In re: MATTHEW ADKINS v. DAIMLER CHRYSLER SERVICES NORTH AMERICA , L.L.C., (Creditor)

*The Honorable Karen K. Caldwell, United States District Judge for the Eastern District of Kentucky, sitting
by designation.
RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 05a0407p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
In re: M ATTHEW ADKINS,
Debtor.
__________________________________________
DAVID WM. RUSKIN , Trustee,
Plaintiff-Appellant,
v.
DAIMLER CHRYSLER SERVICES NORTH AMERICA ,
L.L.C., (Creditor),
Defendant-Appellee.
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N
No. 03-1087
Appeal from the United States District Court
for the Eastern District of Michigan at Detroit.
No. 02-71578—Paul D. Borman, District Judge.
Argued: April 21, 2004
Decided and Filed: October 4, 2005
Before: BATCHELDER and MOORE, Circuit Judges; CALDWELL, District Judge.*
_________________
COUNSEL
ARGUED: Gordon S. Gold, SEYBURN, KAHN, GINN, BESS & SERLIN, Southfield, Michigan,
for Appellant. Charles L. McKelvie, Troy, Michigan, for Appellee. ON BRIEF: Gordon S. Gold,
Tova Shaban, SEYBURN, KAHN, GINN, BESS & SERLIN, Southfield, Michigan, for Appellant.
Elizabeth M. Abood, Daniela Dimovski, SHERMETA, CHIMKO & KILPATRICK, Rochester
Hills, Michigan, for Appellee.
CALDWELL, D. J., delivered the opinion of the court, in which BATCHELDER, J., joined.
MOORE, J. (pp. 11-13), delivered a separate dissenting opinion.
1

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1There is nothing in the record before the Court that indicates why Debtor defaulted on his Plan payments. The
Trustee admitted that Debtor defaulted on payments to the Trustee.
2Debtor did not respond in writing to DaimlerChrysler’s motion. However, his attorney appeared on his behalf
at a hearing before the bankruptcy court and represented to the bankruptcy court that Debtor “agreed” with the Trustee’s
objection. Debtor ceded advocacy of the objection to the Trustee.
_________________
OPINION
_________________
KAREN K. CALDWELL, District Judge. Plaintiff David Ruskin, Standing Chapter 13
Trustee for the Eastern District of Michigan (“Trustee”), appeals the district court’s decision in favor
of DaimlerChrysler Services North America, L.L.C. (“DaimlerChrysler”), in the Trustee’s appeal
from a decision of the bankruptcy court. The Chapter 13 debtor, Matthew Adkins, had defaulted on
his car payments, and DaimlerChrysler, holder of a claim secured by Adkins’s car, moved to
repossess the vehicle. The Trustee argued that any debt remaining after the repossession and sale
of the car at auction should be reclassified as an unsecured claim; DaimlerChrysler argued, and the
bankruptcy court and the district court agreed, that this court’s decision in Chrysler Financial Corp.
v. Nolan (In re Nolan), 232 F.3d 528 (6th Cir. 2000), foreclosed such a reclassification. For the
reasons explained below, we AFFIRM the district court’s decision.
I. FACTUAL BACKGROUND
On August 17, 2001, Adkins (“Debtor”) filed a Chapter 13 petition and proposed plan. On
September 13, 2001, DaimlerChrysler filed a proof of claim secured by the Debtor’s 1997 Plymouth
Neon (“Neon”) for $5,963.81 at 18.75% interest, valuing the Neon at $5,842.50. The Debtor’s
proposed plan valued the Neon at $5,525.00, and proposed an interest rate of 12%. DaimlerChrysler
filed objections to the proposed plan based on the value and interest rate proposed by the debtor.
Following a confirmation hearing and resolution of both the Trustee’s and DaimlerChrysler’s
objections, the bankruptcy court confirmed a plan (“the Plan”) on November 8, 2001. The
confirmed Plan set the value of the Neon at $5,842.00; DaimlerChrysler’s secured claim was subject
to “cram down” to that amount under 11 U.S.C. § 1325(a)(5)(B)(ii), with the remaining deficiency
balance transformed into an unsecured claim for $121.81. The Plan provided that the $5,842.00
secured claim should be paid by 59 monthly payments of $136.00 and interest at 14% per annum.
The Plan provided that these payments on the secured claim would be paid by the Trustee from
payments the Debtor made to the Trustee. The Plan provided that general unsecured creditors
receive no less than 100% on all filed claims.
