In Re Hutchison
449 B.R. 403
Bankr. W.D. Mo.2011Background
- Debtor Hutchison executed a $29,691.92 debt with Community America Credit Union secured by a 2005 Chevrolet Malibu.
- Original Chapter 13 plan proposed retaining the vehicle and paying $10,210 value over the plan at $125/month; plan was confirmed.
- Credit Union asserted its claim value and secured status; later filing of a claim with $17,513.96 and $12,675 vehicle value; treated as secured with $4,838.96 unsecured.
- Debtor repeatedly amended the plan to increase payments but not alter the Credit Union’s treatment; suspensions granted for various months.
- Debtor moved to Texas, citing health costs; proposed amended plan surrendering the vehicle and treating the secured claim as unsecured with a $110/month plan payment.
- Vehicle surrendered in Texas; net sale proceeds were $6,330; remaining secured balance was $11,714.18; Credit Union received $960.82 in principal payments before surrender.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plan modification to surrender collateral is authorized | Hutchison seeks modification under § 1329(a)(1). | Credit Union argues modification cannot reclassify secured balance as unsecured. | Modification authorized; collateral surrender permitted under § 1325(a)(5) and § 1329. |
| Effect of surrender on secured claim amount | Surrender liquidates collateral; debt extinguished to zero balance. | Credit Union remains secured for deficiency unless modified properly. | Liquidation value governs; claim effectively extinguished via § 506(a). |
| Res judicata impact of a confirmed plan on modification | Plan may be modified post-confirmation under § 1329. | Res judicata prevents modification affecting secured claims. | Modification permitted under § 1329; does not defeat res judicata. |
| Adequate protection and depreciation during the plan | Credit Union had no objection to plan as amended regarding depreciation. | Credit Union bears depreciation risk if plan underpays. | Credit Union’s depreciation risk addressed by need to make up missed payments as a condition. |
| Good faith of modification and potential abuse | Modification guided by good faith to avoid abuse. | Modification could be abusive if debtor retains unsecured benefit. | Modification passes good faith test; potential abuse can be mitigated by conditions. |
Key Cases Cited
- In re Nolan, 232 F.3d 528 (6th Cir. 2000) (limits modifications that reclassify secured debt as unsecured)
- Leuellen, 322 B.R. 648 (S.D. Ind. 2005) (treats secured creditor class treatment as modifiable in § 1329 context)
- Knappen, 281 B.R. 714 (Bankr. D. N.M. 2002) (supports post-confirmation modification to address secured claims)
- Day, 247 B.R. 901 (Bankr. M.D. Ga. 2000) (discusses modification under § 1329 and plan timing)
- Rimmer, 143 B.R. 871 (Bankr. W.D. Tenn. 1992) (post-confirmation modification authority)
- Jock, 95 B.R. 75 (Bankr. M.D. Tenn. 1989) (surrender and treatment of secured claims in modification)
- Stone, 91 B.R. 423 (Bankr. N.D. Ohio 1988) (context for modification and secured claim treatment)
- Townley, 256 B.R. 697 (Bankr. D. N.J. 2000) (modification standards post-confirmation)
- Ward, 348 B.R. 545 (Bankr. D. Idaho 2005) (adequate protection and plan modification considerations)
- Hernandez, 282 B.R. 200 (Bankr. S.D. Tex. 2002) (surrender and post-confirmation modification under § 1329)
- Zieder, 263 B.R. 114 (Bankr. D. Ariz. 2001) (modifications to reflect distributions outside plan)
- Mason, 315 B.R. 759 (Bankr. N.D. Cal. 2004) (treatment of secured claims and depreciation considerations)