In re Bivens, Bankruptcy No. 04 B 20324.
Decision Date | 03 January 2005 |
Docket Number | Bankruptcy No. 04 B 20324. |
Citation | 317 B.R. 755 |
Parties | In re Theresa A. BIVENS, Debtor. |
Court | U.S. Bankruptcy Court — Northern District of Illinois |
COPYRIGHT MATERIAL OMITTED
Brian C. Pedersen, for Debtor.
David Cybak, for Creditor.
These matters come before the Court on the objection of Nuvell Credit Corporation ("Nuvell") to confirmation of the Chapter 13 plan of debtor Theresa A. Bivens ("Bivens") with respect to a used 2000 Chevrolet Venture Extended Van (the "Vehicle"), which Bivens purchased by obtaining financing from Nuvell, as well as on Nuvell's motion to modify the automatic stay.1 After conducting an evidentiary hearing, examining the admitted exhibits, and reviewing the testimony, the Court finds that the 7% rate of interest specified in Bivens' plan will provide Nuvell with equivalent present value of its allowed secured claim as paid over time. Accordingly, the Court overrules Nuvell's objection to confirmation. Bivens' oral motion made at trial to extend her plan term to sixty months is granted. Nuvell's motion to modify the stay is granted without leave of the Court upon Bivens' future default in two or more monthly plan payments or upon cancellation or lapse of the insurance on the Vehicle covering Nuvell's interest, after fourteen days' notice of the default by Nuvell to Bivens and her attorneys and her failure to cure such default within such period.
The Court has jurisdiction to entertain this matter pursuant to 28 U.S.C. § 1334 and Internal Operating Procedure 15(a) of the United States District Court for the Northern District of Illinois. It is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (G), and (L).
Section 1325 of the Bankruptcy Code contains the requirements for confirmation of a Chapter 13 plan. With respect to secured claims, § 1325(a)(5) provides as follows:
11 U.S.C. § 1325(a)(5). Under this provision, if a secured creditor will not accept a proposed Chapter 13 plan, the debtor must do one of two things in order to get the plan confirmed: (1) surrender to the creditor the property securing that creditor's claim, or (2) keep the collateral and provide the creditor with a lien securing the claim, as well as a promise of future payments whose total "value, as of the effective date of the plan ... is not less than the allowed amount of such claim." Id. See also Till v. SCS Credit Corp., 541 U.S. 465, ___, 124 S.Ct. 1951, 1955, 158 L.Ed.2d 787 (2004); In re Scott, 248 B.R. 786, 788 (Bankr.N.D.I11.2000). The latter option is commonly referred to as the "cram down" alternative, because it allows the debtor to "cram down" the proposed plan over the objection of a secured claim holder. Till, 541 U.S. at ___, 124 S.Ct. at 1955; Household Auto. Fin. Corp. v. Burden (In re Kidd), 315 F.3d 671, 672, 675 (6th Cir.2003) ( ); In re Jones, 219 B.R. 506, 507 (Bankr.N.D.I11.1998).
Through a cram down, a debtor is allowed to keep her property, and the secured creditor retains its lien. Jones, 219 B.R. at 507. However, if the allowed secured claim is not paid in full on the effective date of the Chapter 13 plan, the debtor must provide the creditor with a stream of installment payments that total the "present value" of the claim. Id. Indeed, the very purpose of Chapter 13's cram down provision is to ensure that the creditor is "in the same economic position that it would have been in had it received the value of its allowed claim immediately." Gen. Motors Acceptance Corp. v. Valenti (In re Volenti), 105 F.3d 55, 63 (2d Cir.1997), overruled on other grounds by Assocs. Commercial Corp. v. Rash, 520 U.S. 953, 117 S.Ct. 1879, 138 L.Ed.2d 148 (1997).
In practice, in order to pay a nonconsenting secured creditor the "indubitable equivalence" of its property interest in compliance with § 1325(a)(5)(B)(ii), Koopmans v. Farm Credit Servs. of Mid.-Am., ACA, 102 F.3d 874, 875 (7th Cir. 1996), the debtor's plan must provide for payments of not only the principal amount of the allowed claim, but also adequate interest to yield present value as of the effective date of the plan, Scott, 248 B.R. at 789. Nuvell objects to confirmation of Bivens' plan, asserting that the proposed interest rate of 7% to be paid on its secured claim is insufficient to meet the present value requirement of § 1325 and that the underlying contract rate of 18.95% in the relevant loan documents between the parties should be required. Thus, at issue is the proper approach to take in determining the cram down interest rate required to provide the present value of Nuvell's claim. As "the more knowledgeable party," Nuvell bears the burden of establishing the appropriate rate to apply in this matter. Till, 541 U.S. at ___, 124 S.Ct. at 1964.