Following confirmation, the Debtor failed to remit the payments to the Trustee as required
by the Plan.1 DaimlerChrysler received no payments on its claims after December 6, 2001. After
more than sixty (60) days passed without any payments from the Debtor, DaimlerChrysler moved
for relief from the automatic stay to repossess and sell the Neon. As part of that motion,
DaimlerChrysler requested that any deficiency balance, or the difference between the amount still
owed to it on the previously allowed secured claim of $5,842.00 and the proceeds from selling the
Neon at auction, should be paid to it as a secured claim as set forth in the original confirmed Plan
after filing an amended Proof of Claim. The Trustee objected to the latter request, and a hearing was
held.2 The bankruptcy court granted the motion for lifting the automatic stay and held that this
court’s decision in Chrysler Financial Corp. v. Nolan (In re Nolan), 232 F.3d 528 (6th Cir. 2000),

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3The bankruptcy court ruled from the bench on the deficiency issue on April 11, 2002, then issued a written
order lifting the stay on April 12, 2002. The bankruptcy court issued a written opinion on the deficiency issue on
June 18, 2002.
4According to the district court’s order of dismissal, Debtor cured his original December 2001 default following
the bankruptcy court’s decision and continued making payments until August 2002. After missing a required payment
on August 17, 2002, however, Debtor was once again in default, but DaimlerChrysler had not yet repossessed the car
when the district court initially denied the Trustee’s appeal. There is no evidence in the record before us as to why
Debtor defaulted the second time.
5According to the record, DaimlerChrysler repossessed the Neon on September 16, 2002. The repossession
took place pursuant to the bankruptcy court’s April 12, 2002, order lifting the automatic stay, even though Debtor had
cured the previous default that led to that order. However, the bankruptcy court’s order did not limit the removal of the
stay to a certain time period nor did it condition the lifting of the stay on Debtor’s ability to cure default.
A written appraisal completed the day after DaimlerChrysler repossessed the Neon shows that the vehicle’s
front window was cracked, that the steering column was broken, and that the vehicle would not start. DaimlerChrysler
sold the car at auction for $800. It is not evident from the record whether the vehicle was damaged before repossession,
or whether it was damaged by the repossession company used by DaimlerChrysler. The Trustee asserts in his brief that
the Neon was driveable before repossession.
required that any deficiency resulting from the sale of the repossessed automobile be paid as a
secured claim.3 In re Adkins, 281 B.R. 905, 910 (Bankr. E.D. Mich. 2002).
The Trustee then appealed to the district court, which initially refused to hear the appeal
because the foreclosure had not yet taken place.4 Once “actual repossession, sale and assertion of
a secured claim for the deficiency by Daimler Chrysler [sic]” took place,5 the appeal was reinstated
nunc pro tunc. The district court had subject matter jurisdiction under 28 U.S.C. § 158.
On December 18, 2002, the district court affirmed the bankruptcy court’s decision. In re
Adkins, 307 B.R. 880, 888 (E.D. Mich. 2002). A timely notice of appeal was filed January 15, 2003.
This Court has appellate jurisdiction under 28 U.S.C. § 1291.
II. LAW AND ANALYSIS
A. Standard of Review
This Court reviews a district court’s statutory interpretation and conclusions of law de novo.
It reviews a bankruptcy court’s factual findings for clear error. In re American HomePatient, Inc.,
414 F.3d 614, 617 (6th Cir. 2005).
B. In re Nolan
The sole legal issue in this case is whether the bankruptcy court and district court correctly
extended the principles this Court espoused in the case Chrysler Financial Corp. v. Nolan (In re
Nolan), 232 F.3d 528 (6th Cir. 2000), to the present situation in which a secured creditor repossesses
a debtor’s vehicle post-confirmation under court-ordered relief from the automatic stay.
In the Nolan decision, a Chapter 13 debtor moved under 11 U.S.C. § 1329 to surrender her
car post-confirmation and reclassify any deficiency resulting from the sale of the surrendered car
as an unsecured claim. 232 F.3d at 529-30. Section 1329 allows modification of a Chapter 13
bankruptcy plan after confirmation of the plan but before completion of payments, on the motion
of the debtor, the trustee, or the holder of an unsecured claim, to “increase or reduce the amount of
payments on claims of a particular class provided for by the plan,” to “extend or reduce the time for
such payments,” or to “alter the amount of the distribution to a creditor whose claim is provided for
by the plan to the extent necessary to take account of any payment of such claim other than under

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6The full version of section 1329 applicable to both Nolan and the present case reads as follows:
Modification of plan after confirmation.
(a) At any time after confirmation of the plan but before the completion of payments under such plan, the
plan may be modified, upon request of the debtor, the trustee, or the holder of an allowed unsecured
claim, to –
(1) increase or reduce the amount of payments on claims of a particular class provided for by the
plan;
(2) extend or reduce the time for such payments; or
(3) alter the amount of the distribution to a creditor whose claim is provided for by the plan to
the extent necessary to take account of any payment of such claim other than under the plan.
