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Casenotes: 2009 WDNY Bankruptcy Cases Archives

Undersecured liens may not be avoided in Chapter 7

In re Spears (Bk 08-13988; Judge Bucki decision Dec. 9, 2009): A Chapter 7 debtor attempted to avoid, or remove, a judgment lien and a mechanic's lien against commercial property. The property was worth $167,000 and had a $220,000 first mortgage. The debtor attempted to remove the junior liens under Bankruptcy Code Section 506(a)(1) and (d). Section 506(a)(1) says that a secured claim is an allowed claim to the "to the extent of the value of such creditor's interest in the [bankruptcy] estate's interest in such property. . .". Section 506(d) states that to the extent that "a lien secures a claim against the debtor that is not an allowed claim, such lien is void.. .".

Car loan in excess of $16,000 is a 'luxury'

In re: Andrea Daniel-Sanders; Bk 09-10695 (Judge Bucki 12/30/2009). In this chapter 13 case in Buffalo, a single mother with three kids filed a case where she had two cars, each with a car loan. Her chapter 13 plan called for keeping both cars and paying general unsecured creditors 25% of the amount owed to them. The chapter 13 trustee objected to the debtor keeping both cars. The trustee believed that if the debtor got rid of one of her cars, she would have more money to pay to unsecured creditors.Judge Bucki concluded that the debtor was justified in having two cars. The father of her children lived with her and took care of the kids in lieu of day care. He did not have a car and so her second car was a necessary household expense as it provided transportation for the kids during the day.However, the amount owed on the loan for the second car was $27,163. Judge Bucki stated that his long-time position was that car loans with a balance of over $15,000 were a "luxury". At the request of both the debtor and the trustee, he revisited his "luxury" car loan amount. He noted that the average cost for acquiring a vehicle, whether new or used, was $12,907, according to the Bureau of Transportation Statistics. Judge Bucki concluded that 20% above this amount, or approximately $16,000, would be a reasonable amount for a car loan, and anything in excess of that he would consider a "luxury" and cannot be paid at the expense of general unsecured creditors. If the debtor wishes a second car, the debtor would have to surrender this vehicle and obtain permission to purchase more modest transportation. It appears that the $16,000 limit applies even if the debtor only owns one vehicle.

Reasonably anticipated changes in income and expenses: CFCU Federal Credit Union v. Frisbie

CFCU Federal Credit Union v. Frisbie; 2009 U.S. Dist. LEXIS 89464 (W.D.N.Y., Judge Siragusa, Sept. 28, 2009). This case, filed in March of 2006, was one of the early post-BAPCPA (Bankruptcy Abuse Prevention & Consumer Protection Act of 2005) cases. CFCU Federal Credit Union, which was aggressively pursuing the outer boundaries of creditor rights under the new bankruptcy changes, filed a motion to have the case found to be automatically dismissed because the answer was blank in the schedules where the debtor is asked if there was any reasonably anticipated changes ti income or expenses in the year following the filing of the petition. In November of 2006 Judge Ninfo ruled that the blank answer was the same as afnswering "none" so the questions were effectively answered. CFCU appealed to the District Court, but then apparently abandoned its appeal because they never filed a brief. District Court dismissed the appeal bot on the grounds that the credit union failed follow through on the appeal and also in the merits.


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