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Question re Till interest required on unsecured portion of 910 vehicle claim?
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one would think so in light of Timbers.
David A. Tilem
Certified Bankruptcy Specialist*
Law Offices of David A. Tilem (a debt relief agency)
206 N. Jackson Street, #201, Glendale, CA 91206
Tel: 818-507-6000 Fax: 818-507-6800
* Bankruptcy specialist cert. by State Bar of CA Bd of Legal
Specialization.
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Under 1325's hanging paragraph, the debtor is arguably prohibited from using 506 to bifurcate the vehicle creditor's "purchase money security interest" claim into the portion that represents the fair market value (secured) and the balance above fair market value (added to the general unsecured class) if the contract was entered into within 910 days of the petition filing date.
Note: The 9th Circuit BAP is considering In re Penrod (BAP docket #07-1360; argued and submitted 1/24/08) and I believe that the District Court is considering the appeal of In re Acaya, 369 B.R. 564 (Bankr.N.D.Cal.2007) both are based upon negative equity (trade-in deficiency portion of a prior vehicle loan added to the current vehicle contract) cram-down on vehicle contracts entered into within 910 days of the Chapter 13 petition filing date, based upon the argument that the negative equity portion does not represent a "purchase money security interest" within the meaning of 1325
If the court determines that the negative equity is "purchase money security interest" then the debtor is not permitted to bifurcate the claim. Bifurcation under 506 would result in the unsecured portion being added to class five. Since the unsecured portion is not added to class five, it remains in class 3. However, isn't Till interest required only on the fair market value of the collateral and 0% interest on the remaining portion of the claim?
The vehicle creditor would arguably be without risk given the large cushion of claim above the value of the collateral and be entitled only to 6% (prime rate without risk of 1 to 3%) on that portion and 0% on the balance; the weighted average of these amounts would be added to the Plan as the "interest rate" in class 3.
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Under 1325's hanging paragraph, the debtor is arguably prohibited from using 506 to bifurcate the vehicle creditor's "purchase money security interest" claim into the portion that represents the fair market value (secured) and the balance above fair market value (added to the general unsecured class) if the contract was entered into within 910 days of the petition filing date. Note: The 9th Circuit BAP is considering In re Penrod (BAP docket #07-1360; argued and submitted 1/24/08) and I believe that the District Court is considering the appeal of In re Acaya, 369 B.R. 564 (Bankr.N.D.Cal.2007) both are based upon negative equity (trade-in deficiency portion of a prior vehicle loan added to the current vehicle contract) cram-down on vehicle contracts entered into within 910 days of the Chapter 13 petition filing date, based upon the argument that the negative equity portion does not represent a
"purchase money security interest" within the meaning of 1325 If the court determines that the negative equity is "purchase money security interest" then the debtor is not permitted to bifurcate the claim. Bifurcation under 506 would result in the unsecured portion being added to class five. Since the unsecured portion is not added to class five, it remains in class 3. However, isn't Till interest required only on the fair market value of the collateral and 0% interest on the remaining portion of the claim? The vehicle creditor would arguably be without risk given the large cushion of claim above the value of the collateral and be entitled only to 6% (prime rate without risk of 1 to 3%) on that portion and 0% on the balance; the weighted average of these amounts would be added to the Plan as the "interest rate" in class 3.
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