Ransom v. FIA Card Services, N. A.

delivered the opinion of the Court.

Chapter 13 of the Bankruptcy Code enables an individual to obtain a discharge of his debts if he pays his creditors a portion of his monthly income in accordance with a court-approved plan. 11 U. S. C. § 1301 et seq. To determine how much income the debtor is capable of paying, Chapter 13 uses a statutory formula known as the “means test.” §§ 707(b)(2) (2006 ed. and Supp. Ill), 1325(b)(3)(A) (2006 ed.). The means test instructs a debtor to deduct specified expenses from his current monthly income. The result is his “disposable income” — the amount he has available to reimburse creditors. § 1325(b)(2).

This case concerns the specified expense for vehicle-ownership costs. We must determine whether a debtor like petitioner Jason Ransom who owns his car outright, and so does not make loan or lease payments, may claim an allowance for car-ownership costs (thereby reducing the amount he will repay creditors). We hold that the text, context, and purpose of the statutory provision at issue preclude this result. A debtor who does not make loan or lease payments may not take the car-ownership deduction.

I

A

“Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA or Act) to correct perceived abuses of the bankruptcy system. ” Milavetz, Gallop & Milavetz, P. A. v. United States, 559 U. S. 229, 231-232 (2010). In particular, Congress adopted the means test — “[t]he heart of [BAPCPA’s] consumer bankruptcy reforms,” H. R. Rep. No. 109-31, pt. 1, p. 2 (2005) (hereinafter H. R. Rep.), and the home of the statutory language at issue here — to help ensure that debtors who can pay creditors do pay them. See, e. g., ibid. (under BAPCPA, “debtors [will] repay creditors the maximum they can afford”).

*65In Chapter 13 proceedings, the means test provides a formula to calculate a debtor’s disposable income, which the debtor must devote to reimbursing creditors under a court-approved plan generally lasting from three to five years. §§ 1325(b)(1)(B) and (b)(4).1 The statute defines “disposable-income” as “current monthly income” less “amounts reasonably necessary to be expended” for “maintenance or support,” business expenditures, and certain charitable contributions. §§ 1325(b)(2)(A)(i) and (ii). For a debtor whose income is above the median for his State, the means test identifies which expenses qualify as “amounts reasonably necessary to be expended.” The test supplants the pre-BAPCPA practice of calculating debtors’ reasonable expenses on a case-by-case basis, which led to varying and often inconsistent determinations. See, e. g., In re Slusher, 359 B. R. 290, 294 (Bkrtcy. Ct. Nev. 2007).

Under the means test, a debtor calculating his “reasonably necessary” expenses is directed to claim allowances for defined living expenses, as well as for secured and priority debt. §§ 707(b)(2)(A)(ii)-(iv). As relevant here, the statute provides:

“The debtor's monthly expenses shall be the debtor’s applicable monthly expense amounts specified under the National Standards and Local Standards, and the debt- or’s actual monthly expenses for the categories specified as Other Necessary Expenses issued by the Internal *66Revenue Service [IRS] for the area in which the debtor resides.” § 707(b)(2)(A)(ii)(I).

These are the principal amounts that the debtor can claim as his reasonable living expenses and thereby shield from creditors.

The National and Local Standards referenced in this provision are tables that the IRS prepares listing standardized expense amounts for basic necessities.2 The IRS uses the Standards to help calculate taxpayers’ ability to pay overdue taxes. See 26 U. S. C. § 7122(d)(2). The IRS also prepares supplemental guidelines known as the Collection Financial Standards, which describe how to use the tables and what the amounts listed in them mean.

The Local Standards include an allowance for transportation expenses, divided into vehicle “Ownership Costs” and vehicle “Operating Costs.”3 At the time Ransom filed for bankruptcy, the “Ownership Costs” table appeared as follows:

Ownership Costs

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App. to Brief for Respondent 5a. The Collection Financial Standards explain that these ownership costs represent “na~ *67tionwide figures for monthly loan or lease payments,” id., at 2a; the numerical amounts listed are “base[d] ... on the five-year average of new and used car financing data compiled by the Federal Reserve Board,” id., at 3a. The Collection Financial Standards further instruct that, in the tax-collection context, “[i]f a taxpayer has no car payment, . . . only the operating costs portion of the transportation standard is used to come up with the allowable transportation expense.” Ibid.

