Kagan Backs Bank on Bankruptcy in First Court Opinion

Justice Elena Kagan, hailed last year by President Barack Obama as a defender of “ordinary citizens,” sided with a Bank of America Corp. unit against an indebted consumer in her first U.S. Supreme Court ruling.

The 8-1 decision limited a provision that lets people receiving bankruptcy protection cut their monthly payments by as much as $471 a month to account for car ownership costs. Kagan said consumers can take that deduction only when they are making loan or lease payments on the car.

“If the debtor already owns a car outright, he has no need for this protection,” the newest justice wrote for the court.

The decision was a defeat for Jason Ransom, a Nevada man who sought to take a deduction for a 2004 Toyota Camry valued at $14,000. Ransom filed for bankruptcy protection in 2006 with more than $82,000 in credit card debt, almost $33,000 owed to Bank of America’s FIA Card Services.

Justice Antonin Scalia, in other contexts one of the most pro-business justices, was the lone dissenter. He said Ransom should have been allowed to take the deduction and that Kagan and the rest of the court misread a provision in a 2005 bankruptcy law.

The Obama administration supported FIA in the case, pointing to the Internal Revenue Service’s conclusion that people who own their car outright can’t claim the deduction. A separate deduction is available to cover car operating expenses.

Photographer: Roger L. Wollenberg/Pool via Bloomberg

Elena Kagan, U.S. Supreme Court justice. Close

Elena Kagan, U.S. Supreme Court justice.

Photographer: Roger L. Wollenberg/Pool via Bloomberg

Elena Kagan, U.S. Supreme Court justice.

Obama, when he nominated Kagan last year to succeed the retiring Justice John Paul Stevens, described her as someone who “has repeatedly defended the rights of shareholders and ordinary citizens against unscrupulous corporations.”

The case is Ransom v. FIA Card Services, 09-907.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net.

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net.

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