(b)(1) Sections 1322(a), 1322(b), and 1323(c) of this title and the requirements of section 1325(a) of this title
apply to any modification under subsection (a) of this section.
(2) The plan as modified becomes the plan unless, after notice and a hearing, such modification is
disapproved.
11 U.S.C. § 1329 (2000). In 2005, Congress added a subsection (a)(4) to allow modification to reduce payment
amounts for the purpose of allowing the debtor to purchase health insurance. Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005 (“BAPCPA”), Pub. L. No. 109-8, § 102(i), 119 Stat. 23, 34 (2005).
7See, e.g., Day v. Systems & Servs. Techs., Inc. (In re Day), 247 B.R. 898 (Bankr. M.D. Ga. 2000); In re
Anderson, 153 B.R. 527 (Bankr. M.D. Tenn. 1993); In re Rimmer, 143 B.R. 871 (Bankr. W.D. Tenn. 1992); In re Frost,
96 B.R. 804 (Bankr. S.D. Ohio 1989).
8The version of 11 U.S.C. 1325(a) applicable to this case and Nolan provides as follows:
(a) Except as provided in subsection (b), the court shall confirm a plan if--
(1) the plan complies with the provisions of this chapter and with the other applicable provisions
of this title;
(2) any fee, charge, or amount required under chapter 123 of title 28, or by the plan, to be paid
before confirmation, has been paid;
(3) the plan has been proposed in good faith and not by any means forbidden by law;
(4) the value, as of the effective date of the plan, of property to be distributed under the plan on
account of each allowed unsecured claim is not less than the amount that would be paid on
such claim if the estate of the debtor were liquidated under chapter 7 of this title on such
date;
(5) with respect to each allowed secured claim provided for by the plan--
(A) the holder of such claim has accepted the plan;
(B)(i) the plan provides that the holder of such claim retain the lien securing such claim; and
(ii) the value, as of the effective date of the plan, of property to be distributed under the plan
on account of such claim is not less than the allowed amount of such claim; or
(C) the debtor surrenders the property securing such claim to such holder; and
the plan.” 11 U.S.C. § 1329(a).6 Prior to Nolan, lower federal courts were split on whether section
1329 allowed a debtor to modify a confirmed plan by surrendering collateral to a secured creditor
(the value of which typically would have already been subjected to “cram down”), and then
reclassifying any deficiency resulting from the sale of the collateral as an allowed unsecured claim
to be paid back at the generally reduced rate for unsecured creditors set forth in the plan. See 232
F.3d at 531-32 (noting split). What the Nolan court termed “a sizable minority” of lower courts7
followed a rationale set forth in In re Jock, 95 B.R. 75 (Bankr. M.D. Tenn. 1989), that allowed such
a surrender and reclassification under section 1329.
In Nolan, however, this Court held that section 1329 did not allow reclassification as an
unsecured claim of a deficiency resulting from the sale of a vehicle surrendered post-confirmation,
finding five “fundamental deficiencies” in the reasoning of Jock and its progeny.
First, Nolan found that “section 1329(a) does not expressly allow a debtor to alter, reduce,
or reclassify a previously allowed claim,” but rather only “affords the debtor a right to request an
alteration of the amount or timing of specific payments.” 232 F.3d at 532 (emphasis added). Jock
and its progeny had interpreted section 1329(b)’s reference to section 1325(a),8 which allows for

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(6) the debtor will be able to make all payments under the plan and to comply with the plan.
911 U.S.C. § 1327 provides in full:
Effect of confirmation
(a) The provisions of a confirmed plan bind the debtor and each creditor, whether or not the claim of such
creditor is provided for by the plan, and whether or not such creditor has objected to, has accepted,
or has rejected the plan.
(b) Except as otherwise provided in the plan or the order confirming the plan, the confirmation of a plan
vests all of the property of the estate in the debtor.
(c) Except as otherwise provided in the plan or in the order confirming the plan, the property vesting in
the debtor under subsection (b) of this section is free and clear of any claim or interest of any creditor
provided for by the plan.
pre-confirmation surrender of collateral and classification of the deficiency as an unsecured claim,
as allowing post-confirmation surrender and reclassification. Nolan, however, rejected this
interpretation of section 1329(b). Nolan held that section 1329(b) does not apply unless the
proposed modifications first comply with section 1329(a), and that section 1329(a) did not expressly
allow reclassification of secured claims to unsecured claims. 232 F.3d at 535. In so holding, the
Nolan court noted that while section 1325(a) allows surrender of collateral pre-confirmation, “[f]or
section 1325(a)(5)(B)(ii) to provide any protection to the creditor when the debtor chooses to retain
her collateral, the secured claim must not be subject to modification throughout the life of the plan.”