B

Ransom filed for Chapter 13 bankruptcy relief in July 2006. App. 1, 54. Among his liabilities, Ransom itemized over $82,500 in unsecured debt, including a claim held by respondent FIA Card Services, N. A. (FIA). Id., at 41. Among his assets, Ransom listed a 2004 Toyota Camry, valued at $14,000, which he owns free of any debt. Id., at 38, 49, 52.

For purposes of the means test, Ransom reported income of $4,248.56 per month. Id., at 46. He also listed monthly expenses totaling $4,038.01. Id., at 53. In determining those expenses, Ransom claimed a car-ownership deduction of $471 for the Camry, the full amount specified in the IRS’s “Ownership Costs” table. Id., at 49. Ransom listed a separate deduction of $338 for car-operating eosts. Ibid. Based on these figures, Ransom had disposable income of $210.55 per month. Id., at 53.

Ransom proposed a 5-year plan that would result in repayment of approximately 25% of his unsecured debt. Id., at 55. FIA objected to confirmation of the plan on the ground that it did not direct all of Ransom’s disposable income to unsecured creditors. Id., at 64. In particular, FT A argued that Ransom should not have claimed the car-ownership allowance because he does not make loan or lease payments on his ear. Id., at 67. FIA noted that without this allowance, Ransom’s disposable income would be $681.55 — the $210.55 he reported plus the $471 he deducted for vehicle ownership. Id., at 71. The difference over the 60 months of the plan amounts to about $28,000.

*68c

The Bankruptcy Court denied confirmation of Ransom’s plan. App. to Pet. for Cert. 48. The court held that Ransom could deduct a vehicle-ownership expense only “if he is currently making loan or lease payments on that vehicle.” Id., at 41.

Ransom appealed to the Ninth Circuit Bankruptcy Appellate Panel, which affirmed. In re Ransom, 380 B. R. 799, 808-809 (2007). The panel reasoned that an “expense [amount] becomes relevant to the debtor (i. e., appropriate or applicable to the debtor) when he or she in fact has such an expense.” Id., at 807. “[W]hat is important,” the panel noted, “is the payments that debtors actually make, not how many cars they own, because [those] payments .. . are what actually affect their ability to” reimburse unsecured creditors. Ibid.

The United States Court of Appeals for the Ninth Circuit affirmed. In re Ransom, 577 F. 3d 1026, 1027 (2009). The plain language of the statute, the court held, “does not allow a debtor to deduct an 'ownership cost’ . . . that the debtor does not have.” Id., at 1030. The court observed that “[a]n 'ownership cost’ is not an 'expense’ — either actual or applicable — if it does not exist, period.” Ibid.

We granted a writ of certiorari to resolve a split of authority over whether a debtor who does not make loan or lease payments on his car may claim the deduction for vehicle-ownership costs. 559 U. S. 1066 (2010).4 We now affirm the Ninth Circuit’s judgment.

*69II

Our interpretation of the Bankruptcy Code starts “where all such inquiries must begin; with the language of the statute itself.” United States v. Ron Pair Enterprises, Inc., 489 U. S. 235, 241 (1989). As noted, the provision of the Code central to the decision of this case states:

“The debtor’s monthly expenses shall be the debtor’s applicable monthly expense amounts specified under the National Standards and Local Standards, and the debtor’s actual monthly expenses for the categories specified as Other Necessary Expenses issued by the [IRS] for the area in which the debtor resides.” § 707(b)(2)(A)(ii)(I).

The key word in this provision is “applicable”: A debtor may claim not all, but only “applicable” expense amounts listed in the Standards. Whether Ransom may claim the $471 car-ownership deduction accordingly turns on whether that expense amount is “applicable” to him.

