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Single Bankruptcy Debtors Not Allowed Two Cars At The Expense Of Unsecured Creditors

Posted By admin || 19-Mar-2010


In the Chapter 13 bankruptcy case of Daniel-Sanders, Andrea C.; In re, the bankruptcy court ruled that a single debtor in Chapter 13 bankruptcy could in fact keep two cars but could only do so if it did not diminish bankruptcy plan payments for unsecured creditors. The details of the Chapter 13 bankruptcy case: The unmarried Chapter 13 debtor took Means Test deductions for two cars. One was a 2004 Honda Odyssey worth $10,949 and encumbered by a loan with a principal balance of $9,368. The other was a 2007 Ford 500 worth $12,730 and encumbered by a loan with a principal balance of $27,737. Because the Ford was purchased less than 910days prepetition, the debtor could not bifurcate the claim into secured and unsecured portions even though the debt included the rollover of a previous car loan. The debtor pro­posed a plan that paid $85,930 to the trustee. That amount was sufficient to satisfy the two car loans and to pay 25 percent of unsecured claims. The trustee objected to confir­mation. The trustee argued that the debtor was entitled to keep only one car and that the debt secured by the Ford was a luxury expense that unfairly diminished the dividend to un­secured creditors. Furthermore, the bankruptcy court suggested that the debtor either get rid of the second vehicle or propose a bankruptcy plan that did not diminish payment to unsecured creditors.  And while single debtors are generally only allowed to keep one car, the bankruptcy debtor was allowed to deduct her 2nd car expense for the Means Test because she had an agreement with the father of her three children that she would provide him transportation if he cared for their children while she worked.  It's important to note that the only reason that this debtor was allowed to deduct the two vehicles in her means test was because of the arrangement with the father of her children.  It was also noted by the bankruptcy court that the transportation arrangement allowed the debtor to work two jobs and avoid the extra expense of child care which would have presumably exceeded the cost of having two vehicles. However, the sole reason that the debtor Chapter 13 bankruptcy play was not confirmed was because the vehicle had a loan attached to it that far exceeded the actual value of the car and payments on the car would have reduced payments to unsecured creditors.
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