Matter of Harvey, Bankruptcy No. 79-1495 C.

• Decision Date: 22 April 1980
• Docket Number: Bankruptcy No. 79-1495 C.
• Citation: 3 BR 608
• Parties: In the Matter of John Withers HARVEY and Margie Frick Harvey, Debtors.
• Court: U.S. Bankruptcy Court — Middle District of Florida

3 B.R. 608 (1980)

In the Matter of John Withers HARVEY and Margie Frick Harvey, Debtors.

Bankruptcy No. 79-1495 C.

United States Bankruptcy Court, M.D. Florida, Tampa Division.

April 22, 1980.

Robert L. King, Tampa, Fla., for Household Finance.

Karl Stevens, Jr., Tampa, Fla., for John & Margie Harvey.

ORDER DENYING APPLICATION FOR DETERMINATION OF SECURED STATUS UNDER SEC. 506

ALEXANDER L. PASKAY, Bankruptcy Judge.

THIS CAUSE came on for hearing with due notice to all parties of interest, upon an Application for Determination of Secured Status, filed by Household Finance Company. The Application was filed pursuant to Sec. 506 of the Code and ostensibly seeks a determination and allowance of a secured claim to the extent of the value of such creditor's interest in its collateral and to the extent that the value of such creditor's interest in its collateral is less than the amount of such allowed claim, the allowance of an unsecured claim.

The Court heard argument of counsel and considered the record and finds that the properties in which Household Finance Company claims to have a security interest were scheduled by the Debtor as exempt. While the Trustee initially filed an objection to the claim because the claim was defective, said defect has been cured by an amendment and on January 18, 1980, this Court entered an order and overruled the Trustee's objection to the exemption claim. Accordingly, the properties in question were released to the Debtors either by virtue of their exempt status or through abandonment by the Trustee and they no longer form a part of the estate, although initially they were part of the estate by virtue of Sec. 541 of the Code.

Prior to the adoption of the Code, the valuation of security was dealt with by Sec. 57h of the Bankruptcy Act which provided the guidelines for the determination of the value of collateral and for the allowance of a deficiency unsecured claim of a secured creditor. Rule 306 went further and provided:

(d) Secured Claims. If a secured creditor files a proof of claim, the value of the security interest held by him as collateral for his claim shall be determined by the court, and the claim shall be allowed only to the extent it is enforceable for any excess of the claim over such value.

Under the pre-Code law, neither the Act nor the Rules intimated that the valuation process was limited to properties which were subject to liquidation and neither the language of the Act nor the Rules would have precluded the valuation of properties which were claimed and set aside as exempt in order to enable the secured creditor to prove and have allowed an unsecured claim. While it is true that under Rule 306 there is no distinction between secured property which is part of the estate and secured property which is claimed and set aside...