"Valuation" = "Redemption"???

[doni49]

I was just reading a blog by JustBroke in which he discusses "Valuation". This sounded an awful lot like a section 722 Redemption. But he also indicated that he did this in his Ch13 case.

Is this the same thing?

http://www.bkforum.com/entry.php?107...-of-Collateral

Thx!

[justbroke]

Valuation is the process of valuing something, using some sort of methodology. In the Chapter 13 context, valuation is used to set the value of certain secured property so that the Plan will continue to pay that amount (also known as the cramdown value) during the Plan. The residual is known as the unsecured amount.

This bifurcation of the secured portion and unsecured portion is not just limited to a Chapter 13. You can do this in a Chapter 7 as well, but you would need to "Redeem" the property in order to enjoy the cramdown. Also, the "methodology" used for valuation in a Chapter 13 is different than that of a Chapter 7. In a Chapter 7, valuation is based on the "liquidation" or "wholesale" value at the time of the hearing to Determine Secured Status, and it's the "current market value" in a Chapter 13. These are two different "valuations".

For example, in my Chapter 13, the valuation of my SUV was $13K. However, I converted to a Chapter 7 and the valuation of the same SUV was then $8K. The balance on the loan was $22K at the time of filing. Notice the difference in the numbers? This is because the valuation method (methodology) is different in the Chapters.

So, yes... in a Chapter 7, to receive the liquidation value, the debtor would need to redeem the collateral under 11 USC 722 (a/k/a the 722 Redemption).

[doni49]

JB,

Thx for the explanation.

[despritfreya]

In response to:

"In a Chapter 7, valuation is based on the "liquidation" or "wholesale" value at the time of the hearing to Determine Secured Status, and it's the "current market value."

Not accurate. . .

Section 506(a)(2) states: If the debtor is an individual in a case under chapter 7 or 13 such value with respect to personal property securing an allowed claim shall be determined based upon the replacement value of such property as of the date of the filing of the petition without deduction for costs of sale or marketing. With respect to property acquired for personal, family or household purposes, replacement value shall mean the price a retail merchant would charge for the property of that kind considering the age and condition of the property at the time value is determined.

Section 722 requires a debtor, who is redeeming property that is used for personal, family or household purposes to pay the lien holder "the amount of the allowed secured claim". . .

Des.

[justbroke]

Section 506(a)(2) states: If the debtor is an individual in a case under chapter 7 or 13 such value with respect to personal property securing an allowed claim shall be determined based upon the replacement value of such property as of the date of the filing of the petition without deduction for costs of sale or marketing. With respect to property acquired for personal, family or household purposes, replacement value shall mean the price a retail merchant would charge for the property of that kind considering the age and condition of the property at the time value is determined.

Not in the 11th Circuit Court of Appeals (Florida, Georgia and Alabama).

The case was In re Perez, 318 BR 742 (Bankr. M.D. Fla. 2005), and the Court found that the case before the U.S. Supreme Court in Associates Commercial Corp. v. Rash, 520 U.S. 953 (1997) ("RASH") was deciding. The court held that the wholesale value is the appropriate value for purposes of a debtor’s redemption of personal property under § 722. The court noted that it found comfort in the “apparent unanimity of all of the reported cases which have reached the same conclusion . . . .” Id. at 747.

See also, In Re Foreman, Case 05-5811-3F7, Bankr. Fla. Middle - Jacksonville.

Specifically, the landmark case, setting precedence and caselaw on this issue, actually came from the Supreme court, but made caselaw through interpretation in an 11th Circuit Case.

Perhaps your Appeals Circuit will come up to speed and use RASH. It's really the interplay of 11 USC 722 and 11 USC 506 at play. Section 506 has always been argued and the RASH decision explains it pretty well... and it's from the Supremes. Remember, in 506, it actually reads "... is a secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property". (emphasis added is mine.)

At least in my little corner of the World -- the Southeast / 11th Circuit -- that is the law of the land. (By the way, this is what I argued in my Motion to Redeem, the creditor challenged, but quickly backed off when I responded to their "opposition" that this is the law in the 11th Circuit.) I hope others will follow, if you're saying (Dee) that it's not the law where you are.

