The court, by an 8-1 vote, ruled against Jason Ransom, a debtor who wanted to shield some income from his creditors by claiming a $471 monthly allowance for a car payment.
The only problem is that he owns his 2004 Toyota Camry outright.
"In short, Ransom may not deduct loan or lease expenses, when he does not have any," Kagan said.
Although it seemed an easy issue, federal appeals courts had arrived at different answers.
And dissenting Justice Antonin Scalia said the courts that ruled for the debtors in these cases were right.
The allowance for car payments comes from a formula that sometimes produces odd results, Scalia said. "Our job, it seems to me, is not to eliminate or reduce those oddities, but to give the formula Congress adopted its fairest meaning," he said.
The bankruptcy case was one of the four she took part in during October.
The case is Ransom v. FIA Card Services, 09-907.