“TRANSFORMATION” RULE AND NEGATIVE EQUITY DISCUSSED; GAP
INSURANCE, SERVICE CONTRACT NOT PART OF COLLATERAL
In re Miller, Case No 08-40935
December 2008, Judge Karlin
Debtor sought, and was permitted, to pay only the cost of the car, rather than cost plus other charges. Court did not rule on whether certain fees not adequately addressed by either side were part of the PMSI. Good discussion of the transformation rule and negative equity.
Digest by: Jan Hamilton, Trustee
NEGATIVE EQUITY ISSUE NOT RULED UPON IN 1327 CASE
In re Kuhasz, Case No. 07-20282
November 2008, Judge Somers
Court noted split within the district. Judge Karlin excluded negative equity from PMSI claim in In re Padgett, 389 BR 203, while Judge Nugent included it. In re Ford 387 BR 14827 but declined to rule on the issue because the plan had been confirmed and the elements of 1329 had not been met.
NEGATIVE EQUITY ROLLED INTO LOAN IS NOT PMSI
In re Padgett, Case No. 07-41284
May, 2008 Judge Karlin
Car creditor objected to debtor’s attempt to avoid paying the negative equity in a 910 case. After analyzing the UCC as it exists in Kansas, the Court confirmed its opinion in Vega, but disagreed with Judge Nugent’s decision in Ford.
NEGATIVE EQUITY IS PMSI FOR PURPOSES OF 910 CAR LOANS
In re Ford, Case No. 07-11561
May 2008, Judge Nugent
Court held that negative equity in a trade in vehicle, financed by lender, is a part of the price of the collateral and constitutes value given to enable debtors to acquire collateral. The entire balance was found to be a “910” obligation under the hanging paragraph of 1325.
NEGATIVE EQUITY IS NOT PMSI
In re Kellerman, Case No. 06-22028
August 2007, Judge Berger
Pre petition payments are to allocated between refinanced negative equity and the PMSI portion of a 910 vehicle claim under 1325(a)’s hanging paragraph by reference to KSA 84-9-103(c). Under Kansas law, PMSI is the purchase price, not negative equity. Start with the vehicle’s cash purchase price and the apply pre petition payments in accordance with the parties written agreement. If no agreement or other manifested intent, the prepetition payments are applied first to unsecured negative equity and then to PMSI.
BUSINESS USE MUST BE “SIGNIFICANT” TO ESCAPE 910 FULL PAYMENT
In re Wilson, Case No. 06-40637
December 2006, Judge Karlin
Debtor sought to avoid the full payment requirement of the 910 car loan provision. Debtors were using the vehicles in question for personal and business use, as they served as foster parents. The court followed Lowder and Bolze. The Court adopted a “significant and material” approach and found that the vehicles were used “significantly” for personal purposes in finding that the vehicles were subject to the 910 paragraph.
Digest by: Jan Hamilton, Trustee
10th CIRCUIT ‘RULES’
In re Rule, Case No. 06-22145
July, 2008, Judge Berger
Judge Berger followed In re Ballard 526 F. 3d 634 (10th Cir. 2008), in finding that a 910 car loan may have a deficiency balance after sale of the vehicle.Continue Reading
CAR OWNED BY CHILD CAN BE CRAMMED DOWN BUT NOT GOOD FAITH
In re Lewis, Case No. 06-20027
August 2006, Judge Somers
The vehicle the debtors proposed to cramdown in the plan was found to belong to the daughter, even though titled to debtors. Daughter made the payments. However, the Court found that the plan was not filed in good faith, citing Young and Flygare, and granted stay relief to the creditor.
