WHY FILE FOR CHAPTER 13 BANKRUPTCY, Terry Bankert Flint Bankruptcy Attorney 235-1970

One of the most common reasons a debtor chooses to file a Chapter 13 case is to prevent the foreclosure of the debtor’s residence by the mortgage company. Therefore, an important deadline for filing a Chapter 13 case is before the foreclosure sale. There are numerous deadlines to be concerned with, and most are far more subtle than the foreclosure sale. The following should be considered:

1. Repossession. The automatic stay provided by 11 USC 362(a)will stop repossession from occurring; furthermore, filing the Chapter 13 petition before the sale of the vehicle by the secured claim holder will stop the sale as well, even if the debtor is not in possession of the vehicle at the time the petition is filed.
2. Means test. The applicable commitment period (three to five years) of the Chapter 13 plan is determined by a calculation requiring the determination of current monthly income. 11 USC 1325(b)(4). Current monthly income in a Chapter 13 case is defined as “the average monthly income from all sources that the debtor [and the debtor’s spouse] receives …, derived during the 6-month period ending on the last day of the calendar month immediately preceding the date of the commencement of the case.” See 11 USC 101(10A)(A);1322(d). The length of the debtor’s plan may vary, depending on when the case is filed. See 11 USC 1325(b).
3. Credit counseling. 11 USC 109(h) requires the debtor to receive a “briefing … that outlined the opportunities for available credit counseling” during the 180 days preceding the filing of the petition. If possible, the debtor should wait to file the petition until the day after the briefing was received.
4. Residential lease. If possible, the debtor should file his or her Chapter 13 case before the entry of a judgment of possession by a residential lessor. The automatic stay may expire 30 days after the petition is filed if a judgment of possession was obtained prepetition. See 11 USC 362(b)(22).
5. Eligibility based on debt limits under 11 USC 109(e). Since contingent, unliquidated debt does not count towards the debt limits set forth in 11 USC 109(e), the debtor may need to file his or her petition before a debt becomes noncontingent or liquidated.
6. Eligibility under 11 USC 109(g) based on earlier filings. A debtor is ineligible for bankruptcy relief under 11 USC 109(g) if he or she had a case pending within the 180 days before filing the petition and that case was dismissed “for willful failure of the debtor to abide by orders of the court, or to appear before the court in proper prosecution of the case” or the debtor voluntarily dismissed his or her case after a motion for relief from the automatic stay was filed.
7. Discharge under other chapters of the Code. If a debtor has received a Chapter 7, 11, or 12 discharge in a case filed during the four years before filing the present case, or a Chapter 13 discharge in a case filed during the two years before filing the present case, he or she is not eligible for a discharge. 11 USC 1328(f). The debtor may file the case and obtain the protection of the automatic stay; however, the debtor will not receive a discharge. This potentially results in a debtor’s successfully completing a Chapter 13 plan and subsequently having to pay his or her prepetition debt.
8. Taxes. 11 USC 507(a)(8) establishes the time frame for priority treatment of income taxes. Because priority claims must be paid in full (see 11 USC 1322(a)(2)), the debtor may be able to delay filing the Chapter 13 case until the tax claims become unsecured nonpriority claims and therefore subject to payment with all other general unsecured creditors.
9. Extension or imposition of the automatic stay. If the debtor has had one or more cases pending within the one year preceding the filing of the present case, but dismissed, the automatic stay may expire 30 days after the case is filed or not even come into effect. 11 USC 362(c)(3) and (4).

A debtor’s prepetition domicile may have an impact on venue and exemptions. See 11 USC 522(b)(3)(A).

current to 1/10/13

Handling Consumer and Small Business Bankruptcies in Michigan ch 2 (Richardo I. Kilpatrick et al eds, ICLE 2009), at http://www.icle.org/modules/books/chapter.aspx?lib=bankruptcy&book=2009550820&chapter=02 (last updated 12/28/2012).

FLINT BANKRUPTCY SERVICE ARE OFFERED BY FLINT BANKRUPTCY LAWYER TERRY BANKERT 235-1970, http://www.attorneybankert.com

FLINT BANKRUPTCY SERVICE ARE OFFERED BY FLINT BANKRUPTCY LAWYER TERRY BANKERT 235-1970



Duty to Attend Flint Bankruptcy Hearings and Creditors’ Meetings

The Flint Bankruptcy debtor must attend and submit to examination under oath at the meeting of creditors held in their Flint Area bankruptcy case. 11 USC 343.

A meeting with the Bankruptcuy Trustee must be held not less than 21 days or more than 40 days after a case is commenced for Chapter 7 liquidation or Chapter 11 reorganization cases, not less than 21 days or more than 35 days after a case is commenced for Chapter 12 family farmer or fisherman debt-adjustment cases, or not less than 21 days or more than 50 days after a case is commenced for Chapter 13 individual debt adjustment cases. See Bankruptcy Rule 2003(a).

