· Ownership
vs operation expenses on means test:
Ransom
v. MBNA Am. Bank, N.A., No. 08-15066
U.S.
9th Cir Ct of Appeals, August 14, 2009
In an appeal from the Bankruptcy Court's refusal to approve
Debtor's Chapter 13 plan, the Bankruptcy Court's order is
affirmed, where an above-median income debtor seeking
bankruptcy relief under Chapter 13 may not deduct from his
projected disposable income a vehicle "ownership cost" for a
vehicle he owns free and clear.
Read more...
· Issue:
a vehicle acquired for business use in the last year
was under the hanging paragraph
A dump truck purchased less than one year prepetition was
found to be covered by the hanging paragraph in In re
Littlefield, 388 B.R. 1 (Bankr. D. Me. 2008). In that
ruling, Judge Haines said
"Reading the statute as I do means just this: Congress
extended (910 days, as opposed to 1-year) anti-modification
protection to creditors holding PMSIs in motor vehicles
acquired for a debtor's personal use. It did not target
PMSIs in motor vehicles generally as a category of security
that, but for the personal use proviso, would receive less
anti-modification protection than all other things of
value."
· Cross-Collateralization
argument:
In
re Gibson, 234 B.R. 776, 3 Cal. Bankr. Ct.Rep. 88 (Bankr.N.D.Cal.
Jun 03, 1999) in which the court held that "Pursuant to
choice of law clause contained in loan and security
agreement executed by Chapter 13 debtors, Illinois law, not
California law, governed determination of whether
agreement's dragnet clause was enforceable; although
debtors' collateral presumably had always been in
California, enforceability of dragnet clause was not an
issue of perfection or the effect of perfection or
non-perfection", then held that the dragnet clause was too
vague and unenforceable. The Court said that: "agreement
consisted of one page, with text on two sides and, although
debtors expressly agreed to items and conditions on both
sides of document, front side of agreement contained all key
terms of agreement other than dragnet clause in conspicuous,
easy-to-read print, dragnet clause was buried in long,
complex paragraph on reverse side of document, which was
packed from margin to margin with a multitude of single-
spaced provisions in minute, difficult-to-read type, parties
were of unequal bargaining power, and nothing called
debtors' attention to substance of the dragnet clause in
particular."
· Ownership
allowance vs operation expenses In
re Ransom,
2007 WL 4625248 (9th Cir. BAP).
The Bankruptcy Appellate Panel for the Ninth Circuit (“BAP”)
recently considered the issue of ownership allowance vs
operation expenses in the context of a Chapter 13 plan
confirmation rather than dismissal under
Section 707(b).
The BAP held that in determining projected disposable income
for purposes of Chapter 13 plan confirmation, a debtor is
not able to deduct a vehicle ownership expense pursuant to
§ 707(b)(2)(A)(ii)(I)
when a debtor owns the vehicle free and clear of any liens or
encumbrances. (Although Ransom deals with the
confirmation of a plan under Chapter 13, it is instructive
in Chapter 7 cases because § 1325 uses the means test under
§ 707(b)(2)(A)
to determine the debtor's projected disposable income.)
In re SAWICKI,
Debtor., WL No. 2-07-bk-3493-CGC. (Feb. 12, 2008)
Judge Case followed Ransum, but did not like it. (Thorough
discussion on BAP decisions and why judges should follow
despite their differences.
·
In re
Chamberlain,
369 B.R. 519 (Bkrtcy. Ariz. 2007). Judge Haines held
that where the debtor owned a vehicle free and clear, the
debtor nevertheless could claim an ownership expense
deduction in calculating "the debtor's projected disposable
income" under §707 for purposes of a Chapter 13 plan.
·
In re
Garcia,
2007 WL 2692232 (Bkrtcy. Ariz. September 11, 2007). In
contrast to Judge Haines' ruling in In re Chamberlain
discussed immediately above, Judge Marlar held that where
the debtor owned a vehicle free and clear, the debtor may not claim an ownership expense deduction in calculating
"the debtor's projected disposable income" under §707 for
purposes of a Chapter 13 plan.
-
Hanging Paragraph and Cross-Collaterized Debt:
In re Quevedo, 345 B,R, 238 (Bankr.S.D.Cal.
2006). Decent case. Used background from
Congressional proceedings, various changes as proposed
to Sect. 1325 over the years, and Collier and Brown and
Ahern comments.
-
In
Re: Peaslee, No. 073962 U.S. 2nd Circuit Court of Appeals,
October 20, 2008
In appeal from judgment
reversing a Bankruptcy Court finding that negative
equity on a trade-vehicle is included in the purchase
money security accompanying a new car's purchase and is
therefore protected from cram down by the Hanging
Paragraph of Section 1325 of the Bankruptcy code, the
court here certifies the question of whether negative
equity is included in a purchase money security interest
under state's interpretation of the Uniform Commercial
code (UCC).
Read more...