Because the Code does not define “applicable,” we look to the ordinary meaning of the term. See, e. g., Hamilton v. Lanning, 560 U. S. 505, 513 (2010). “Applicable” means “capable of being applied: having relevance” or “fit, suitable, or right to be applied: appropriate.” Webster’s Third New International Dictionary 105 (2002). See also New Oxford American Dictionary 74 (2d ed. 2005) (“relevant or appropriate”); 1 Oxford English Dictionary 575 (2d ed. 1989) (“pa-pable of being applied” or “[f]it or suitable for its purpose, appropriate”). So an expense amount is “applicable” within the plain meaning of the statute when it is appropriate, relevant, suitable, or fit.

What makes an expense amount “applicable” in this sense (appropriate, relevant, suitable, or fit) is most naturally understood to be its correspondence to an individual debtor’s financial circumstances. Rather than authorizing all debtors to take deductions in all listed categories, Congress es*70tablished a filter: A debtor may claim a deduction from a National or Local Standard table (like “[Car] Ownership Costs”) if, but only if, that deduction is appropriate for him. And a deduction is so appropriate only if the debtor has costs corresponding to the category covered by the table — that is, only if the debtor will incur that kind of expense during the life of the plan. The statute underscores the necessity of making such an individualized determination by referring to “the debtor’s applicable monthly expense amounts,” § 707(b)(2)(A)(ii)(I) (emphasis added) — in other words, the expense amounts applicable (appropriate, etc.) to each particular debtor. Identifying these amounts requires looking at' the financial situation of the debtor and asking whether a National or Local Standard table is relevant to him.

If Congress had not wanted to separate in this way debtors who qualify for an allowance from those who do not, it could have omitted the term “applicable” altogether. Without that word, all debtors would be eligible to claim a deduction for each category listed in the Standards. Congress presumably included “applicable” to achieve a different result. See Leocal v. Ashcroft, 543 U. S. 1, 12 (2004) (“[W]e must give effect to every word of a statute wherever possible”). Interpreting the statute to require a threshold determination of eligibility ensures that the term “applicable” carries meaning, as each word in a statute should.

This reading of “applicable” also draws support from the statutory context. The Code initially defines a debtor’s disposable income as his “current monthly income . . . less amounts reasonably necessary to be expended.” § 1325(b)(2) (emphasis added). The statute then instructs that “[a]mounts reasonably necessary to be expended . . . shall be determined in accordance with” the means test. § 1325(b)(3). Because Congress intended the means test to approximate the debtor's reasonable expenditures on essential items, a debtor should be required to qualify for a deduction by actually incurring an expense in the relevant category. If a debtor will not have a particular kind of expense *71during his plan, an allowance to cover that cost is not “reasonably necessary” within the meaning of the statute.5

Finally, consideration of BAPCPA’s purpose strengthens our reading of the term “applicable.” Congress designed the means test to measure debtors’ disposable income and, in that way, “to ensure that [they] repay creditors the maximum they can afford.” H. R. Rep., at 2. This purpose is best achieved by interpreting the means test, consistent with the statutory text, to reflect a debtor’s ability to afford repayment. Cf. Hamilton, 560 U. S., at 520 (rejecting an interpretation of the Bankruptcy Code that “would produce [the] senseless resul[t]” of “denying] creditors payments that the debtor could easily make”). Requiring a debtor to incur the kind of expenses for which he claims a means-test deduction thus advances BAPCPA’s objectives.

Because we conclude that a person cannot claim an allowance for vehicle-ownership costs unless he has some expense falling within that category, the question in this case becomes: What expenses does the vehicle-ownership category cover? If it covers loan and lease payments alone, Ransom does not qualify, because he has no sueh expense. Only if that category also covers other costs associated with having a car would Ransom be entitled to this deduction.