The meeting may be held as late as 60 days after the case is commenced if it is held at a place not regularly staffed by the trustee. Id. The meetings may be held in the courtroom, although the Flint Bankruptcy judge will not attend the meeting, or at some other location designated by the U.S. trustee. 11 USC 341; Bankruptcy Rule 2003.

All the creditors the Flint Bankruptcy debtor has listed on his or her schedules and filed with the court must receive written notice that includes the date, time, and place of this meeting.

Remember that the Flint Bankruptcy debtor’s attendance at this meeting is mandatory and will be excused only under extraordinary circumstances. See, e.g., In re Owens, 221 BR 199 (Bankr WD Tenn 1998).

If the Flint Bankruptcy judge to whom your client’s case has been assigned elects to hold a discharge Flint Bankruptcy Hearing, your client is obliged to attend. 11 USC 521(a)(5), 524(d).

The Flint / Genesee BankruptcuTrustee


Appointment

In Chapter 7, 12, and 13 cases, the U.S. trustee appoints a trustee to administer the assets of the Flint Bankruptcy debtor for the benefit of creditors. 11 USC 323. Promptly after the order of relief is entered in a Chapter 7 case, the U.S. trustee selects an interim trustee, who will continue to serve as trustee unless a different one is elected at the meeting of creditors. 11 USC 701, 702. The appointed trustee must file a bond with the court to ensure the faithful performance of his or her statutory duties. 11 USC 322(a); Bankruptcy Rule 2010.
The court does not automatically appoint a trustee in Chapter 11 cases. Instead, the Flint Bankruptcy debtor-in-possession is charged with the responsibility of administering the estate.

However, if sufficient cause exists, the court may displace the Flint Bankruptcy debtor-in-possession by appointing a trustee. In this context, cause includes fraud, dishonesty, incompetence, or gross mismanagement. 11 USC 1104(a)(1). Bankruptcy Rule 2007.1 was amended to implement 11 USC 1104(b) and allows creditors (within 30 days after the court orders the appointment of a trustee) to request a meeting to elect a disinterested person as the trustee in a Chapter 11 case. Bankruptcy Rule 2007.1(b). Notice of this meeting must be given in accordance with Bankruptcy Rule 2002.

In Chapter 12 and 13 cases, the U.S. trustee will normally appoint a standing trustee to administer cases that are venued in certain counties in the judicial district.

Duties

The trustee in Chapter 7 cases may operate the Flint Bankruptcy debtor’s business, but only if the court permits. 11 USC 721. The Chapter 7 trustee’s primary duty, however, is to reduce all nonexempt property to cash as quickly as possible and distribute the money to creditors. 11 USC 704(a)(1). The trustee must also see that the Flint Bankruptcy debtor performs his or her stated intentions regarding the collateral securing individual consumer debts. 11 USC 704(a)(3). The remainder of a Chapter 7 trustee’s duties are specified in 11 USC 704 and Bankruptcy Rule 2015(a).

Chapter 12 and 13 trustees are primarily responsible for analyzing proposed payment plans and ensuring that Flint Bankruptcy debtors comply with the terms of their confirmed plans, especially the payment provisions. Unlike trustees in Chapter 7 cases, Chapter 12 and 13 trustees will normally not liquidate the Flint Bankruptcy debtors’ assets. Rather, these trustees will distribute to creditors monies that the Flint Bankruptcy debtors are required to pay in accordance with their confirmed plans. In Chapter 12 cases, however, if a Flint Bankruptcy debtor-in-possession is removed for cause under 11 USC 1204(a), the standing trustee will step in and operate the Flint Bankruptcy debtor’s farming or fishing business. See §10.87.

The trustees in Chapter 7, 11, 12, and 13 also have certain monitoring and reporting requirements with respect to domestic support obligations. 11 USC 101(14A), 11 USC 704(a)(10) and (c)(10), 11 USC 1106(a)(8) and (c), 11 USC 1202(b)(6) and (c), and 11 USC 1302(b)(6) and (d).


FLINT BANKRUPTCY SERVICE ARE OFFERED BY FLINT BANKRUPTCY LAWYER TERRY BANKERT 235-1970, http://www.attorneybankert.com

FRONT LOADED SPOUSAL SUPPORT AND TAX IMPLICATIONS

FYI-Flint Divorce Bankruptcy Attorney Terry R. Bankert 235-1970, www.attorneybankert.com  asks DID YOU KNOW?.From Creative Tax and Financial Planning to Settle the Challenging Divorce Case Joseph W. Cunningham Joseph W. Cunningham JD CPA PC Troy

What are Section 71 payments?

