Duhaime's Law Dictionary


Personal Use Definition:

Non-business use.

In re Grimme, Justice Vincent Aug of the United States Bankruptcy Court wrote:

"The personal use element of the hanging paragraph has spawned a surprisingly large volume of cases setting forth various legal tests to be used when performing this relatively straightforward analysis.... The application of these complicated legal tests is burdensome, requires extensive testimony, and has resulted in the unnecessary splitting of hairs with some surprising results.

"Rather, we believe that the term personal use means, simply, non-business use."

The United States Bankruptcy Court, sitting in Brownsville, Texas, Justice Richard Schmidt presiding, used these words in seemingly preferring the splitting of hairs approach:

"Personal use is not defined in the Bankruptcy Code. Courts interpreting the term have developed a variety of approaches. One approach suggests that the term is satisfied if the acquirer intended a debtor's personal use to be significant and material. Another approach suggests that the Internal Revenue guidelines should apply, which provide that vehicles used for transportation to and from work are not business property. Finally, other Courts apply a totality of the circumstances test on a case-by-case basis, and holds that a vehicle is not for personal use if it enables a debtor to make a significant contribution to the family income."1

In Re Medina, the issue before the same Justice Schmidt was the allegation that a particular vehicle had been btained for personal use. The Court:

"[A] substantial factor in considering the totality of the circumstances is whether the acquisition of the vehicle enabled the debtor to make a significant, contribution to the gross income of the family unit. If it did, then this court concludes that the vehicle was not acquired for the personal use of the debtor."

REFERENCES:

  • In re Grimme, 371 BR 814 (2007)
  • In re Johnson, 350 BR 712 (2007)
  • In re Martinez, 363 BR 525 (2007; Note #1)
  • In re Medina, 362 BR 799

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