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Redemption Motions

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Redemption motion

Chapter 7 Trustee Karl Anderson was the Trustee on a Recent case heard by Judge Houle concerning redemption motions on a car. Judge Houle had a nice summary on the law regarding this issue:

On May 31, 20xx, “Debtors” filed for chapter 7 relief. Karl Anderson is the duly appointed chapter 7 trustee (“Trustee”).

On July 10, 20xx, the Trustee filed his Report of No Distribution (“No Asset Report”).

On August 22, 20xx, the Debtors filed their motion for redemption (“Motion”) of a 2005 Cadillac Escalade (“Escalade”). The Escalade is encumbered by the lien of Santander Consumer USA, Inc. (“Santander”).

On September 17, 20xx, Santander filed its Opposition to the Motion (“Opposition”).

DISCUSSION

The Debtors seek to redeem the Escalade pursuant to FRBP 6008 and 11 U.S.C. § 722. An individual Chapter 7 debtor may redeem tangible personal property (intended primarily for personal, family or household use) from a lien securing a dischargeable consumer debt, if such property is exempt under 11 USC § 522 or has been abandoned under § 554 (burdensome or of inconsequential value and benefit to the estate). Redemption is made by paying the lienholder the amount of its allowed claim secured by the lien (i.e., the fair market value of the collateral). 11 U.S.C. § 722.

Debtors listed the Escalade on their schedule D as encumbered personal property. Additionally, the Docket reflects that the Trustee has filed a No Asset Report in this case. Debtors have further indicated that the Escalade is tangible personal property that is intended primarily for personal, family or household use. (Smith Decl. ¶2). Moreover, the Debtors have submitted evidence that the value of the Escalade is $2,825 based on the following:

The Escalade is inoperable and needs a new engine and transmission (Id. at ¶ 4);

The total cost of repairs to replace the engine and transmission is $6,765.33 (Id.); and

The value asserted is based on salvage value quotes received by the Debtors (Id. at ¶ 5). 
Santander opposes the Motion on the basis that Debtors have failed to provide

admissible evidence of the value of the Escalade. Santander asserts that the Escalade should be valued at no less than $12,075 based on retail value, not trade-in or salvage value as indicated by the Debtor.

Presently the Ninth Circuit has not established a uniform method for valuation. See In re Ayres, 2010 WL 652825 at *5, 2010 Bankr.LEXIS 519 at *13 (Bankr.N.D.Cal. 2010) (collecting cases detailing vehicle valuation and describing the

state of the law in the Ninth Circuit). However, in In re Morales, the United States Bankruptcy Court for the Central District of California determined that retail value should be calculated “by adjusting the Kelley Blue Book or N.A.D.A. Guide retail value for a like vehicle by a reasonable amount in light of the evidence presented regarding the condition of the vehicle or any other relevant factors.” In re Morales, 387 B.R. 36, 45 (Bankr.C.D.Cal.2008).

Here, the Debtors have failed to provide sufficient evidence in support of the Motion. First, the Debtors have provided the trade-in value as a starting point for valuation which is the incorrect beginning valuation under existing authorities. Next, the Debtors have provided evidence of repair quotes from Hohl Motor Company that appear to indicate work has already been performed (see, e.g. statement in estimate that servicer “installed customer supplied engine and tested everything operating normally at this time.”). Additionally, Debtor Smith asserts that she obtained several quotes but has not provided authenticated copies of the quotes for salvage value. For these reasons, the Court finds that the Debtor has not adequately supported the valuation asserted of $2,825.

For the foregoing reasons, the Motion is DENIED.

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