1. They are essentially another name for alimony, or spousal support, payments
that qualify as taxable to the payee under IRC Section 71 and deductible by
the payer under IRC Section 215.

C. What are the “front loading” rules


1. In addition to the above Section 71 requirements, a series of payments must
not be excessively “front loaded”.


2. This means that payments scheduled over a period of years may not be
skewed toward the front end of the period so that a disproportionately large
portion of the total will be paid in the early years of the payment schedule
(which would be the tendency if the payments actually represented property
rather than support).


3. The front-loading rules are more complicated than the other requirements
under IRC 71. But, a basic understanding is necessary for attorneys to effectively
use Section 71 payments.


a. In short, payments that are excessively front loaded during a three-year
measuring period must be “recaptured”, which means that the payer,
who deducted the payments, must now report them as income, and the
payee, who was originally taxed on the payments, is now entitled to a
deduction.


b. If a decline in payments that would otherwise result in alimony recapture
occurs because of one of the following events, no recapture is
required:
• death of either spouse
• remarriage of the payee spouse
• fluctuations of income outside the control of the payer provided
the payer is obligated to pay a fixed portion or percentage of an
income stream (such as a bonus paid pursuant to a formula, rent or
royalty income from a property interest, etc.) for at least three
years.

c. Recapture is determined according to when payments are actually
made, not when they are scheduled.


d. Recapture rules do not apply to temporary alimony paid during pendency


of divorce.


4. Steps for computing alimony recapture


a. The measuring period is the three successive calendar years beginning
with the year in which payments commence pursuant to the divorce or
separation instrument. They are referred to as the “post-separation
years.” The test for recapture consists of the following two steps.


i. The total paid in the third calendar year is added to a $15,000 statutory
allowance. The sum is then subtracted from the total paid in
the second year. Any difference is recapture.


ii. Then the average of payments made in years two (net of recapture,
if any) and three is added to the $15,000 statutory allowance. The
sum is subtracted from the total paid in year one. Once again, any
difference is recapture


b. The total amount of recapture from years one and two is reported as
income by the payer and claimed as a deduction by the payee in year
three.


c. Examples illustrating the application of the alimony recapture rules are
presented on Exhibit 1.


5. Rules of Thumb Regarding Alimony Recapture—Awareness of a few simple
rules of thumb is generally sufficient to avoid running afoul of recapture
strictures.


a. Declining Payments Only—Recapture only applies to a schedule of
payments that declines from year to year over the three-calendar-year
measuring period. It does not apply if payments are level or increase.


b. $15,000 Threshold—If payments do not exceed $15,000 annually,
there cannot be recapture because of a $15,000 statutory allowance.
The rules only come into play if payments total more than $15,000 in
first and/or second of the three calendar years beginning with the first
year in which payments are made.


c. $10,000 Safe Harbor—There will never be recapture if the reductions
in total payments between years one and two and then between years
two and three do not exceed $10,000 each. To illustrate, no recapture
results from the payment schedule shown below:

Flint Michigan should discuss filing for Chapter 9 Bankruptcy

FLINT MICHIGAN SHOULD CONSIDER OUR OWN BAIL OUT WITH A CHAPTER 9 MUNICIPAL BANKRUPTCY..

News reports show We could  be witnessing soon the largest Chapter 9 bankruptcy filings in the history of the U.S.?  Several on MLIVE have speculated that the City of Flint should declare bankruptcy. The City  of Flint has been struggling throughout the Great Recession and now faces high unemployment and rising crime rates. The City of Flint  has also been listed as one of the nation's most violent cities and currently is under the control of an Emergency Manager appointed by Michigan Governor

The demise of the auto related jobs, high foreclosure problems  contributed to a municipal decline. The banks collapsed and home prices plummeted.With the empty houses, the city officials are collecting less property taxes. These are not  the only contributing factor to the demise of Flints  economy. It doesn't look like Flint  is headed for Chapter 9 bankruptcy anytime soon, but it may be time for local officials to heed the warning  that Flint current Emergency Manager may not be able to solve Flints financial demise. A public discussion of Chapter 9 Bankruptcy should begin in Flint.

Is municipal bankruptcy all bad? How can things get worse?

These Chapter 9 Bankruptcies are being seriously considered in other parts of the country, why not here?

MARCH 5 2012 -Recently a federal judge ruled Alabama ‘s Jefferson County can go ahead with its $4.23 billion bankruptcy case, the biggest ever by an American municipality. The recent late Sunday ruling by U.S. Bankruptcy Judge Thomas Bennett opens the road for the county to restructure more than $3 billion in debt incurred as a result of an expensive sewer-system overhaul, as well as other liabilities. Sound familiar. Flint Mayors and City Councils have allowed the looting of our water and sewer fund.