-
In re
Rodriguez,
375 B.R. 535, 2007 WL 2701295 (9th Cir. BAP August 28,
2007). Reversing the Bankruptcy Court for the Western
District of Washington, the BAP decided to follow the
minority line of decisions and held that under the "hanging
paragraph" following §1325(a)(9), a Chapter 13 debtor
surrendering a motor vehicle acquired within 910 days of the
petition date cannot thereby eliminate any remaining
deficiency claim.
-
Capital One Auto Fin. v. Osborn,
No. 07-1726 (8th Cir Ct App,
2/5/08) The hanging paragraph in 11 U.S.C. section 1325
does not eliminate an under-secured creditor's deficiency
claim when, in a Chapter 13 plan, debtors propose to
surrender a car purchased within 910 days before filing for
bankruptcy. The creditor is entitled to an unsecured
deficiency claim if there is a right to a deficiency
judgment under state law.
- In re
Brown, 346 B.R. 868 (Bkrtcy.N.D.Fla. 2006) LEWIS M. KILLIAN
JR., Bankruptcy Judge CREDITOR HOLDING PMSI NOT ENTITLED TO
DEFICIENCY CLAIM IN CHAPTER 13 WHERE DEBTOR SURRENDERS
VEHICLE IN FULL SATISFACTION OF DEBT § 1325(a)5) (hanging
paragraph), § 506, 502
Debtor proposed to surrender a motor vehicle subject to a
PMSI and purchased for personal use within 910 days of
filing the petition, in full satisfaction of the
undersecured debt. Creditor objected.
The court first held that despite language in § 1325(a)
(hanging paragraph) that Code § 506 does not apply to a PMSI
debt, the debt is still a secured debt. The court ruled that
"just because § 506 does not apply does not mean that there
is no secured claim. Section 506(a) simply provides for the
bifurcation of claims into secured and unsecured portions in
accordance with the value of the collateral; it does not
form the basis for a secured debt." The court essentially
held that § 502 is the section that determines the secured
status of a claim.
The court then observed that "Secured creditors, like every
other party to a bankruptcy case, have to take both the good
and the bad," held that . . . the Hanging Paragraph
following § 1325(a)(9) allows the Debtor to surrender his
vehicle, which is the subject of a 910 claim, in full
satisfaction of the debt owed to Wells Fargo."
-
Is the fourth option (ride through) really dead after
BAPCPA? 10/08: The prevailing view is that BAPCPA
eliminated the "fourth option" of staying current on
collateral but not reaffirming. However, there are some
recent decisions saying that while the automatic stay
may terminate, there may be state law limitations on
when a creditor may repossess the collateral. See
In re Steinhaus, 349 B.R. 694 (Bankr. D. Idaho 2006) and
In re Malachin, 2007 Pa. Dist. & Cnty. Dec. LEXIS 158 (October
2008), in which a state court refused a creditor's
efforts to repo a car post-bankruptcy when the debtor
was current on payments. The case is a reminder that
ridethrough may be a state law issue, not a bankruptcy
issue.
-
In re Dumont,
383 B.R. 481 (9th Cir. BAP 2007). In a decision
authored by Judge Baum, the BAP joined all the other
courts that have considered the issue in confirming that
the former "ride-through" option for retaining
collateral simply by continuing to make payments on the
relevant debt was eliminated by BAPCPA's changes to 11
U.S.C. §§362 and 521. The BAP also held that the
bankruptcy court lacked jurisdiction to determine
whether the creditor's subsequent repossession of the
debtor's vehicle violated state law.
· In re
Moustafi,
371 B.R. 434 (Bkrtcy. Ariz. 2007). In a case involving a
pro-se Chapter 7 debtor, Judge Hollowell held that (a) a
proposed reaffirmation agreement relating to a car loan
where the debtor had no equity in the vehicle was not in the
debtor's best interest, and (b) despite §§362 and 521,
because the debtor had made an effort to reaffirm (even
though disapproved by the Bankruptcy Court), the car loan
would "ride through" the bankruptcy and the debtor would be
entitled to retain the vehicle so long as she met her
obligations under the loan contract.
·
In re
Anderson,
2007 WL 1839699 (D. Ariz. June 26, 2007). An auto dealer
that sold the debtor a vehicle submitted a title application
to the Tempe MVD that was rejected because the debtor had an
outstanding fine owed to ADOT. The dealer then re-submitted
the application with funds sufficient to pay the fine.
After the application was re-submitted, the debtor filed her
Chapter 7 bankruptcy. Subsequent to the debtor's bankruptcy
filing -- and more than 10 days after the debtor and the
dealer had signed the security agreement -- the application
was granted. On these facts, the District Court affirmed
the Bankruptcy Court's grant of summary judgment in favor of
the Chapter 7 trustee, determining that the dealer's claim
was unsecured because (a) the dealer did not obtain
perfection until after the debtor had filed her bankruptcy,
and (b) the post-petition granting of the application did
not relate back.
PRE: BAPCPA
Physically disabled, plus is
motor home a motor vehicle: In re Sleeth, 300 B.R.
351, 30-00628-YUM-EWH Trustee had burden of proving
that the debtors were not entitled to increased motor
vehicle exemption (physically disabled). Court holds
Trustee failed that burden.
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