Cramdown, Paid Off and Totaled Question

[mylife]

Hi All,

It's been a while since I posted and I always get great advice here and need some now. Our SUV was crammed down and paid off in the 13. We just have about 12 months left in the 13 and the SUV was totaled in an accident yesterday. When we inquired before, we were told we would not get the lien release until completion of the plan. Will they be entitled to the payment from the insurance company on the SUV or will we get the full amount. The attorney is unsure and do not want to approach the credit union about it so that we stay under the radar. Any insight will be appreciated. We live in MD.

Thanks a bunch!

[despritfreya]

I think the insurance company sends the $$ to the Trustee. Since the secured claim has been paid I think the insurance proceeds belong to the bk estate for the benefit of unsecured creditors (subject to any exemption you might have). But, if that happens, I do not know how the insurance company can get title to the vehicle. This is a very interesting issue and I would like to know the eventual outcome.

Des.

[mylife]

Thanks Des for the response. I'll be sure to post an update.

[andy158]

Yes this is interesting. I am sure there is some protocol for a situation like this. Please let us know how it pans out.

[ValleYum]

Is a substitution of collateral allowed in a BK 13 - from the court's viewpoint - could the insurance company provide an equal or better value automobile in lieu of a settlement check? This seems more fair to the debtor otherwise they are car-less and the unsecured get paid the value of their automobile. Blergh.

Mylife: Make sure that when you are signing papers for totalling your SUV that you don't sign anything settling any personal injury claim at the same time - insurance companies have been known to combine these forms. Good Luck!

[mylife]

Thanks for the advice ValleYum. Still seems like a complicated situation. The insurance company received the title and the atty letter stating we are entitled to the money but they are still requesting the lien release. The atty has never had this situation and still unsure how to proceed. He believes the credit union will ask for the money. Said that if the trustee said they want it then we do have exclusions that can be applied which will allow us to keep it. I suggested that the credit union allow us to keep the money on the contingency that we complete the plan and if we don't then we pay it back, that covers them. The attorney will speak with his colleagues and speak with his credit union contact and let us know what he finds out.

[mylife]

After going back and forth with the attorney and lender, neither knew exactly how it would all work out. Since the statue of limitations in Maryland is three years, we have decided to wait until after discharge to close the insurance case and have the check sent directly to us. The lender said that was fine with them and will not do anything further. So excited!!

[159515951]

I would have guessed the route the Trustee would take on this one would be to grant an interest (lien) on the new vehicle's title, but it sounds like your solution is cleaner and easier.

[mylife]

They haven't asked and we haven't mentioned the new vehicle. Trying to stay under the radar since we have only have about 13 months.

[ValleYum]

My best wishes for a quick clean 13 months.