Trustee Objection to exemption, Not sure waht to thinks

[etechjc]

This was on pacer yesterday, Is this bad for me? I owe 12K truck is listed as about value of 13K. Im not behind on the payments. If he gets this what are my options? Id rather give up the truck and buy another car after discharge than pay any money that I don't have, IS that an option?

TRUSTEE’S OBJECTION TO EXEMPTIONS
The Trustee objects as follows:
1. To the claim of 05 Dodge Ram 1500 as exempt under the provisions of §
513.430.1(5) because any equity or value in the vehicle has been created by
the trustee’s use of his power under §544. As such, no exemption is
allowed. §522(g).
WHEREFORE, the trustee requests an order of the Court sustaining this objection.

[HHM]

Sounds like the trustee is avoiding the lien.

What is the background here, who has the lien?

[etechjc]

Well,
State Farm Bank has the lien. There is a lien, At least it is written on the title that State Farm has a lien against the truck. About probably 1300 in equity we tried to exempt under standard exemption. We didn't really have much more to exempt. and even have room to exempt our tax refund.

Do I understand to avoid the lien means that state farm would effectively hold no secured interest on the loan anymore? If that is case what is the point, That seems like a Using debt to pay debt scenario on the Trustees behalf and completely defeat what I understand the trustee's role to be.

On any note, I think my lawyer is going to want money to object and I just don't have any, So probably just going to have to let what happens happen.

Im confused.

[HHM]

How does "state farm" have lien. Isn't it an insurance company?

The answer is, it depends. The trustee has the ability, in certain circumstances, to void a lien. In some states, (like CO), a secured party must perfect their lien and for cars, there are very particular requirements that must be followed exactly. If the proposed lien holder messes up any step in the process, the BK trustee makes the case that the lien is not perfected and therefore void.

The trustees job is to get money for ALL unsecured creditors in your case. So, if the trustee can void a secured parties lien, that is money for the mass of your unsecured creditors (albeit, that secured creditor becomes unsecured).

It sounds like the trustee thinks there is some defect in State Farm's lien.

[etechjc]

State Farm is an insurance company backed by a national bank. There are actual StateFarm banking locations all over the US. They also do House, Auto, etc... loans and not bad rates at all. But I know, I was surprised myself when I found out they did that.

Im still confused though in what avoiding the lean does. Doesn't the original Lean holder of the avoided lean (Now an unsecured creditor) still get preference for the funds that are created by the sell of said asset? And If not, Couldn't a AP be filed to make it that way (God I hope not!)?

Also, If I understand, If they didn't file the lien 100% correctly they probably screwed themselves along with me out of a truck and $13K?

Also I read somewhere that Bankruptcy Code does not let you avoid voluntary or nonjudicial liens, Does this not apply towards trustees?

BTW, I do appreciate your help.

[etechjc]

I do have another car that has a value of about $300, does this affect anything?

Ok, Let me ask this, What is my worst case scenario if I do nothing and trustee gets his exemption?

[DebtEnder]

Worst case is the lien on the truck is voided opening up large amounts of equity. Truck is sold, you get your exemption amount 1500 I think you said and TT gets his cuts and rest is paid to your creditors based on how many file claims and at what priority.

[etechjc]

I could live with that. Will the TT take care of the selling and all that if it comes down to that? Will this affect the discharge if it comes down to that?


Also, If it sells for less than I stated it was worth, Does that affect anything? Only reason I ask is I was at an auto auction last week and saw almost the exact same truck go for $7300, Really disgusted me.

[tcreegan]

Hi etechjc,

This is very interesting, I don't see how the trustee can avoid an ordinary car loan under section 544. Unless, as HMH said, the lien was never perfected.

If the trustee can get it from State Farm, the trustee will do the selling and pay you your exemption amount. Shouldn't have any effect on the discharge. It can sell for less but not less than your exemption amount, you gotta get paid!

Guess we will have to see if State Farm howls about it.

Let us know how this turns out !!

Tom in Colo