Negative Equity

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.

What Is Business Use of Vehicle?

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

Creditor Gets Deficiency Claim After Collateral Surrender

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. [Read more…]

Cramdown of Daughter’s Car Bad Faith

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.

910 Car Claims Get Interest

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. [Read more…]

How Much Is My Attorney Paid to Defend Dismissal?

WICHITA NO LOOK FEE FOR DEFENDING MOTIONS TO DISMISS MAY BE $350.00
In re Kiser, Case No. 06-11453
January 2009, Judge Nugent

Debtor filed a motion to modify plan to increase monthly payment and to pay attorney fees of $500.00. Court allowed $400.00. Judge Nugent quoted Judge Karlin in Beck in supporting its conclusion that a presumptive fee of this nature may be appropriate.

How Much are Chapter 13 Bankruptcy Fees in Topeka?

13 ATTORNEY FEES IN TOPEKA
In re Beck, Case No. 06-40774
February 2007, Judge Karlin

This case should be read in conjunction with the later rendered Professional Fee and Expense Guidelines in Bankruptcy Cases of Judge Karlin. Based upon 330, the evidence and the Johnson factors, the presumptive fee for below the line debtors is $2800 and $3300 for an above the line debtor with $400.00 allowed as additional fees for 363(c) motions, without prejudice to obtaining additional fees by way of a formal application or narrative explanation. Further, presumptive fees for motions ($150.00 plus postage) and responses ($200.00 plus postage) are also established.

How Much Are Chapter 13 Bankruptcy Fees in Wichita?

13 ATTORNEY FEES IN WICHITA
In re Mayer, Case No. 06-10013
October 2006, Judge Nugent

This is Judge Nugent’s fee decision. The “presumptive” fee in Wichita is $2500, without prejudice to fee applications, based upon the language of 330, testimony and the various factors recited.

Digest by:  Jan Hamilton, Trustee

What Is Personal Use of Vehicle for 910 Claim?

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”.

Is Force Placed Insurance Part of 910 Vehicle Claim?

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.

Do I Have to Pay My Creditor’s Attorneys Fees?

2016 APPLICATIONS BY CREDITORS
In re Loy, Case No. 07-41333
December 2007, Judge Karlin

This case contains a discussion of the various issues that are to be considered by court and counsel in the context of a 2016 application by a creditor. This same issues present themselves in proofs of claim issues pertaining to attorney fees.

Digest by:  Jan Hamilton, Trustee

Should My LLC or Small Corp File Bankruptcy?

Should my LCC or small corporation file bankruptcy?  Usually not.  The general rule of thumb is that single owner corporations or limited liability companies should not file bankruptcy.

Occasionally, there is a benefit to filing bankruptcy for a small corporation, such as recovering a preference to pay priority trust fund taxes the owner owes personally. The down side to corporate bankruptcy filing is the bankruptcy trustee asking questions, making demands and suing the owner on various theories of mismanagement or insider transactions–the owner losts control of the corporation.

An LLC or corporation does not get a discharge of debts in bankruptcy.  It can stop business and liquidate in bankruptcy, but that is better done under state corporation dissolution laws.  Generally, a small business owner has incurred personal debt for the business or has guaranteed corporate debt and may need to file a personal bankruptcy.  The contingent liability for the corporate debts can be listed in the personal case to stop collection against the owner.

An LLC or corporation is not eligible to file a chapter 13 debt adjustment bankruptcy.  Corporations can reorganize in bankruptcy under chapter 11, which is very expensive and has many requirements small businesses are not equipped to comply with.

See a bankruptcy attorney with experience representing small business owners to determine if your single-owner LLC or corporation should file bankruptcy?  A business dissolution coupled with a personal bankruptcy for you may be a better solution for you.

Surrendered Collateral Doesn’t Count on Bankruptcy Means Test?

22C EXPENSE NOT PERMITTED ON SURRENDERED COLLATERAL
In re Miller, Case No. 07-22927
December 2008, Judge Somers
This decision ties to the concepts enunciated in the various Lanning decisions, i.e., to
what extent may post petition changes in circumstances be considered in determining
what is to be paid by an above the line debtor.  Digest by Jan Hamilton, Trustee.

Income and Expenses After Bankruptcy Change Chapter 13 Means Test

REITERATION THAT INCOME AND EXPENSE CHANGES MAY BE
CONSIDERED POST PETITION IN 13.

In re Tholl, Case No. 07-22677
December 2008, Judge Somers
Court reviewed and followed the Melvin decision regarding changes of income and expenses after the filing of the chapter 13 bankruptcy but prior to confirmation of the chapter 13 bankruptcy plan.

Deviation from Bankruptcy Means Test for Expenses, Too

LANNING EXTENDED TO EXPENSE SIDE
In re Melvin, Case No. 07-22352
December 2008 Judge Somers

Court extended the Lanning analysis and found there was no binding precedent on the issue of whether actual of 22C expenses were mandated and found that 22C expenses may be deviated from also. This is consistent with dicta in Lanning, and Judge Nugent in In Re Hoss, 08-10365, and In re Arroyo, No. 07-12779. It may also be inconsistent with Judge Karlin in the bankruptcy court decision in Lanning.

Lanning has been appealed by the bankruptcy trustee and is currently pending in the U.S. Supreme Court.  Oral argument is expected in March 2010.

Digest by:  Jan Hamilton, Trustee

How Can I Afford to File Bankruptcy?

How can I afford to file bankruptcy?

If I can’t pay my bills, how can I afford to pay my bankruptcy attorney?

If I can’t pay my bills, how can I afford to pay my bankruptcy attorney? Part Two

Representing yourself

How much does bankruptcy cost?

Cost of filing bankruptcy