In Re Alexander

Aug 20, 1998
Bankruptcy 98-42598 S
Versions:

ORDER OVERRULING OBJECTION TO CONFIRMATION

MARY D. SCOTT, Bankruptcy Judge.

THIS CAUSE is before the Court upon an objection to confirmation filed on June 5, 1998, by the creditor Bill Fitts Autо Sales, Inc. The parties stipulated to the facts and briefed the issues for the court.

In 1997, the debtor and her spouse refinanced a 1994 Dodge car and bought a 1990 Chevrolet truck from Bill Fitts Auto Sales, Inc., financing the vehicles at $15,607.80. On May 27, 1998, the debtor filed this bankruptcy case. Although thе debtor drives the 1994 Dodge car, and makes provision for the debt related to the Dodge in her plan, her husband, whose whereabouts áre unknown, absconded with the truck. In view of the disappearance of the truck, the debtor proposes in her plan to surrender hеr interest in the truck and treat that claim as unsecured.

The Bankruptcy Code provides in рertinent part that the court shall confirm a plan if, with respect to each allоwed secured claim, the holder of the claim accepts the plan, the plаn provides for retention of the Ken and payment of the value of the collatеral, or the debtor surrenders the property securing such claim to such holder. 11 U.S.C. § 1325(a)(5). ‍​‌​​‌​​‌‌‌‌‌​​‌​‌‌​​‌‌​‌‌‌​‌​‌‌‌‌​‌​​‌‌​​​‌​​‌​‌‍In the instant case, the debtor proposes to surrender her interest in the 1990 pick-up truck. Bill Fitts Auto Sales objects to this treatment in the plan, asserting that, if debtor surrenders the truck, she must actuаlly produce the property and turn it over to Bill Fitts Auto Sales or provide for payment of its lien through the plan.

In support of its position, Bill Fitts Auto Sales urges the Court to follow In re Smith, 207 B.R. 26 (Bkrtcy.N.D.Gа.1997), in which the court sustained an-objection to a plan modification proposеd under 11 U.S.C. § 1329. In Smith, the debtor obtained confirmation of a plan which provided for retention of a vehicle secured by a valid lien. When the vehicle became'a mechanical liability, the debtor abandoned the vehicle.at the ‍​‌​​‌​​‌‌‌‌‌​​‌​‌‌​​‌‌​‌‌‌​‌​‌‌‌‌​‌​​‌‌​​​‌​​‌​‌‍repair shop without paying аny of the repair costs, advised the creditor of its location, and sought modificatiоn of the plan to surrender the vehicle. The court refused to permit the debt in Smith to modify the plan to surrender the vehicle without actually turning the property over to the crеditor. Smith is distinguishable from the facts of this case on a number of factual and legal grounds, First, Smith arisеs in the plan modification context and, indeed, the ‍​‌​​‌​​‌‌‌‌‌​​‌​‌‌​​‌‌​‌‌‌​‌​‌‌‌‌​‌​​‌‌​​​‌​​‌​‌‍discussion limits its application to thаt context. See generally, Smith, 207 B.R. at 30, 31. Secondly, there is an element of culpable behavior on the part of the Smith debtor that is not evident in the instant case. In Smith, plan confirmation was delayed in the first instance because debtor failеd to timely file a federal income tax return, and, immediately after confirmation, virtually abandoned the vehicle at a repair shop, with attendant repair bills.

In contrast, thе case authority in which the factual situations are similar, if not identical, to this situation pеrmit ‍​‌​​‌​​‌‌‌‌‌​​‌​‌‌​​‌‌​‌‌‌​‌​‌‌‌‌​‌​​‌‌​​​‌​​‌​‌‍the debtor to provide for the claim as unsecured with “surrender” of the estate’s interеst in the cohateral. See, e.g., In re Gabor, 155 B.R. 391 (Bkrtcy.N.D.W.V.1993); In re Elliott, 64 B.R. 429 (Bkrtcy.W.D.Mo.1986). In Gabor and El liott, like this case, codebtors absconded with the collaterаl, leaving the debtors, apparently blameless, with the debt but no means of satisfying it. This Court determines, like Gabor and Elliott, that relief or remedy exists for not only the debtor, but also the creditor. The debtor in this сase is entitled to her fresh start. She has complied with the Bankruptcy Code by surrendering the collateral The fact that she, through no fault of her own, cannot physically drive the vehicle to the creditor’s place of business does not obviate surrender of the vеhicle. Second, the creditor has a remedy as well as retention of its hen. Although its clаim in the bankruptcy case is unsecured, it retains its lien on the collateral as well as its right to pursue the codebtor. See In re Gabor, 155 B.R. 391 (Bankr.N.D.W.V.1993); In re Elliott, 64 B.R. 429 (Bkrtcy.W.D.Mo.1986). Cf. Green Tree Financial Servicing ‍​‌​​‌​​‌‌‌‌‌​​‌​‌‌​​‌‌​‌‌‌​‌​‌‌‌‌​‌​​‌‌​​​‌​​‌​‌‍Corp. v. Theobald (In re Theobald), 218 B.R. 133 (10th Cir. BAP 1998) (the statutory provision regarding surrender is not a mechanism for the creditor to avoid its obligations under state law for proceeding against collateral).

The Court doеs not believe that this holding will, as urged by the creditor, result in an “open invitation to fraud on the part of any Debtor.” The dearth of cases addressing this issue belie this imagining. Further, any evidence of bad faith or fraud on the part of the debtor may result in a different result. Indeed, this Court prеviously had such a scenario presented and determined that the debtor’s bad faith in proposing a plan modification to surrender a vehicle destroyed in a postcоnfirmation accident precluded plan modification. See In re Cooper, 167 B.R. 889 (Bkrtcy.E.D.Ark.1994). Based upon the foregoing, it is

ORDERED that the Objection to Confirmation filed on June 5, 1998, by the creditor Bill Fitts Auto Sales, Inc., is Overruled.

IT IS SO ORDERED.