[despritfreya]

In response to:

"At least in my little corner of the World -- the Southeast / 11th Circuit -- that is the law of the land."

Not sure what happened in your case but Perez and Foreman are pre BAPCPA cases and were in the majority prior to October 17, 2005. See below:

In re Ortiz, Case No. 06-16243-BKC-RBR (Bankr. S.D.Fla. 2/27/2007) (Bankr. S.D.Fla., 2007)

"Pursuant to 11 U.S.C. § 722 a Chapter 7 Debtor has the right to redeem exempt personal property from a valid lien by paying the holder of that lien "the amount of the allowed secured claim... in full at the time of redemption." 11 U.S.C. § 722. However, the value of a secured claim is governed by 11 U.S.C. § 506. The issue before the Court is what test should be applied to determine the value of the car. The Debtor claims the value to be the market value of the vehicle. FMCC alternatively argues that the value should be the retail value of the vehicle.

Prior to the changes made by BAPCPA, case law in the Eleventh Circuit supported the position that the value was the wholesale value on the date of the hearing. See In re: Perez, 318 B.R. 742, 747 (Bankr. M.D. Fla 2005)(noting "the apparent unanimity of all of the reported cases, which have reached the same conclusion in applying the wholesale/liquidation-value standard as the appropriate standard for valuing collateral in Chapter 7 redemption cases." (internal quotations and citations omitted)); accord In re: Foreman, No.05-5811-3F7, 2006 Bankr. LEXIS 2175 at *4 (Bankr. M.D. Fla. 2006).

With the adoption of BAPCPA, § 506(a)(2) was added, it reads: If the debtor is an individual in a case under chapter 7 or 13, such value with respect to personal property securing an allowed claim shall be determined based on the replacement value of such property as of the date of the filing of the petition without deduction for costs of sale or marketing. With respect to property acquired for personal, family, or household purposes, replacement value shall mean the price a retail merchant would charge for property of that kind considering the age and condition of the property at the time value is determined.

Accordingly, under BAPCPA the value must be the "replacement value". What is unclear from the statute is when this "replacement value" is to be calculated. The first sentence of the statute states that the "claim shall be determined based on the replacement value of such property as of the date of the filing of the petition without deduction for costs of sale or marketing." 11 U.S.C. §506(a)(2)(emphasis added). The second sentence reads "replacement value shall mean the price a retail merchant would charge for property of that kind considering the age and condition of the property at the time value is determined." 11 U.S.C. §506(a)(2)(emphasis added).. . .

Accordingly, the Debtor's expert found that the retail cost of repairs to the car would be approximately $2,723.00. This was broken down as $1,923.00 to recondition the exterior of the car, plus $400.00 for new tires and $400.00 for repairing the interior. FMCC expert's repair estimate is not going to be considered because he used a wholesale cost of repair. Therefore, the Court determines that the actual retail price of the repairs is $2,723.00. FMCC's expert testified that he would determine the retail value of a similar car by taking the NADA value adding it to the quotes from two dealers and then dividing by three. His retail value result is $11,841.671. Debtor's expert testified that after repairs and reconditioning the retail value of the car would be approximately $10,500. The Court will average in the Debtor expert's retail figure of $10,500 to FMCC expert's figure of $11,841.67. The retail price of an identical car is thus determined to be $11,506.25. Therefore, the final replacement value of is $8783.252."

Des.

[Pandora]

*meekly raises hand to ask a People's Court moment..*

Ok...but - if what you say is true Des - then how come whenever someone sues for damages to a vehicle (going to assume the basis is the same) - that all judges in any court will not allow damages over and above the actual Blue Book value of the vehicle? Also - same thing goes for insurance companies - if the damage exceeds the blue book value of the car, insurance totals the car. You still owe the difference if more than value - and must roll that into the replacement vehicle you get unless you have GAP insurance....

isnt it the same thing in BK? Because our entire 13 is based upon non-exempted assets (vehicles owned outright) and their valuations came directly from an average of blue book / NADA, not what it would cost to replace it new.

*puts hand down and stands firmly in her corner of the world*

ETA: and... I may not know what the hell I'm talking about..but...it sounded similiar in points so LOL just wanted to add that.

