In Re Morris
DECISION AND ORDER
This matter comes before the Court on appeal from the Bankruptcy Court. On December 20, 2006, the Court granted Debtor leave to pursue this interlocutory appeal. Debtor’s appeal presents the following issue: did the Bankruptcy Court err by allowing interest to be added to Wells Fargo’s claim on a secured vehicle loan purchased within 910 days of Debtor’s bankruptcy filing (a “910 claim”)? The Court answers no. The decision of the Bankruptcy Court is affirmed.
On November 26, 2003, Debtor purchased a 2001 Ford Explorer (the Vehicle). Wells Fargo financed the purchase and was granted a security interest in the Vehicle.
On December 28, 2005, Debtor filed a petition under Chapter 13 of the Bankruptcy Code. On January 25, 2006, Wells Fargo filed a proof of claim on in the amount of $14,933.96 plus 9% interest ($1,979.52) for a total claim of $16,913.48.
On February 7, 2006, Debtor filed an objection to Wells Fargo’s claim. Wells Fargo responded that its calculation of interest was based on the “prime plus” formula described in
Till v. SCS Credit Corp.,
After an evidentiary hearing, the Bankruptcy Court found that Wells Fargo had a secured claim for purposes of 11 U.S.C. § 1325(a)(5)(B)(ii). Therefore, the court found that Wells Fargo was entitled to interest on its claim according to the Till formula.
*798
This appeal presents a purely legal question involving the proper statutory interpretation of various provisions of the Bankruptcy Code. Accordingly, the Court will conduct a
de novo
review of the Bankruptcy Court’s decision.
See Meyer v. Rigdon,
§ 1325(a)(5)(B)(ii) of the Bankruptcy Code, as interpreted by the Supreme Court, requires payment of interest in addition to the allowed secured claim when a debtor retains the collateral.
See Rake v. Wade,
Pursuant to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”), the following sentence was added to the end of § 1325(a):
For purposes of paragraph (5), section 506 shall not apply to a claim described in that paragraph if the creditor has a purchase money security interest securing the debt that is the subject of the claim, the debt was incurred within 910-day [sic] preceding the date of the filing of the petition, and the collateral for that debt consists of a motor vehicle (as defined in section 30102 of title 49) acquired for the personal use of the debt- or, or if collateral for that debt consists of any other thing of value, if the debt was incurred during the 1-year period preceding that filing.
This sentence is commonly known as the “hanging paragraph” of § 1325(a). The parties agree that Wells Fargo’s claim is a claim described in the hanging paragraph.
The hanging paragraph refers to Section 506 of the Bankruptcy Code. Section 506(a) provides:
[1] An allowed claim of a creditor secured by a lien on property in which the estate has an interest ... is a secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property ... and is an unsecured claim to the extent that the value of such creditor’s interest ... is less than the amount of such allowed claim. Such value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor’s interest.
Debtor argues that Wells Fargo’s claim is not an “allowed secured claim” because the hanging paragraph states that Section 506 does not apply for purposes of § 1325(a)(5)(B)(ii). Accordingly, Debtor argues that Wells Fargo is not entitled to interest on its claim.
This argument fails because Section 506 does not provide the sole definition of “allowed secured claim.” In fact, the Supreme Court has specifically held that Section 506 is “not a definitional provision.”
Dewsnup v. Timm,
Section 502 of the Bankruptcy Code determines whether a claim is “allowed” by reference to applicable state law.
See Raleigh v. Illinois Dep’t of Revenue,
Numerous courts, after considering the hanging paragraph, follow the same logic and reach the same conclusion.
See In re Brown,
Debtor relies upon
In re Carver,
In
Till,
the Supreme Court noted that “if we have misinterpreted the intended meaning of “value, as of the date of the plan,’ we are confident Congress will enact appropriate remedial legislation.”
Till,
NOW, THEREFORE, BASED ON THE FOREGOING, IT IS HEREBY ORDERED THAT:
1. Debtor’s appeal is DENIED; and
2. The Bankruptcy Court’s decision overruling Debtor’s objection to Wells Fargo’s claim (Claim # 4) is AFFIRMED.
SO ORDERED.