The less inclusive understanding is the right one: The ownership category encompasses the costs of a car loan or lease and nothing more. As noted earlier, the numerical amounts listed in the “Ownership Costs” table are “base[d]... on the five-year average of new and used car financing data compiled by the Federal Reserve Board.” App. to Brief for Re*72spondent 3a. In other words, the sum $471 is the average monthly payment for loans and leases nationwide; it is not intended to estimate other conceivable expenses associated with maintaining a car. The Standards do account for those additional expenses, but in a different way: They are mainly the province of the separate deduction for vehicle “Operating Costs,” which include payments for “[vjehicle insurance,. . . maintenance, fuel, state and local registration, required inspection, parking fees, tolls, [and] driver’s license.” Internal Revenue Manual §§5.15.1.7 and 5.15.1.9 (May 1, 2004), reprinted in App. to Brief for Respondent 16a, 20a; see also IRS, Collection Financial Standards (Feb. 19, 2010), http:// www.irs.gov/individuals/article/0„id=96543,00.html.6 A person who owns a car free and clear is entitled to claim the “Operating Costs” deduction for all these expenses of driving — and Ransom in fact did so, to the tune of $338. But such a person is not entitled to claim the “Ownership Costs” deduction, because that allowance is for the separate costs of a car loan or lease.

The Collection Financial Standards — the IRS’s explanatory guidelines to the National and Local Standards — explicitly recognize-this distinction between ownership and operating costs, making clear that individuals who have a car but make no loan or lease payments may claim only the operating allowance. App. to Brief for Respondent 3a; see supra, at 66-67. Although the statute does not incorporate the IRS’s guidelines, courts may consult this material in interpreting the National and Local Standards; after all, the IRS uses those tables for a similar purpose — to determine how much money a delinquent taxpayer can afford to pay the Government. The guidelines of course cannot control if they are at odds with the statutory language. But here, the Collection *73Financial Standards’ treatment of the car-ownership deduction reinforces our conclusion that, under the statute, a debtor seeking to claim this deduction must make some loan or lease payments.7

Because Ransom owns his vehicle free and clear of any encumbrance, he incurs no expense in the “Ownership Costs” category of the Local Standards. Accordingly, the car-ownership expense amount is not “applicable” to him, and the Ninth Circuit correctly denied that deduction.

Ill

Ransom’s argument to the contrary relies on a different interpretation of the key word “applicable,” an objection to our view of the scope of the “Ownership Costs” category, and a criticism of the policy implications of our approach. We do not think these claims persuasive.

A

Ransom first offers another understanding of the term “applicable.” A debtor, he says, determines his “applicable” deductions by locating the box in each National or Local Standard table that corresponds to his geographic location, income, family size, or number of cars. Under this approach, a debtor “consult[s] the tablets] alone” to determine his appropriate expense amounts. Reply Brief for Petitioner 16. Because he has one car, Ransom argues that his “applicable” allowance is the sum listed in the first column of the “Owner*74ship Costs” table ($471); if he had a second vehicle, the amount in the second column ($332) would also be “applicable.” On this approach, the word “applicable” serves a function wholly internal to the tables; rather than filtering out debtors for whom a deduction is not at all suitable, the term merely directs each debtor to the correct box (and associated dollar amount of deduction) within every table.

This alternative reading of “applicable” fails to comport with the statute’s text, context, or purpose. As intimated earlier, supra, at 70, Ransom’s interpretation would render the term “applicable” superfluous. Assume Congress had omitted that word and simply authorized a deduction of “the debtor’s monthly expense amounts” specified in the Standards. That language, most naturally read, would direct each debtor to locate the box in every table corresponding to his location, income, family size, or number of cars and to deduct the amount stated. In other words, the language would instruct the debtor to use the exact approach Ransom urges. The word “applicable” is not necessary to accomplish that result; it is necessary only for the different purpose of dividing debtors eligible to make use of the tables from those who are not. Further, Ransom’s reading of “applicable” would sever the connection between the means test and the statutory provision it is meant to implement — the authorization of an allowance for (but only for) “reasonably necessary” expenses. Expenses that are wholly fictional are not easily thought of as reasonably necessary. And finally, Ransom’s interpretation would run counter to the statute’s overall purpose of ensuring that debtors repay creditors to the extent they can — here, by shielding some $28,000 that he does not in fact need for loan or lease payments.

