Debtor Lori Schneider’s income is higher than the median income for her family size, so her
Chapter 13 plan is subject to § 1325(b)(3) of the Bankruptcy Code. That section provides that her
reasonably necessary expenses are governed by § 707(b)(2) of the Code. Section § 707(b)(2)
incorporates the standard expenses used by the Internal Revenue Service for the area in which the debtor
resides when considering an offer in compromise. The only issue remaining in this case is whether
Schneider is entitled under IRS standards to the $332.00 ownership expense she has claimed for her
second car and third cars, a 1998 Ford Contour and a 1993 Toyota Corolla. She owns both vehicles free
and clear. The Chapter 13 Trustee at first objected to any ownership expense, and then amended his
objection to oppose any amount over $200.00.
Under the IRS standards, no ownership deduction is allowed for a vehicle which is owned free
and clear. In re Hardacre, 338 B.R. 718, 728 (Bkrtcy.N.D.Tex.2006); IRM 5.8.5.5.2(3)[“After the loan
is ‘retired’ . . . the ownership expense is not applicable . . . .” The ownership deduction claimed by
Schneider at line 29 of her form B 22C therefore cannot be allowed.
Entered on Docket
July 18, 2006
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 06-10188 Doc# 20 Filed: 07/18/06 Entered: 07/18/06 13:49:06 Page 1 of 2

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However, the IRS standards make allowance for vehicles owned free and clear. While there is
no allowable ownership expense, they allow and additional operating expense of $200.00 over and
above the standard operating expense for each vehicle over six years old or with over 75,000 miles on
it. Id. This deduction is not unfettered; IRM 5.8.5.5.2(1) provides that expenses that are excessive
should be disallowed, so a debtor cannot increase the deduction by owning unnecessary vehicles.
However, since both the Contour and the Corolla are more than six years old, Schneider may deduct the
standard operating expense plus $200.00 for each vehicle, provided that she show that each vehicle is
necessary for the functioning of her family.
For the foregoing reasons, the Trustee’s objection will be sustained. Further proceedings shall
be consistent with this decision. Either party may submit an appropriate form of order.
Dated: July 18, 2006
SAlan Jaroslovsky
U.S. Bankruptcy Judge
Case: 06-10188 Doc# 20 Filed: 07/18/06 Entered: 07/18/06 13:49:06 Page 2 of 2