In Re Ozenkoski
ORDER
The matter before the Court is the Objection to Confirmation of Plan filed by GMAC, Brief in Support of GMAC’s Objection to Confirmation of Debtor’s Plan, Debtor’s Legal Brief Concerning Objection to Confirmation and Reply Brief in Support of GMAC’s Objection to Confirmation of Debtor’s Plan. The parties agreed to submit simultaneous briefs on the issue of personal use of a vehicle as it applies to the hanging paragraph of 11 U.S.C. § 1325(a). Upon consideration of the record as a whole, the Court makes the following FINDINGS OF FACT:
JURISDICTION
The Court has jurisdiction of this matter pursuant to 28 U.S.C. §§ 151, 157, and 1334 (2009) and Local Rule 81-9.01(B) of the United States District Court for the Eastern District of Missouri. This is a core proceeding under 28 U.S.C. § 157(b)(2)(L) (2009). Venue is proper in this District under 28 U.S.C. § 1409(a) (2009).
CONCLUSIONS OF LAW
The Burden of Proof
Both Debtor and GMAC claim the other has the burden to produce evidence the Vehicle is, or is not, a personal use vehicle under 11 U.S.C. § 1325(a). Debtor is correct in his assertion that the initial burden of proof is on the objecting creditor. A party seeking to change the status quo will usually have the burden of proof.
Education Assistance Corp. v. Zellner,
GMAC provided evidence Debtor signed the Contract which states the Vehicle was purchased for personal use. Although this fact alone does not
prove
Debt- or’s intended use at the time of acquisition, it is a strong indication of Debtor’s intended use for the Vehicle and is sufficient to
A Personal Use Vehicle
At issue before the Court is whether Debtor’s Vehicle was “acquired for personal use” according to § 1325(a).
The language in the hanging paragraph states:
For purposes of paragraph (5), section 506 shall not apply to a claim described in that paragraph 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 (as defined in section 30102 of title 49) acquired for the personal use of the debt- or, or if collateral for that debt consist of any other thing of value, if the debt was incurred during the 1-year period preceding that filing.
11 U.S.C. § 1325(a) (2009).
“[T]he term ‘personal use’ means, simply, non-business use.”
In re Grimme,
In
Hill,
the court found the appropriate test to be “whether the acquisition of the vehicle enabled the debtor to make a significant contribution to the gross income of the family unit.”
Hill,
A second application of the “totality of the circumstances” approach is found in
Solis,
In
Joseph,
a third approach to applying the “totality of the circumstances” analysis was introduced.
Joseph,
While not every personal use vehicle will be used for business purposes, most business use vehicles will be used for an occasional personal purpose. In the instant case, Debtor’s Vehicle is a mixed use vehicle. To determine whether the Vehicle was acquired for personal use for purposes of § 1325(a), this Court asks whether the business needs served by acquiring the Vehicle are ancillary to the personal needs of Debtor or whether the personal needs are secondary to Debtor’s use in his business or trade. The test used by the Hill Court effectively deems a personal use vehicle a business vehicle if there exists any business use at all. The Hill test is unreasonable because it allows a vehicle primarily used to satisfy personal needs to easily escape the restrictions of § 1325(a) simply because a debtor drives to work in it. In contrast, the Solis Court’s “substantial and material test” assumes personal use unless the car is used almost entirely for business purposes. The Solis test is unreasonable because it ignores the fact that, in reality, most business vehicles will occasionally be used to satisfy personal needs. The test articulated in Joseph allows a reasonable amount of personal use which will naturally occur in the course of the ownership of a business vehicle. Thus, the Joseph test is the most reasonable test to use in the instant case. Also, to adhere to the plain meaning of § 1325(a), the intention of Debtor at the time of the acquisition of the Vehicle must be considered. Although such intent is relevant, it does not render evidence of subsequent business use irrelevant. Debt- or’s intent at acquisition should be considered in the “totality of the circumstances” and subsequent use may be an indicator of Debtor’s intention at the time of purchase.
GMAC alleges the Vehicle was not intended to be used for business purposes
at the time of acquisition.