As against all this, Ransom argues that his reading is necessary to account for the means test’s distinction between “applicable” and “actual” expenses — more fully stated, between the phrase “applicable monthly expense *75amounts” specified in the Standards and the phrase “actual monthly expenses for . . . Other Necessary Expenses.” § 707(b)(2)(A)(ii)(I) (emphasis added). The latter phrase enables a debtor to deduct his actual expenses in particular categories that the IRS designates relating mainly to taxpayers’ health and welfare. Internal Revenue Manual § 5.15.1.10(1), http://www.irs.gov/ irm/part5/irm_05-015-001. html#d0el381. According to Ransom, “applicable” cannot mean the same thing as “actual.” Brief for Petitioner 40. He thus concludes that “an ‘applicable’ expense can be claimed [under the means test] even if no ‘actual’ expense was incurred.” Ibid.

Our interpretation of the statute, however, equally avoids conflating “applicable” with “actual” costs. Although the expense amounts in the Standards apply only if the debtor incurs the relevant expense, the debtor’s out-of-pocket cost may well not control the amount of the deduction. If a debt- or’s actual expenses exceed the amounts listed in the tables, for example, the debtor may claim an allowance only for the specified sum, rather than for his real expenditures.8 For the Other Necessary Expense categories, by contrast, the debtor may deduct his actual expenses, no matter how high *76they are.9 Our reading of the means test thus gives full effect to “the distinction between 'applicable’ and 'actual’ without taking a further step to conclude that 'applicable’ means 'nonexistent.’” In re Ross-Tousey, 368 B. R. 762, 765 (Bkrtcy. Ct. ED Wis. 2007), rev’d, 549 F. 3d 1148 (CA7 2008).

Finally, Ransom’s reading of “applicable” may not even answer the essential question: whether a debtor may claim a deduction. “[C]onsult[ing] the table[s] alone” to determine a debtor’s deduction, as Ransom urges us to do, Reply Brief for Petitioner 16, often will not be sufficient because the tables are not self-defining. This case provides a prime example. The “Ownership Costs” table features two columns labeled “First Car” and “Second Car.” See supra, at 66. Standing alone, the table does not specify whether it refers to the first and second cars owned (as Ransom avers), or the first and second cars for which the debtor incurs ownership costs (as FIA maintains) — and so the table does not resolve the issue in dispute.10 See In re Kimbro, 389 B. R. 518, 533 *77(Bkrtcy. App. Panel CA6 2008) (Fulton, J., dissenting) (“[0]ne cannot really 'just look up’ dollar amounts in the tables without either referring to IRS guidelines for using the tables or imposing pre-existing assumptions about how [they] are to be navigated” (footnote omitted)). Some amount of interpretation is necessary to decide what the deduction is for and whether it is applicable to Ransom; and so we are brought back full circle to our prior analysis.

B

Ransom next argues that viewing the car-ownership deduction as covering no more than loan and lease payments is inconsistent with a separate sentence of the means test that provides: “Notwithstanding any other provision of this clause, the monthly expenses of the debtor shall not include any payments for debts.” §707(b)(2)(A)(ii)(I). The car-ownership deduction cannot comprise only loan and lease payments, Ransom contends, because those payments are always debts. See Brief for Petitioner 28, 44-45.

Ransom ignores that the “notwithstanding” sentence governs the full panoply of deductions under the National and Local Standards and. the Other Necessary Expense categories. We hesitate to rely on that general provision to interpret the content of the car-ownership deduction because Congress did not draft the former with the latter specially in mind; any friction between the two likely reflects only a lack of attention to how an across-the-board exclusion of debt payments would correspond to a particular IRS allowance.11 *78Further, the “notwithstanding” sentence by its terms functions only to exclude, and not to authorize, deductions. It cannot establish an allowance for nonloan or nonlease ownership costs that no National or Local Standard covers. Accordingly, the “notwithstanding” sentence does nothing to alter our conclusion that the “Ownership Costs” table does not apply to a debtor whose car is not encumbered.