MARCH 5 2012-Cases brought by other U.S. municipalities, such as Harrisburg, Pennsylvania, have been thrown out by other federal judges in recent months. The city of Stockton, California, last week decided to default on its debt in an effort to avoid becoming the most populous U.S. city to file for bankruptcy

What is a Chapter 9 Bankruptcy. It is properly titled “adjustment of debts” of a municipality and is commonly referred to as a “municipal reorganization”. It is similar to a Chapter 11 Business reorganization.

A Chapter 9 will allow Flint to reorganize its debt under the protection of a Federal Court.  Flint can start the process by filing a petition and a plan for reorganization with the court.  The plan proposed a repayment of the municipal debt broken down by class of creditor over a period of time.

The Chapter 9 City gets a discharge of debt when the plan is confirmed. The Court Maintains jurisdiction to make sure the plan is complied with.

Citizens should seriously consider and debate these options then apply pressure for action where we can.

BANKRUPTCY REDEEMPTION, KEEP CAR IN BANKRUPTCY FOR WHAT IT IS REALLY WORTH!

WITH OVER $10,000 IN CHAPTER SEVEN BANKRUPTCY DEBTOR CAN REDEEM HIS CAR FOR $1,400 ON PROPER MOTION

What many debtors/ citizens do not know is that thye can keep their car by paying only what it is worth not what is owed.

In a  Chapter 7 Bankrutpcy you may keep your car if it has a value of $3,400 or lesst within in one exemption. The lein still continues and you commonly are told you have to reaffirm the entir debt to keep your car. But whjat if your vehicle is worth much less than what you owe on it?

In a Chapter 7 liquidation case, an individual debtor may redeem certain "tangible personal property intended primarily for personal, family, or household use" that is encumbered by a lien. To qualify, the property generally either (A) must be exempt under section 522 of the Bankruptcy Code, or (B) must have been abandoned by the trustee under section 554 of the Bankruptcy Code. To redeem the property, the debtor must pay the lienholder the full amount of the applicable allowed secured claim against the property. [3]


BANKRUPTCY, CAR, REDEMPTION posted here by Bankruptcy Attorney Terry Bankert in note , cited format. For additional information call 810-235-1970

see also
http://occupyflintlegal.wordpress.com/2012/03/20/save-car-in-bankrutpcy-pay-only-what-it-is-worth/




BANKRUPTCY, CAR, REDEEMPTION posted here by Bankruptcy Attorney Terry Bankert in note , cited format. For additional information call 810-235-1970



To cause this reduced buy out you will probably have to go before a bankrutpcy judge. §3.109 Pursuant to Bankruptcy Rule 1007 and 11 USC 722, the debtor may file a motion with the court to allow the [2]

An example of the most common redemption of personal property is the redemption of a car. The fair market value of a car may be thousands of dollars less than what is owed on the loan. The debtor has the option of purchasing the car from the lender for the amount of the replacement or current market value of the car. [2]

YOU WILL MOTION THE FEDERAL BANKRUPTCY JUDGE TO REDEEM YOUR PROPERTY

 This can be accomplished through negotiation; however, it is most often done by a motion to redeem personal property. A motion of this type will most often be a contested matter that will require testimony and an appraisal of the asset in question. Thus, it is usually up to the court to approve the redemption and valuation.   [2]

Value is often contested at this motion; however, once this is settled, the debtor pays the lender the fair market value of the property and the title is transferred. Form 3.6 is a sample motion for redemption of personal property.[SEE BELOW]
D. Payment to the Creditor   [2]

EXAMPLE FROM RECENT COURT OPINION

CNAC Motor Car Credit Co. appeals an order of the bankruptcy court granting Steven M. Perales’ motion to redeem his 2002 Dodge Neon for a lump sum of $1,400. For the reasons that follow, we affirm the bankruptcy court’s order.   [1]

[The writers purpose here is to review the use of a redemption motion in a chapter seven bankruptcy. Most arguments as to valuation are stricken. Note this opinion has been altered for media presentation. Consult the original and legal counsel before you rely on content presented here.- Terry Bankert]

FINAL ORDERS OF A MICHIGAN BANKRUPTCY COURT ARE APPEALED  TO THE 6TH CIRCUIT COURT

III. FACTS

$10,014 OWED ON CAR  CITIZEN FILES FOR CHAPTER SEVEN BANKRUPTCY
On February 11, 2011, Steven M. Perales (“Debtor”) filed a voluntary petition for relief under
chapter 7 of the Bankruptcy Code. Listed on Schedule B was a debt owing CNAC Motor Car Credit
Co. (“CNAC”) in the amount of $10,014. The debt to CNAC is secured by a 2002 Dodge Neon.   [1]

CITIZEN FILED A MOTION TO REDEEM AT LESS THAN THE AMOUNT OWED IN CHAPTER SEVEN?