Section 362(d) of the Code provides for modification of the automatic stay and states in pertinent part as follows:
11 U.S.C. § 362(d). Thus, § 362(d) provides two grounds under which relief from the automatic stay may be granted. In re Jackson, No. 98 B 15483, 1999 WL 703093, at *3 (Bankr.N.D.Ill. Sept.9, 1999) . The first ground is cause, including lack of adequate protection. 11 U.S.C. § 362(d)(1). The second is that the debtor does not have any equity in the property and the property is unnecessary to an efficacious reorganization. 11 U.S.C. § 362(d)(2).
As the party requesting relief from the stay, Nuvell bears the burden on the issue of Bivens' equity in the Vehicle. 11 U.S.C. § 362(g)(1). See also Fed. Nat'l Mortgage Ass'n v. Dacon Bolingbrook Assocs. Ltd. P'ship, 153 B.R. 204, 208 (N.D.I11.1993); In re Stand-field, 152 B.R. 528, 534 (Bankr.N.D.I11.1993). Bivens, opposing such relief, has the burden of proof on all other issues. 11 U.S.C. § 362(g)(2). See also Fed. Nat'l Mortgage, 153 B.R. at 208; Standfield, 152 B.R. at 534. The decision to lift or otherwise modify the automatic stay pursuant to § 362(d) is committed to the sound discretion of the bankruptcy court. Jackson, 1999 WL 703093, at *3 (citing In re Boorngarden, 780 F.2d 657, 660 (7th Cir.1985); Holtkamp v. Littlefield (In re Holtkamp), 669 F.2d 505, 507 (7th Cir.1982)).
The facts in this matter are substantially undisputed. On August 4, 2003, Bivens bought the Vehicle from Webb Chevrolet, Inc. for $12,202.34, plus $1,024.90 in taxes and fees. Ex. 1, Retail Installment Contract; Ex. 2 at ¶¶ 1, 3.2 At the same time, she purchased a service contract covering the Vehicle for $t,495.00. Ex. 1, Retail Installment Contract. Bivens made a cash down payment of $500.00 and received a $200.00 trade-in credit for her 1992 Dodge Caravan. Id. She financed the balance of $14,022.24 by entering into a retail installment contract (the "Contract"), which Webb Chevrolet thereafter assigned to Nuvell. Id.; Ex. 2 at ¶¶ 22.
Pursuant to the Contract, the balance, plus interest at the rate of 18.95%, was to be paid by Bivens in sixty monthly installments of $366.22.3 Ex. 1, Retail Installment Contract; Ex. 2 at ¶¶ 23, 24. Webb Chevrolet—and Nuvell, as assignee—retained purchase money security interests in the Vehicle and in the unearned premiums of the extended service contract, both of which were subsequently perfected by Nuvell. Ex. 1, Retail Installment Contract; Ex. 2 at ¶¶ 16,19, 20.
From September 2003 through March 2004, Bivens made six payments under the Contract, four of which were late. Ex. 2 at ¶¶26-28, 30-32, 34-37. On May 25, 2004, Bivens, by then in default, filed a voluntary petition for relief under Chapter 13 of the Code. Motion at ¶1. At the same time, she filed a Chapter 13 plan, which valued Nuvell's secured claim at $7,500.00 and proposed to pay the claim at an annual percentage rate of 7%. Ex. 7 at p. 2; Motion at ¶11. Under these terms, the total amount to be paid on the claim, including interest, over the initial plan term of thirty-nine months was estimated at $8,398.06. Ex. 7 at p. 2.
On June 1, 2004, Nuvell filed its proof of claim in the amount of $13,928.52, asserting that the entire amount was secured.4 Ex. 6. One week later, on June 8, 2004, Nuvell filed the instant objection to confirmation and motion to modify the automatic stay. Nuvell disputed Bivens' appraisal of its secured claim at $7,500.00, as well as the interest rate of 7% under the proposed plan. Subsequently, the parties stipulated that the value of the Vehicle for...
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