A debtor who purchases an automobile within 910 days of bankruptcy can nonetheless bifurcate the claim if the car was purchased for the personal use of the debtor’s domestic partner, according to Bankruptcy Judge Patrick M. Flatley of Wheeling, W.Va.
The debtor bought a car for his domestic partner about two years before filing a chapter 13 petition. At the same time, he bought another car for himself that he used to drive for Uber.
The debtor’s partner exclusively used the car until about three months after the chapter 13 filing, when the debtor’s own car broke down. The debtor then began using his partner’s car to drive for Uber and bought her another.
The debtor filed a plan proposing to bifurcate the lien. Evidently without opposition from the lender regarding value, the debtor said the car was worth about $18,000, which he proposed to pay in full under the plan with 3.5% interest. At filing, the debt on the car was about $25,000.
The lender contended that the debtor could not bifurcate the lien as a consequence of the hanging paragraph in Section 1325(a), which precludes bifurcating a purchase money lien on an auto bought with 910 days of filing if the car was “acquired for the personal use of the debtor.”
In his Jan. 19 opinion, Judge Flatley was persuaded to follow bankruptcy court authority in the Fourth Circuit that examines the “totality of the circumstances” to determine whether “the debtor’s personal use is ‘significant and material.’” In that respect, he said, the touchstone is the debtor’s intent at the time of purchase.
Judge Flatley therefore held that the debtor was entitled to bifurcate the lien because he “purchased the vehicle for the exclusive use of his non-filing partner.”