On April 25, 2011, the Debtor filed a motion to redeem the 2002 Dodge Neon for the lump
sum of $1,132 pursuant to 11 U.S.C. § 722 and Federal Rule of Bankruptcy Procedure 6008.
Attached to the Debtor’s motion was a printout from Edmonds.com showing that the trade-in value
of the vehicle was $792, the private party sale value was $1,132, and the dealer retail was $1,586.   [1]

ONLY THE VALUATION WAS ARGUED?

At both the hearing before the bankruptcy court 1 on the Debtor’s motion and on appeal,
CNAC argues only that the valuation was improper. [The Court found the valuation to be $1,400-trb]   [1]

THE COMPANY HOLDING THE NOTE ON THE CAR FILED FOR RELIEF FROM THE AUTOMATIC STAY.
The notice also indicated that the bankruptcy court would conduct a hearing on CNAC’s
motion for relief from the automatic stay at the same time.   [1]

CITIZEN FILED A MOTION TO REDEEM UNDER 11 USC SEC. 722

The Debtor’s motion also included a “Notice of Motion to Redeem” which indicated that any party
opposing the requested relief must file a written response with the bankruptcy court by May 25,
2011. CNAC received notice of the Debtor’s motion.   [1]

CITIZENS MOTION WAS OPPOSED

CNAC filed a Motion in Opposition to the Debtor’s Motion to Redeem on April 28, 2011.

DID THE CITIZEN GET IT WRONG AND NO PART OF THE DEBT WAS DISCHARGEABLE?

In its opposition, CNAC asserted that the vehicle was not exempt, was not abandoned, and that the
debt thereon was not dischargeable.   [1]

CITIZENS OWES US $10,013.54 SAYS COMPANY.....

ISSUES AT HEARING

COMPANY HAS A RETAIL CONTRACT, PAY OR RETURN THE CAR IT SAYS TO CITIZEN

Counsel for CNAC argued that because there was a retail installment contract
which had not been paid in full, the Debtor must either return the vehicle or pay the entire
outstanding balance of $10,014 to redeem it. Again, CNAC provided no evidence to the court
regarding the value of the vehicle.   [1]

OOPS COMPANY FORGOT TO ARGUE THE MOST IMPORTANT ISSUE

Although CNAC originally stated in its opposition to the Debtor’s motion to redeem that the vehicle was not subject to redemption, it did not make such assertions before the bankruptcy court at the June 6, 2011 hearing. CNAC also failed to make those assertions in this appeal. Therefore, the only dispute before the bankruptcy court, and now before the Panel, concerns the amount the Debtor must pay CNAC to redeem the vehicle.   [1]

CITIZENS CAN REDEEM THEIR CAR AND OTHER PERSONAL PROPERTY

A. In General

§3.107 Redemption of personal property is a process by which the debtor purchases the secured property for the amount of the allowed secured claim. What this means is that the debtor may buy the secured property for the current fair market value of that secured property. 11 USC 722. Note that the property must be intended for the personal, family, or household use of the debtor. Id.   [2]

11 USC SECTION . 722  An individual debtor may, whether or not the debtor has waived the right to redeem under this section, redeem tangible personal property intended primarily for personal, family, or household use, from a lien securing a dischargeable consumer debt, if such property is exempted under section 522 of this title or has been abandoned under section 554 of this title, by paying the holder of such lien the amount of the allowed secured claim of such holder that is secured by such lien in full at the time of redemption.

11 USC SECTION 522 EXEMPTION AS TO PERSONAL PROPERTY
(a)In this section—
(2)“value” means fair market value as of the date of the filing of the petition or, with respect to property that becomes property of the estate after such date, as of the date such property becomes property of the estate.
(2)The debtor’s interest, not to exceed $3,400 in value, in one motor vehicle.

11USCSECTION 524 - WHAT IS THE “ALLOWED SECURED CLAIM”.
“What if your creditor has a security interest or lien? Your bankruptcy discharge does not eliminate any lien on your property. A ‘lien’ is often referred to as a security interest, deed of trust, mortgage or security deed. Even if you do not reaffirm and your personal liability on the debt is discharged, because of the lien your creditor may still have the right to take the property securing the lien if you do not pay the debt or default on it. If the lien is on an item of personal property that is exempt under your State’s law or that the trustee has abandoned, you may be able to redeem the item rather than reaffirm the debt. To redeem, you must make a single payment to the creditor equal to the amount of the allowed secured claim, as agreed by the parties or determined by the court.”.


