The Chapter 13 debtor surrendered his vehicle to the creditor. The Bankruptcy Court held that the surrender satisfied the debtor's financial obligations in full. The creditor appealed, claiming he should have a deficiency claim. The court of appeals called this the "glitch or gap" in the revised Bankruptcy Code. The Court said it must fill the gap until Congress can correct the mistake, and since there is no legislative history to suggest that Congress intended to eliminate deficiency claims, such claims should be governed and adjudicated as they were before the 2005 amendments were enacted. The court of appeals reversed the bankruptcy court's decision and allowed the deficiency claim.
Modification of tax loan interest rate in Chapter 13 Bankruptcy
March 9, 2010
In re Sheffield, 390 B.R. 302 (Bankr. S.D. Tex. 2008)
ReTax paid the debtor's ad valorem property tax pre petition. The Chapter 13 debtor proposed a plan which paid 12 percent interest on the secured claim of ReTax. ReTax objected to confirmation, arguing that section 511 of the Bankruptcy Code, which addresses the interest rate on tax claims, required that the debtors provide for the contract rate of 15 percent.
The Court held that, under Texas law, the tax claim is extinguished when the tax is paid, and a new non-tax claim is created, secured by a tax lien. The tax lien is not subject to the anti-modification provisions of Section 1322(b)(2), because the claim does not arise from a security interest (a lien created by an agreement) but rather rises from statute. The Court noted that, although the lien was transferred by agreement, the lien was created by statute.
Chapter 7 Bankruptcy means test ownership expense of vehicle allowed
March 8, 2010
Tate v. Bolen (In re Tate), 571 F 3d. 423, (5th Cir. 2009)
A Chapter 7 debtor claimed a vehicle ownership allowance in the amounts of $471.00 and $332.00 in the means test and $343.00 operating expenses for the two vehicles they owned even though they owed no money on these vehicles.
The Court noted that policy consideration support for the plain language approach because costs are associated with the ownership of a vehicle regardless of the existence of a related debt. Additionally, the Court stated that to hold otherwise would punish those that payoff their vehicle prior to the bankruptcy filing and reward those that finance a vehicle on the brink of filing for bankruptcy. Based on case law and statutory interpretation, the Court concluded that the plain language approach was the best statutory interpretation.
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