C

Ransom finally contends that his view of the means test is necessary to avoid senseless results not intended by Congress. At the outset, we note that the policy concerns Ransom emphasizes pale beside one his reading creates: His interpretation, as we have explained, would frustrate BAPCPA’s core purpose of ensuring that debtors devote their full disposable income to repaying creditors. See supra, at 71. We nonetheless address each of Ransom’s policy arguments in turn.

Ransom first points out a troubling anomaly: Under our interpretation, “[djebtors can time their bankruptcy filing to take place while they still have a few car payments left, thus retaining an ownership deduction which they would lose if they filed just after making their last payment.” Brief for Petitioner 54. Indeed, a debtor with only a single car payment remaining, Ransom notes, is eligible to claim a monthly ownership deduction. Id., at 15, 52.

But this kind of oddity is the inevitable result of a standardized formula like the means test, even more under Ransom’s reading than under ours. Such formulas are by their nature over- and under-inclusive. In eliminating the pre-BAPCPA case-by-ease adjudication of above-median-income debtors’ expenses, on the ground that it leant itself to abuse, Congress chose to tolerate the occasional peculiarity that a brighter-line test produces. And Ransom’s alternative reading of the statute would spawn its own anomalies — even placing to one side the fundamental strangeness of giving a debtor an allowance for loan or lease payments when he has *79not a penny of loan or lease costs. On Ransom’s view, for example, a debtor entering bankruptcy might purchase for a song a junkyard ear — “an old, rusted pile of scrap metal [that would] si[t] on cinder blocks in his backyard,” In re Brown, 376 B. R. 601, 607 (Bkrtcy. Ct. SD Tex. 2007) — in order to deduct the $471 ear-ownership expense and reduce his payment to creditors by that amount. We do not see why Congress would have preferred that result to the one that worries Ransom. That is especially so because creditors may well be able to remedy Ransom’s “one payment left” problem. If car payments cease during the life of the plan, just as if other financial circumstances change, an unsecured creditor may move to modify the plan to increase the amount the debtor must repay. See 11 U. S. C. § 1329(a)(1).

Ransom next contends that denying the ownership allowance to debtors in his position “sends entirely the wrong message, namely, that it is advantageous to be deeply in debt on motor vehicle loans, rather than to pay them off.” Brief for Petitioner 55. But the choice here is not between thrifty savers and profligate borrowers, as Ransom would have it. Money is fungible: The $14,000 that Ransom spent to purchase his Camry outright was money he did not devote to paying down his credit card debt, and Congress did not express a preference for one use of these funds over the other. Further, Ransom’s argument mistakes what the deductions in the means test are meant to accomplish. Rather than effecting any broad federal policy as to saving or borrowing, the deductions serve merely to ensure that debtors in bankruptcy can afford essential items. The car-ownership allowance thus safeguards a debtor’s ability to retain a car throughout the plan period. If the debtor already owns a car outright, he has no need for this protection.

Ransom finally argues that a debtor who owns his car free and clear may need to replace it during the life of the plan; “[g]ranting the ownership cost deduction to a vehicle that is owned outright,” he states, “accords best with economic reality.” Id., at 52. In essence, Ransom seeks an emer*80gency cushion for car owners. But nothing in the statute authorizes such a cushion, which all debtors presumably would like in the event some unexpected need arises. And a person who enters bankruptcy without any car at all may also have to buy one during the plan period; yet Ransom concedes that a person in this position cannot claim the ownership deduction. Tr. of Oral Arg. 20. The appropriate way to account for unanticipated expenses like a new vehicle purchase is not to distort the scope of a deduction, but to use the method that the Code provides for all Chapter 13 debtors (and their creditors): modification of the plan in light of changed circumstances. See § 1329(a)(1); see also supra, at 79.

IV

Based on BAP CPA’s text, context, and purpose, we hold that the Local Standard expense amount for transportation “Ownership Costs” is not “applicable” to a debtor who will not incur any such costs during his bankruptcy plan. Because the “Ownership Costs” category covers only loan and lease payments and because Ransom owns his car free from any debt or obligation, he may not claim the allowance. In short, Ransom may not deduct loan or lease expenses when he does not have any. We therefore affirm the judgment of the Ninth Circuit.

It is so ordered.