An example of the most common redemption of personal property is the redemption of a car. The fair market value of a car may be thousands of dollars less than what is owed on the loan. The debtor has the option of purchasing the car from the lender for the amount of the replacement or current market value of the car. This can be accomplished through negotiation; however, it is most often done by a motion to redeem personal property. A motion of this type will most often be a contested matter that will require testimony and an appraisal of the asset in question. Thus, it is usually up to the court to approve the redemption and valuation.   [2]

B. Obtaining Financing

§3.108 Obviously, a debtor in a Chapter 7 case may have a difficult time obtaining the funds necessary to redeem the property. There is no provision in the Code allowing the redemption of personal property to take place over a period of time in the same manner as a reaffirmation agreement. That being said, when it comes to automobiles, many programs offered by lenders will allow a debtor to redeem the property by taking out a loan with a new lender. The new lender will be granted a security interest in the property and will lend at specific disclosed terms. Lenders are often willing to lend the money because the property that is being used as collateral on the loan is worth the amount owed on it; since the debtor is discharging all other obligations and cannot file another Chapter 7 bankruptcy case for eight more years, 11 USC 727(a)(8), lending to the debtor is often considered a good risk.   [2]

C. Motion for Redemption

§3.109 Pursuant to Bankruptcy Rule 1007 and 11 USC 722, the debtor may file a motion with the court to allow the redemption of personal property. Value is often contested at this motion; however, once this is settled, the debtor pays the lender the fair market value of the property and the title is transferred. Form 3.6 is a sample motion for redemption of personal property.

D. Payment to the Creditor   [2]

§3.110 Payment in full must take place pursuant to the redemption requirements at the time of the redemption. Further, the redemption process must be completed within 45 days after the first meeting of creditors. If the redemption is not completed, the automatic stay is vacated as to such personal property and the property is no longer property of the estate unless the court orders otherwise before the expiration of the 45-day period.     [2]


COURT RULED THE CITIZEN  COULD REDEEM THE CAR FOR THE $1,400 VALUE BUT HAVING  A $10,014 BALANCE DUE.

At the conclusion of the hearing, the bankruptcy court ruled from the bench that the Debtor
had the right to redeem the Dodge Neon. The court further found that, after looking at several
sources on its own, it had arrived at a value of $1,400, which was only slightly more than the
Debtor’s proposed value of $1,132.    [1]

IN A CHAPTER SEVEN DEBTOR KEEPS A CAR BY PAYING MARKET VALUE OF $1,400 WHEN $10,014 WAS OWED?

On June 13, 2011, the bankruptcy court entered a written order
granting the Debtor’s motion to redeem which directed the Debtor to pay CNAC a lump sum of
$1,400 within 30 days of entry of the order. CNAC’s timely notice of appeal followed on June 22,
2011.   [1]

IV. DISCUSSION

JUST WHAT IS AN ALLOWED SECURED CLAIM IN A REDEMPTION IN CHAPTER SEVEN BANKRUPTCYT?

Pursuant to 11 U.S.C. § 722, an individual debtor may redeem consumer goods from a lien
securing a dischargeable consumer debt, if the property is exempt under 11 U.S.C. § 522 or has been
abandoned under § 544, by paying the lienholder in full, at the time of redemption, the amount of
the “allowed secured claim” that is secured by the collateral. 11 U.S.C. § 722.   [1]

JUST WHAT IS AN ALLOWED SECURITY CLAIM?

The term “allowed secured claim” is not defined in the Bankruptcy Code. See, 11 U.S.C.
§ 101. However, 11 U.S.C. § 506 describes how to determine a creditor’s secured claim, and, thus,
what amount a debtor must pay pursuant to § 722 in order to redeem property:

SECURED CLAIM IS WHAT IS OWED ON THE CAR IS THE VALUE OF THE CREDITORS INTEREST.

An allowed claim of a creditor secured by a lien on property in which
the estate has an interest . . .    [1]

THE CLAIM IS SECURED TO THE EXTENT OF ITS VALUE
is a secured claim to the extent of the
value of such creditor’s interest in the estate’s interest in such
property . . .    [1]

THE CLAIM IS UNSECURED FOR THE AMOUNT OWED OVER VALUE. DOES THIS APPLY TO CHAPTER SEVEN?

and is an unsecured claim to the extent that the value of
such creditor’s interest . . . is less than the amount of such allowed
claim.    [1]

THIS VALUE TO BE DETERMINED

Such value shall be determined in light of the purpose of the
valuation and of the proposed disposition or use of such property, and
in conjunction with any hearing on such disposition or use or on a
plan affecting such creditor’s interest.   [1]

506(a)(2)