GMAC notes Debtor’s 2008 Business Expense Form, which is part of Debtor’s Return, indicates the date the Vehicle was placed into service was July, 20, 2008, 20 days after its purchase. GMAC alleges the 20-day difference signifies Debtor did not acquire, or intend to acquire, the Vehicle for a business purpose on the very day of purchase. However, given that Debtor reports no change in job duties during this 20-day period, it is extremely unlikely he bought the Vehicle with the intent to use it solely for personal use and then changed his mind a mere 20 days later. Also the date the Vehicle is put into use as reported to the IRS may be Debtor’s approximation of the purchase date of the Vehicle and is merely evidence of the time around which Debtor began using the Vehicle for his business. Even if Debtor did wait 20 days to put the Vehicle to a business use, it is not a significant length of time and is
Debtor insists the indication of personal use on the Contract is a mistake and that he discussed his business-related intent for the Vehicle with the salesperson at the time of purchase. GMAC points out Debtor has not produced any evidence to prove the statements to the salesperson were ever made. The box marked personal on the Contract is evidence of Debtor’s intention for the Vehicle, however, such evidence “is not dispositive, and must be considered in light of the totality of the circumstances.”
Joseph,
Debtor claims he uses the Vehicle in the course and scope of his employment and that it allows him to generate income as a textbook salesperson. Debtor further claims his employer requires him to use his own vehicle for those work related duties but does not specify exactly which duties he performs and how they require the use of the Vehicle. GMAC argues Debtor has produced no evidence showing his employer requires him to have a vehicle or that his employer pays for the loan payments, insurance, maintenance, gas or repairs. GMAC further asserts Debtor has not produced evidence to show that the Vehicle was not used for personal purposes. It is unreasonable for GMAC to demand Debtor to provide evidence he did not use the Vehicle for personal purposes as it is nearly impossible to prove an action that has
not
been taken. Additionally, Debtor is not required to show proof Debt- or’s employer paid for the Vehicle, insured the Vehicle, or even required the Vehicle at all if the Debtor can show the truck was used in the course and scope of his employment.
In re Powell,
In support of his claim that the Vehicle was used predominantly for business purposes in the course of his employment, Debtor has offered his Return which includes a copy of his Alternative Minimum Tax Form and Employee Business Expense Form. The Employee Business Expense form reports 82.52% of the miles driven in the Vehicle in 2008 were for business purposes. GMAC contests the use of the IRS forms and claims the IRS forms have no relevancy according to Powell. (where car had been purchased in 2007 and information on the 2008 IRS forms did not corroborate debtor’s claim car was for business use, 2008 IRS forms were found to be insufficient evidence of acquisition for non-personal use for purposes of § 1325). Under the circumstances, this Court finds the Return is not only relevant, but also the most compelling piece of evidence offered by Debtor. The Return suggests Debtor subjectively considered the Vehicle a business vehicle. On the Return, Debtor claimed the Vehicle as a business expense resulting in a substantial amount of total claimed deductions. Due to the large deductions, Debtor was subjected to an alternative minimum tax. Ultimately, by claiming the Vehicle as a business expense, Debtor subjected himself to a substantial amount of additional taxes. If Debtor did not use the Vehicle in the course and scope of his employment he certainly would not have claimed the Vehicle as a business expense to his own detriment. Debtor reported similar mileage figures in his brief and the Return lends credibility to those claims.
Where a vehicle was primarily used for business purposes, it hardly seems logical that Congress would intend the Vehicle to be deemed a personal use vehicle merely because the personal box was checked on a boilerplate contract and Debtor may have waited 20 days to begin using the Vehicle. While the subjective intent of Debtor at the instant of the Vehicle’s purchase is relevant, this intent may be inferred from Debtor’s actual use of the Vehicle after its purchase. The fine print on the boilerplate contract and the ambiguous 20-day window in which the Vehicle may, or may not, have been used for business purposes, are not persuasive enough to overcome Debtor’s evidence that the Vehicle was predominantly used in the course and scope of his employment. Therefore,
IT IS ORDERED THAT GMAC’s Objection to Confirmation of Plan is OVERRULED.