·
Appraisals for vehicles:
KC Appraisal
Service. He comes to the debtor, takes pictures and does a
very thorough report for around $70. 623.780.0189 and
Sierra Auction (one of the auction houses that the trustees
used ) to get it appraised for around $125 or so. (602)
242-7121 Ask for Shelly
·
Issue: lender claiming
purchase money secured interest in "negative equity" in
vehicle traded during purchase of new vehicle. In
re Penrod, vs Americredit Financial, No. 08-60037 (9th
Circuit Ct of Appeals) The bankruptcy court
held that AmeriCredit did not have a purchase money security
interest in the portion of the loan related to the negative
equity charges. However, the bankruptcy court acknowledged
that AmeriCredit had a purchase money security interest in
the remaining balance. In doing so, the bankruptcy court
adopted the dual status rule, which allows part of a loan to
have non-purchase money status, while the remainder is
covered by a purchase money security interest.2
BAP and 9th Cir upheld lower court's decision.
Disagreeing with the Second, Fourth,
Fifth, Sixth, Seventh, Eighth, Tenth and Eleventh Circuits,
the Ninth Circuit concluded that held a creditor which
financed the debtor's automobile purchase did not have a
purchase money security interest in the "negative equity" of
the debtor's trade-in. Payment of the remaining debt on the
trade-in was not an "expense" or "other similar obligation,"
within the definition of "purchase-money obligation."
· Perfection
of Lien more than 20 days pre- bankruptcy (547(c): In
re: Taylor, No. 08-60033
(U.S. 9th
Circuit Court of Appeals, March 22, 2010)
In debtors' appeal from the bankruptcy court's order
avoiding a transfer of a security interest in an automobile
to a bank, the order is reversed where the bankruptcy
court's determination of the value of the security interest
was clearly erroneous, because there was no evidence to
support the bankruptcy court's finding that the value of the
security interest equaled the amount of the original loan at
the time the bank perfected its security interest.
Read more...
ARS 28-2133
Index and filing of liens, encumbrances or instruments;
constructive notice (2011)
B. The filing and issuance of a new certificate of title as
provided in this article is constructive notice to creditors
of the owner or to subsequent purchasers of all liens and
encumbrances against the vehicle described in the
certificate of title, except those that are authorized by
law and that are dependent on possession. If the documents
referred to in this article are received and filed in a
registering office of the department within thirty
business days after the date of their execution, the
constructive notice dates from the time of execution.
Otherwise, the notice dates from the time of receipt and
filing of the documents by the department as shown by its
endorsement.
C. The method provided in subsection B of this section for
giving constructive notice of a lien or encumbrance on a
vehicle required to be titled and registered under section
28-2153 or a mobile home required to be titled under section
28-2063 is exclusive, except for liens dependent on
possession. A lien, encumbrance or title retention
instrument or document that evidences any of them and that
is filed as provided by this article is exempt from the
provisions of law that otherwise require or relate to the
recording or filing of instruments creating or evidencing
title retention or other liens or encumbrances on vehicles
of a type subject to registration under this chapter.
In
re Roser, (C.A.10 (Colo.))
July 23, 2010: Avoidance - Trustee could not avoid, as
hypothetical lien creditor, bank's lien against debtor's
motor vehicle perfected postpetition. Pursuant to the
bankruptcy statute making a trustee's avoidance powers
subject to any generally applicable law permitting the
perfection of an interest in property to be effective
against an entity acquiring rights in the property before
the date of perfection, a Chapter 7 trustee could not avoid,
as a hypothetical lien creditor under his strong-arm powers,
the lien against a debtor's motor vehicle held by a bank
that had a purchase money security interest in the vehicle
and filed its motor-vehicle lien within 20 days of the
debtor obtaining the vehicle. Pursuant to Colorado's version
of the Uniform Commercial Code (UCC), the bank's timely acts
gave it priority over any interests in the vehicle that
arose between the prepetition attachment of its security
interest at the loan closing and its postpetition perfection
of its lien, including the trustee's hypothetical judgment
lien that arose on the intervening petition date. In so
holding, the Tenth Circuit Court of Appeals rejected an
earlier decision in which a Bankruptcy Appellate Panel had
ruled that the UCC provision did not apply to liens, such as
that of the bank, that were perfected under the Colorado
Certificate of Title Act (CCTA)
· Ownership
vs operation expenses on means test:
Ransom
v. MBNA Am. Bank, N.A., No. 08-15066
US
Supreme Court 09-907 1-11-11 (affirmed) 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.
· · "Tired
Iron": vehicles over six years old and/or more than 75,000
miles
Each of these cases were decided
by a different Arizona bankruptcy judge.
1. In re Chamberlain, 369 B.R.
519 (Bankr.Ariz., 2007): This case touched upon the
tired-iron deduction in footnotes 6 and 7. The heart of the
case was whether an ownership expense could be taken on a
free and clear vehicle. Judge Haines ruled in debtor's
favor, but this case has been overturned by In re Ransom,
577 F.3d 1026 (9th Cir., 2009) as to the ownership expense
issue.
2. In re Sawicki, Case No.
2-07-bk-343-CGC (Bankr.Ariz., 2008): Judge Case, in
summarizing the U.S. Trustee's position in the case on page
2, states that "The U.S. Trustee relies on the Internal
Revenue Manual (IRM), 5.8.5 Financial Analysis, for a
determination that Debtor is entitled only to a $200.00
monthly allowance under the vehicle ownership expense rather
than a $471.00 expense allowance. The $200.00 is allowed
under IRM (Internal Revenue Manual) 5.8.5 for vehicles, such
as debtor's, that are not encumbered with a loan or lease
and are over six years old and/or have a reported 75,000
miles of usage."
3. In re Steven & Donna
Watkins, Case No. 07-6317-PHX-SSC (Bankr.Ariz., 2008): Pages
9 and 10: " The Debtors also urge that they should be
allowed to take a vehicle ownership expense because their
vehicles are older and unreliable. The Court notes that as
of the petition date, the Debtors had a five-year-old
vehicle; the other was three years old. The Ransom decision
also addressed this issue, stating that the debtors might be
entitled to an"older vehicle"
expense for vehicles that were
older than six years, or that had mileage above 75,000
miles. In this case, as of the petition date, neither of the
Debtors' vehicles was more than six years old. The Debtors
have never alleged that either of the vehicles has high
mileage, nor have they requested an evidentiary hearing on
this issue.
Therefore, the Court declines to
allow an "older vehicle" expense to the Debtors... Footnote
11: "Although the Debtors have never asserted, or requested
an evidentiary hearing as to the mileage of their vehicles
for purposes of claiming an "older vehicle" expense, the
United States Trustee indicated that she would allow the
Debtors to claim such an expense if appropriate. The Court
notes that when the petition was filed in 2007, the Debtors'
2002 Ford Focus would have been only five years old.
Therefore, the only way the Debtors could claim the "older
vehicle" deduction would be to show that the vehicle had
more than 75,000 miles on it. As noted, the Court is unable
to address this issue."
4. In re Ransom, 380 B.R. 799
(B.A.P. 9th Cir., 2007): Page 808 "Numerous safeguards are
in place to protect both debtors and creditors. Debtors who
own old or high mileage cars "free and clear," are entitled
to an extra $200 per month operating expense."
The official cite for this IRS
deduction is found in the Internal Revenue Manual §
5.8.5.5.2 (09-01-2005) (available at
www.irs.gov/irm/parts/ ch08s05.html# d0e74647)
·· 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
ride through 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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