Section 506(a)(2) further describes in more detail the method of valuing a secured claim if the debtor
is an individual in chapter 7 or 13. It states:
If the debtor is an individual in a case under chapter 7 or 13, such
value with respect to personal property securing an allowed claim
shall be determined based on the replacement value of such property
as of the date of the filing of the petition without deduction for costs
of sale or marketing. With respect to property acquired for personal,
family, or household purposes, replacement value shall mean the
price a retail merchant would charge for property of that kind
considering the age and condition of the property at the time value is
determined.   [1]

506 HAS INADEQUATE CASE LAW TO DEFINE IT.

Section 506(a)(2) was added to the Bankruptcy Code in 2005 when Congress passed the
Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). Unfortunately, “no
consensus has emerged in the case law interpreting § 506(a)(2) as to how replacement value for
motor vehicles should be determined.” In re Pearsall, 441 B.R. 267, 270 (Bankr. N.D. Ohio 2010)
(collecting cases detailing vehicle valuation). As the Pearsall court explained, “[t]he results reached
ultimately seem to depend, not entirely surprisingly, on the overall record a court is presented with
in a particular case.” Id. Courts have employed a variety of vehicle valuation methods under
§ 506(a)(2) ranging from use of the Kelley Blue Book or N.A.D.A. Guide retail values of a like
vehicle to the opinion testimony of a car salesperson as to what he would sell a vehicle for on the
lot. Id. at 270-71. The Sixth Circuit has not established a uniform method.   [1]

CITIZEN SEEKING REDEMPTION HAS BURDEN

As the party seeking redemption, the Debtor “bear[s] the burden of proving the appropriate
redemption value by a preponderance of the evidence.” In re Herrera, 454 B.R. 559, 561 (Bankr.
E.D.N.Y. 2011) (citations omitted) (collecting cases holding debtor bears burden of proving value
by preponderance of evidence for redemption purposes under § 722). Therefore, the Debtor here
bore the evidentiary burden of proving that the replacement value of his vehicle was, more likely
than not, $1,132, the amount he proposed to pay......   [1]

Fed. R. Bankr. P. 3012. The purpose of Rule 3012 is to ensure that a creditor who files a motion
seeking a determination of its secured status and the value of its collateral pursuant to 11 U.S.C.
§ 506 is entitled to a hearing on those issues upon notice to other interested parties. “Rule 3012 does
not, however, require a separate [valuation] hearing.” Piedmont Trust Bank v. Linkous (In re
Linkous), 141 B.R. 890, 894 (W.D. Va. 1992); In re Taylor, 289 B.R. 379, 386 n.5 (Bankr. N.D. Ind.
2003).3 “Valuation issues may also arise in connection with other requests such as redemption
under § 722,” Id., or confirmation of a plan. Calvert, 907 F.2d at 1072; In re Hoskins, 262 B.R. 693,
697 (Bankr. E.D. Mich. 2001)....   [1]

COMPANY SAYS CITIZEN MUST REDEEM THE CAR FOR THE FULL AMOUNT OWED NOT THE VALUATION?

In its objection to the Debtor’s redemption motion, CNAC did not object to the Debtor’s
Edmonds.com attachment nor did it provide any evidence of the value of the vehicle. Instead,
CNAC simply insisted that the vehicle should be redeemed for the full amount owed on the debt.   [1]

At the June 6, 2011 hearing, at which counsel for CNAC appeared, it again did not present any
evidence regarding the value of the vehicle, but rather stated that the redemption amount should be
the same as the outstanding loan.   [1]


COMPANY WAS SO SURE OF ITS ARGUMENT IT DID NOT ARGUE VALUATION


CNAC presented no evidence of value nor did it object to the evidence submitted by the Debtor.

THE COMPANY DID NOT APPLU 506(a)(2) correctly.   [1]

Rather it simply stated that the redemption value should be identical to the outstanding balance on the debt
which is simply not the standard set forth under § 506(a)(2). The only evidence submitted by the parties came from the Debtor. Therefore, the Debtor met his burden of proof.   [1]

CITIZENS USE OF REDEMPTION HAS TO BE BY MOTION.

