In re Hill, 06-20123.

• Decision Date: 01 September 2006
• Docket Number: No. 06-20123.,06-20123.
• Citation: 352 B.R. 69
• Parties: In re Joel HILL, Deborah Hill, Debtors.
• Court: U.S. Bankruptcy Court — Western District of Louisiana

352 B.R. 69

In re Joel HILL, Deborah Hill, Debtors.

No. 06-20123.

United States Bankruptcy Court, W.D. Louisiana.

September 1, 2006.

Max M. Morris, Lake Charles, LA, for Debtors.

MEMORANDUM RULING

GERALD H. SCHIFF, Bankruptcy Judge.

Joel and Deborah Hill ("Debtors") filed a voluntary petition for relief under chapter 13 of the Bankruptcy Code on April 26, 2006. Debtors have filed a chapter 13 plan to which Jeff Davis Bank and Trust Company ("Jeff Davis Bank") has objected. A hearing on confirmation was held on July 6, 2006 at which time the testimony of the Debtors was taken. The court subsequently reset the matter for hearing following the court's ruling in another case on the same legal issue which is at issue herein. At the hearing held on August 24, 2036, the matter was taken under advisement.

The issue herein is whether the Debtors can modify the secured claim of Jeff Davis Bank pursuant to Section 1325(a)(5)(3). The court has recently issued Reasons for Decision¹ on this very issue and held as follows:

Section 506(a)(1) generally provides that a claim secured by a lien on property of the estate is a secured claim to the extent of the value of the property and is an unsecured claim to the extent that the value of the collateral is less than the amount of the claim. The effect of section 506(a)(1) is to bifurcate certain creditor claims into secured and unsecured portions.

Section 1325(a)(5)(3), which is the cramdown provision, requires the court to confirm a plan over the creditor's objection if the plan provides that: (a) the creditor retains its lien, (b) the allowed amount of the secured claim is paid, and (c) the creditor receives equal monthly payments sufficient to provide the creditor with adequate protection.

The hanging paragraph following section 1325(9) provides in relevant part:

For purposes of paragraph (5)[treatment of secured claims], section 506 [providing for bifurcation of under-secured claims] shall not apply ... if the creditor has a purchase money security interest securing the debt that is the subject of the claim, the debt was incurred within the 910-day preceding the date of the filing of the petition, and the collateral for that debt consists of a motor vehicle ... acquired for the personal use of the debtor,....

Thus, the hanging paragraph prohibits cramdown under section 1325(a)(5) if the following facts exist: (a) the creditor holds a purchase money security interest in a motor vehicle; (b) the debt was incurred within 910 days of the bankruptcy filing; and (c) the motor vehicle was acquired for the personal use of the debtor. As the Debtor concedes that the first two requirements are satisfied, the sole issue in the instant case is whether the motor vehicle was acquired for the Debtor's personal use.

Congress, however, in its infinite wisdom, or lack thereof, chose not to define .the term "personal use." TMCC contends that the term should be interpreted as meaning not for use for profit or business motive, arguing that the Internal Revenue Service ("IRS") guidelines on business deductions should be used to determine whether a vehicle is used for a business purpose, i.e., if the debtor cannot take a deduction for the expenses relating to the vehicle, the use of the vehicle should be deemed personal. On the other hand, the Debtors assert that resolution of the dispute should be analyzed in conjunction with the particular exemption law applicable to the case, i.e., since Louisiana is an opt-out state, if the vehicle is exempt under LSA-R.S. 13:3881A(2), the vehicle should be deemed used for a business purpose. The court disagrees with both approaches.

First of all, the court does not believe that Congress intended the court to rely upon the IRS standards in determining whether a vehicle was acquired for the personal use of the debtor. In enacting the recent amendments to the Bankruptcy Code, Congress made specific reference to certain provisions of the Internal Revenue Code. See, e.g., the so-called "means test" found in section 707(b)(2)(A)(ii)(I). If Congress had intended for the IRS guidelines to apply in cases involving the hanging paragraph they certainly knew how to do so and obviously chose not to do so. Consequently, and while acknowledging that other courts may have utilized this approach, this court concludes that reference to the IRS standards for a determination of the issue is inappropriate. Further, the court does not' believe that Congress intended the issue to be decided by the exemption statutes applicable to the case. The United States Constitution gives power to the Congress "to establish ... uniform laws on the subject of bankruptcies throughout the United States." U.S. Const. art I, § 8, cl. d. If the applicability of the "hanging paragraph" hangs upon the exemption laws of the several states, identical facts may bring about inconsistent results depending upon the forum where the case is pending. Again, the court acknowledges that certain courts have utilized the exemption statutes in analyzing the applicability of the hanging paragraph. Further, the Congress itself has somewhat dodged the "uniformity" requirement of the Constitution in enacting the opt-out provision of section 522(b)(2) which often leads to inconsistent and non-uniform results among the several states. Nonetheless, this court concludes that the exemption laws are not determinative of the business versus personal issue.

The court also acknowledges that many interested persons in addition to the immediate parties before the court are awaiting this court's decision in anticipation of the court establishing a "bright line" test for the determination of business versus personal use. Unfortunately, the court declines to do so, concluding, as is the case in several instances of interpretation under the Bankruptcy Code, the issue should be determined by the "totality of circumstances" approach. See, e.g., Public Finance Corp. v. Freeman, 712 F.2d 219 221 (5th Cir.1983)("the phrase `proposed in good faith' [in section 1325] must be viewed in light of the totality of the circumstances surrounding confection of a given Chapter 13 plan."); Matter of Gamble, 143 F.3d 223, 226 (5th Cir.1998) (in applying section 523(a)(15)(B), "an assessment of benefit and detriment ... implicates an analysis of the totality of the circumstances, not just a comparison of the parties' relative net worths.").

Although no litmus test is afforded for deciding the business versus personal issue, the court is able to provide some guidance regarding the factors which should be considered in evaluating the totality of the circumstances. The language of the statute provides some, although minimal, guidance....