by When Jamie Denise McGinness filed for chapter 13 bankruptcy, she owed $27,867.56 on her Nissan Altima. She sought to strip down the unsecured portion of the debt. Nissan Motor Acceptance Corporation objected to confirmation of her plan, citing the hanging paragraph of Section 1325(a)(5), which provides that a loan made to secure the purchase of a vehicle bought for personal use within 910 days of filing for bankruptcy may not be stripped down. The court overruled Nissan’s objection. In re McGinness, No. 17-14746 (Bankr. E.D. Tenn. March 2, 2018).
The case turned on the meaning of “personal use” for purposes of the 901-day provision. Courts generally look to the debtor’s intent at the time of purchase and have created several versions of a “totality of circumstances” test to address the question. The least onerous test looks at whether the vehicle makes it possible for the debtor to make a significant contribution to gross income (if only by providing transportation to and from work). A more onerous test looks at whether the vehicle is used for significant and material personal reasons, even if it is used for work. A third option, adopted in In re Joseph, No. 06-50655, 2007 WL 950267 (Bankr. W.D. La. March 20, 2007), looks at whether the vehicle is primarily used for the performance of the debtor’s job even though it might also be used for personal purposes.
The court adopted the “predominant use” test outlined in Joseph to find that Ms. McGinness used the vehicle primarily for business purposes. Ms. McGinness was a “health care provider” whose employment consisted of transporting patients of her employer, a nonprofit health care corporation, to various appointments and events. She used the vehicle for this purpose three to six hours a day, five to seven days a week. Furthermore, owning a vehicle capable of transporting patients was a condition of her employment, and she was reimbursed for mileage. These facts pointed to her use of the vehicle primarily for business purposes even though she used the same vehicle for personal needs as well.
The court was unpersuaded by the terms of the retail contract in which a boilerplate provision stated Ms. McGinness’s intention to use the vehicle for personal purposes. While the contractual provision was a relevant factor, the court found that it had not been pointed out to Ms. McGinness at the time of purchase, and Nissan did not ask her about her intended use of the vehicle.
The court thus found that the hanging paragraph did not apply and that Nissan’s claim was subject to valuation under section 506(a) and strip-off. It overruled Nissan’s objection to confirmation.