SURRENDER IN FULL SATISFACTION OF 910 AND PAYMENT IN FULL
WITH NOT INTEREST NOT ALLOWED
In re McClay, Case No. 07-20106
October 2008, Judge Berger
910 vehicle case. Plan provided for payment of full debt with no interest and option to surrender in full satisfaction. This was found to be an attempt to modify prospectively and Court opined that 1329 would have to be used. Court followed 10th Cir. In re Jones, 530 F3d 1284, (10th Cir. 2008). Debtor must pay interest. In re Ballard, 526 F3d 634 (10th Cir. 2008) holds that deficiency must be provided for if vehicle is surrendered.Continue Reading
PERSONAL VS. BUSINESS USE FOR 910 CAR CLAIMS
In re Lowder, Case No. 05-44802
August 2006, Judge Karlin
Creditor objected to confirmation as debtor sought to avoid the 910 car loan restriction by arguing that she used the car to get to and from work and, therefore, not “personal”. Debtor contended that Toyota is entitled to no interest. Creditor sought the Till rate. Judge Karlin restated her position from Vega. Additionally, she found that these facts supported “personal” use and not a “business” use. Further, Till applies, in order to provide the creditor with the present value of its claim.
“PERSONAL USE” NOT THE SAME AS “PERSONAL, FAMILY OR
HOUSEHOLD”
In re Humphrey, Case No. 06-20783
October 2006, Judge Berger
Debtors attempted to cram down a 910 motor vehicle. The Court determined that “personal use” is not the same as “personal, family or household use” used elsewhere in the code. A vehicle acquired for the debtor’s spouse is not subject to 1325(a)(5)(B) and 506 applies. Cramdown allowed.
CAR PURCHASED FOR COMMON LAW WIFE IS PERSONAL, NOT BUSINESS
In re Bolze, Case No. 06-40036
August 2006, Judge Karlin
Creditor objected to plan that sought to escape the 910 hanging paragraph. The Court restated the rules established in Vega and Lowder. Debtor attempted to distinguish amongst “household”, “family” or “personal”. Basically, the Court said “personal” is not “business” and vice versa. Therefore, a car purchased for Mr. Bolze’s common law wife was “personal”.
COST OF FORCED PLACED INSURANCE IS PART OF PMSI FOR 910 VEHICLE
In re Townsend, Case No 07-20956
April 2008, Judge Somers
Noting that BAPCPA does not define PMSI but that the phrase is a term of art under the UCC, the Court found that under Missouri law, 9-103 governs and forced place insurance falls within the Missouri definition of PMSI.
Collateral: The property that is subject to a lien. A creditor with rights in collateral is a secured creditor and has additional protections in the Bankruptcy Code for the claim secured by collateral. The measure of the secured claim is the value of the collateral available to secure the claim: it is possible to have a lien on property that is subject to a senior lien or liens such that the security available to pay the claim is really without value to the junior creditor. The general rule with respect to liens is “First in time, first in right.” More on Secured Debts.
OWNERSHIP EXPENSE NOT ALLOWED IF VEHICLE PAID FOR
In re Howell, Case No. 06-11652
April 2007, Judge Nugent
Trustee objected to 13 confirmation under 1325(b)(1)(B) on basis that debtors projected disposable income was too low because they were deducted an ownership expense on Line 28 of B22C even though vehicle was fully paid for and even though they had claimed a standard vehicle operating allowance on Line 27. Objection Sustained, even though 707(b) (2) (A) (ii) (I) and B22C do not offer specific guidance. Judge Nugent rejected the other view on the basis that an expense is not “applicable” if it is not actually incurred.
Digest by: Jan Hamilton, Trustee
Jan Hamilton Trustee
Jan Michael Hamilton, standing chapter 13 bankruptcy trustee for cases filed in Topeka, was inducted into the American College of Bankruptcy Friday. Hamilton was in the private practice of law from 1973 through 1999 when he was named to the trustee post.
Hamilton traveled to Washington, D.C., for the ceremony at the U.S. Supreme Court building. Thirty three attorneys and judges were in the 20th class inducted into the college.
The American College of Bankruptcy is an honorary associationContinue Reading