Pursuant to the Bankruptcy Rules, the filing of the motion to redeem is a contested matter
under Federal Rule of Bankruptcy Procedure 9014.    [1]

COURT THEN MUST MAKE A DETERMINATION

As a result, the court was required to make
findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52(a), made
applicable to contested matters in bankruptcy by Federal Rules of Bankruptcy Procedure 7052 and
9014. These findings and conclusions can be written or oral. The main requirement for these
findings is that they “must be sufficient to enable a reviewing court to determine the factual basis
for the court’s ruling.” Veal v. Am. Home Mortgage Serv., Inc. (In re Veal), 450 B.R. 897, 919
(B.A.P. 9th Cir. 2011). “This same standard applies in this Circuit even when the findings are based
on documentary, rather than testimonial, evidence.” Brown v.UAW, 689 F.2d 69, 71 (6th Cir. 1982).
In the case of Corzin v. Fordu (In re Fordu), 201 F.3d 693 (6th Cir. 1999), the Sixth Circuit
Court of Appeals stated the standard used in reviewing a decision under Federal Rule of Civil   [1]

V. CONCLUSION

For the foregoing reasons, the Panel affirms the order of the bankruptcy court granting the
Debtor’s motion to redeem the vehicle for $1,400.   [1]

Motion for Authority to Redeem Personal Property and Approval of Associated Financing and Attorney Fees
[Insert caption.] MOTION FOR AUTHORITY TO REDEEM PERSONAL PROPERTY AND APPROVAL OF ASSOCIATED FINANCING AND ATTORNEY FEES UNDER 11 USC 722 Debtor, by and through counsel, moves the court pursuant to 11 USC 722 and Bankruptcy Rule 6008 for a Redemption Order on the following grounds: The item to be redeemed is tangible personal property intended primarily for personal, family, or household use and is more particularly described as follows: Year ___ Make ______ Model ______ VIN #__________________________________ The interest of the Debtor in such property is exempt or has been abandoned by the estate and the debt (which is secured by this property to the extent of the allowed secured claim of the Creditor) is a dischargeable consumer debt. The allowed secured claim of the Creditor for purposes of redemption, the “redemption value,” should be determined to be not more than $[amount]as evidenced by the attached written appraisal. Arrangements have been made by the Debtor to pay to the Creditor up to the amount above in a lump sum should this motion be granted. The payment for this proposed redemption is to be financed through [name of lender], with all of the particulars of that financing (interest rate, finance charge, amount financed, total of payments, amount of payments, etc.) set forth in full detail in the attachment(s) to this motion. As demonstrated there, the monthly amount, term of the payments, and the overall amount of the repayment will be decreased significantly through the proposed redemption. Moreover, the Debtor has agreed to borrow and disperse additional funds in the amount of $[amount], from the loan with [name of lender], for representation of the Debtor in securing for the benefit of the Debtor an order granting the Debtor the right to redeem under 11 USC 722 a certain motor vehicle, such compensation being in addition to that previously disclosed and being for services rendered beyond the scope of the legal services to have been rendered for such compensation previously disclosed. The Debtor requests the Court to order the Creditor to accept from the Debtor the lump-sum payment of the redemption value and release its lien of record. In the event the Creditor objects to this motion, the Debtor requests the Court to determine the value of the property as of the time of the hearing on such objection.     Dated:                       [Firm name]   By /s/                          [Typed name of attorney (P___)] Attorney for Debtor [Address, telephone] NOTICE Notice is given that unless an objection is made to this motion within 20 days following the date of service below, an order sustaining the motion may be granted by the Court. CERTIFICATE OF SERVICE I certify that the foregoing has been served upon the Creditor noted above, the U.S. Trustee, and the Chapter 7 Trustee by mailing a copy of this motion by first class U.S. Mail on [date].                               Attorney for Debtor

source
[1]
BANKRUPTCY ARTICLE 03/18/12

By order of the Bankruptcy Appellate Panel, the precedential effect
of this decision is limited to the case and parties pursuant to 6th
Cir. BAP LBR 8013-1(b). See also 6th Cir. BAP LBR 8010-1(c).
File Name: 12b0002n.06
BANKRUPTCY APPELLATE PANEL OF THE SIXTH CIRCUIT
In re: STEVEN M. PERALES,
Debtor.
______________________________________
))))
No. 11-8045
Appeal from the United States Bankruptcy Court
for the Northern District of Ohio, Eastern Division at Canton.
Bankruptcy Case No. 11-60366.
Decided and Filed: March 12, 2012
Before: EMERSON, McIVOR, and PRESTON, Bankruptcy Appellate Panel Judges.
____________________
COUNSEL
ON BRIEF: Thomas C. Loepp, MAISTROS & LOEPP, LTD., Stow, Ohio, for Appellant. Douglas
L. Thrush, THRUSH & ROHR, LLC, Canton, Ohio, for Appellee.
-------------------

[2]
Handling Consumer and Small Business Bankruptcies in Michigan ch 3 (Richardo I. Kilpatrick et al eds, ICLE 2009), at http://www.icle.org/modules/books/chapter.aspx/?lib=bankruptcy&book=2009550820&chapter=03
(last updated 03/09/2012).

[3]
http://en.wikipedia.org/wiki/Bankruptcy_in_the_United_States#Redemption