Creditors Challenge To Debtor’s Amended Chapter 13 Bankruptcy Slapped Down–Image via Wikipedia
In a recent bankruptcy case of a debtor who wanted to amend their Chapter 13 bankruptcy plan by surrendering their vehicle and paying the deficiency as an unsecured debt, the creditor holding the car loan unsuccessfully challenged the changes.
The present dispute arose as a result of the filing by the Debtor on September 20, 2010, of an amended Chapter 13 plan in which she proposes to surrender the vehicle and reduce her plan payments to $110.00 per month, extinguishing the Credit Union’s secured claim and allowing it an unsecured claim for a deficiency. The Credit Union has objected to the proposed amendment contending that it is unauthorized by the Bankruptcy Code and that it should retain a secured claim for the balance due it under the plan after application of the proceeds of sale of the vehicle. The vehicle was surrendered to the Credit Union in the state of Texas where Debtor now resides and sold for the net amount (after $270.00 of recovery expenses) of $6,330.00. The remaining principal balance on the secured claim of the Credit Union at the time of surrender was $11,714.18, which would leave a balance of $5,384.18. From the date of the first payment to the date of surrender, the Chapter 13 trustee has disbursed to the Credit Union only $960.82 in principal payments on its secured claim.
The creditor challenged the amendment to the Chapter 13 bankruptcy plan because they said that it treated them unfairly. According to the creditor, since the vehicle was depreciated, they would get less money for it at resale, therefore making the change to the bankruptcy plan unfair. But the bankruptcy court said that they creditor was not being treated unfairly because the debtor had been making payments on the vehicle for the two years she had been in the Chapter 13 bankruptcy. The bankruptcy court also pointed out that if the debtor had surrendered the vehicle at the beginning of the bankruptcy plan instead of 2 years into it, they still would not have received “retail value” when they resold the vehicle. They concluded that because the debtor had a good reason for amending her Chapter 13 bankruptcy plan, the changes were not abusive and that they should be allowed.
(source: http://leagle.com/xmlResult.aspx?xmldoc=In%20BCO%2020110203561.xml&docbase=CSLWAR3-2007-CURR)
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