[despritfreya]

*meekly raises hand to ask a People's Court moment..*

Ok...but - if what you say is true Des - then how come whenever someone sues for damages to a vehicle (going to assume the basis is the same) - that all judges in any court will not allow damages over and above the actual Blue Book value of the vehicle? Also - same thing goes for insurance companies - if the damage exceeds the blue book value of the car, insurance totals the car. You still owe the difference if more than value - and must roll that into the replacement vehicle you get unless you have GAP insurance....

isnt it the same thing in BK? Because our entire 13 is based upon non-exempted assets (vehicles owned outright) and their valuations came directly from an average of blue book / NADA, not what it would cost to replace it new.

*puts hand down and stands firmly in her corner of the world*

ETA: and... I may not know what the hell I'm talking about..but...it sounded similiar in points so LOL just wanted to add that.

Simple answer:

THE CREDIT CARD INDUSTRY THROUGH ITS LOBBYISTS, HAD CONGRESS AND THE PRESIDENT IN ITS POCKETS!!!

No, I am not biased at all. . .

In the real world that you are talking about the blue book type valuation is correct. In the fake "bankruptcy world" a higher value is used subject to the condition of that auto and, if in a 13 and not beyond the 910 rule, the balance owed is the value. The bankrutpcy world is "fairy land"but we are stuck with it.

And. . . in the bk world you use 2 different values. 1) what I like to call "garage sale" value if no lien and 2) "replacement value" if there is a lien..

Got to go into a meeting. Continue later. No time to do spell check so sorry if spelling sucks.

Des.

[Pandora]

Simple answer:

THE CREDIT CARD INDUSTRY THROUGH ITS LOBBYISTS, HAD CONGRESS AND THE PRESIDENT IN ITS POCKETS!!!

No, I am not biased at all. . .

In the real world that you are talking about the blue book type valuation is correct. In the fake "bankruptcy world" a higher value is used subject to the condition of that auto and, if in a 13 and not beyond the 910 rule, the balance owed is the value. The bankrutpcy world is "fairy land"but we are stuck with it.

And. . . in the bk world you use 2 different values. 1) what I like to call "garage sale" value if no lien and 2) "replacement value" if there is a lien..

Got to go into a meeting. Continue later. No time to do spell check so sorry if spelling sucks.

Des.

wont argue with ya on point 1 at all!

well what the hell - for us BK world IS the real world - at least at the moment and for the next 5 long years. Damn double edged swords getcha coming and going. We didnt owe anything on ours...

Thanks for the explain...

[justbroke]

Not sure what happened in your case but Perez and Foreman are pre BAPCPA cases and were in the majority prior to October 17, 2005. See below:

Rash and Perez are still good law in the Southeast. Decisions have been made throughout 2006-present day based on Perez.

I still see cases in the Middle District citing Rash and Perez as the law. I used it in my case to my advantage. I'm sure different courts may be re-evaluating, but they haven't in the Middle and North.

But you're right, I can't find the "old" 506 language in the BAPCPA amendments! I blame H. Clinton, B. Obama, and the Maverick, if they voted for it.

[tigergem]

Ok. I guess I will chime in here. Rash and Perez still ride in Texas, as well, so far as I know. I used Rash, and there is much case law citing both Rash and Perez, post BAPCA, in all of the Texas districts.

I have noticed, however, that my judge is just now beginning to catch himself on some other pre-BAPCA issues that were allowed to continue on (perhaps erroneously), going forward, of course. I got caught up in one of those "catches" recently regarding language in my modification confirmation order. I had copied language from a very recently confirmed order written by an attorney to the affect that the lien of the secured creditor shall be released once the fair market value of the collateral is paid in full.

My trustee advised this language represents the provisions of the old law prior to BAPCA which now requires that the lien is not released until either you pay all of the claim (including the unsecured portion) as determined in non-bankruptcy law (ie, state law) or until you receive your discharge under the bankruptcy [see Section 1325(5)(B)(i) of the Bankruptcy Code]. He acknowledged that this language had been included in modification orders without notice of the debtors’ attorneys, creditors’ attorneys, or himself for the last several years until just last month when my judge noticed it…..he instructed debtors’ attorneys to remove it from all future orders and instructed my trustee to be his watch dog on this issue.

I just changed the language to be in compliance with the current law, and we're good.