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Use of car is not income in a Chapter 13 rules WI bankrutpcy ct

On Behalf of | Aug 12, 2016 | Chapter 13 Bankruptcy, Firm News |

At least in one bankruptcy court of the Eastern District of Wisconsin. In a Chapter 13, a debtor who worked for a car dealer receives a vehicle as part of her compensation. It added $625 per month to her income. However, she also had a second, personal vehicle. She did not include it in her current monthly income as listed on her Chapter 13 filings.

The trustee in her bankruptcy objected, as her plan did not pay anything to unsecured creditors, as her other secured debts and necessary living expenses used up all of her available income.

The trustee argued that her dealership-provided car should count as an additional $625 within her CMI, which would then leave some cash available to pay to other creditors. The bankruptcy judge disagreed. He determined that CMI is related to Census Bureau calculations of income and a leading bankruptcy treatise also suggests the Census Bureau’s definition of income should be used.

That definition excludes “like kind” compensation, like the use of a vehicle. This makes sense, in that use of the vehicle while she is employed is not a liquid asset and cannot be given to creditors. If she found a different job, she would also lose access to the vehicle and would need her personal vehicle.

The court looked at various definitions of income, including the dictionary definition and the Internal Revenue Code’s definition and found none were adequate for defining income in this case. Because of the non-cash nature of the “compensation” for the use of the vehicle, the court determined that it was “logical” to exclude it from CMI.