Id. at 533 n.8.
Indeed, the second principle on which Nolan reversed the Jock line of cases was the finding
that the proposed modification “would violate section 1325(a)(5)(B), which mandates that a secured
claim is fixed in amount and status and must be paid in full once it has been allowed.” 232 F.3d at
533. Nolan held that a post-confirmation surrender and subsequent reclassification is an attempt to
bifurcate a claim that has already been classified as fully secured, and thus would negate the
requirement in section 1325(a)(5)(B)(ii) that a plan is not to be confirmed unless the property to be
distributed on account of a claim is not less than the allowed amount of the claim. Id.
Third, Nolan found that the proposed post-confirmation modification would violate section
1327(a),9 which provides that a confirmed Chapter 13 plan is binding on debtor and creditor, and
postulated “an unlikely congressional intent to give debtors the option to shift the burden of
depreciation to a secured creditor by reclassifying the claim and surrendering the collateral when
the debtor no longer has any use for the devalued asset.” 232 F.3d at 533. Allowing the post-
confirmation surrender and reclassification, Nolan reasoned, would subject secured creditors to a
double reduction of a secured claim in those cases where the creditor already experienced a “cram
down” in valuation at the time of confirmation. Id. at 534. Nolan found that allowing debtors to
experience such a windfall was unfair and found no evidence for congressional approval of such a
result. Id.
Fourth, because section 1329(a) only allows the debtor, the trustee, and the holders of
unsecured creditors to move for a modification under that section, the Jock interpretation of section
1329 would create an inequitable situation where the secured creditor could not move to reclassify
its claim if the collateral securing the claim appreciates in value, but others can move to shift the
burden of a collateral’s depreciation in value to the creditor. Id.
Fifth and finally, Nolan held that using section 1329 to reclassify claims post-confirmation
was at odds with the plain language of section 1329. “This section does not state that the plan may
be modified to increase or reduce the amount of claims.” 232 F.3d at 534 (quoting In re Banks, 161
B.R. 375, 378 (Bankr. S.D. Miss. 1993)) (emphasis in Nolan). Nolan noted that the Bankruptcy
Code uses the terms “claim” (which is specifically defined in the Code) and “payment” (which is

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1011 U.S.C. § 506(a), prior to its amendment by BAPCPA in 2005, provided as follows:
An allowed claim of a creditor secured by a lien on property in which the estate has an
interest, or that is subject to setoff under section 553 of this title, is a secured claim to the
extent of the value of such creditor's interest in the estate's interest in such property, or to the
extent of the amount subject to setoff, as the case may be, and is an unsecured claim to the
extent that the value of such creditor's interest or the amount so subject to setoff 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.
not) differently throughout the Code, thus making it less likely that Congress intended the word
“claim” to be substituted for the word “payment” in section 1329. Id.
Based on these five reasons, Nolan held that “a debtor cannot modify a plan under section
1329(a) by: (1) surrendering the collateral to a creditor; (2) having the creditor sell the collateral and
apply the proceeds toward the claim; and (3) having any deficiency classified as an unsecured
claim.” 232 F.3d at 535 (citing In re Coleman, 231 B.R. 397, 398 (Bankr. S.D. Ga. 1999)).
C. Application of Nolan principles to Post-Confirmation Repossession of Collateral
The Trustee contends that the bankruptcy court and district court erred by applying Nolan
to the present case, because Nolan is factually distinguishable. In Nolan, the debtor voluntarily
sought to modify her plan by surrendering her vehicle and having the deficiency reclassified as an
unsecured claim. Given that the debtor in Nolan reported having frequent mechanical trouble with
the vehicle and had put many, many miles on the vehicle, the Trustee argues, it was clear in Nolan
that the debtor was seeking to shift the burden of depreciation (which she likely accelerated through
her use and lack of maintenance) to the secured creditor. Here, the Trustee contends, it was
DaimlerChrysler’s decision to move to lift the automatic stay under 11 U.S.C. § 362(d)(1) and
repossess the secured collateral. The Trustee contends that under the present circumstances, Nolan
should not be applied to allow the treatment of any deficiency resulting from sale of the collateral
as a secured claim for purposes of future distributions from the Plan. Allowing DaimlerChrysler to
affirmatively repossess the vehicle and retain secured status in the Plan, the Trustee argues, would
allow DaimlerChrysler an unfair “double recovery” and would also be unfair to the other unsecured
creditors. The Trustee further contends that allowing DaimlerChrysler to retain secured status in
the Plan after it repossesses and sells the collateral makes no sense under the Bankruptcy Code
because a claim is only a “secured claim” under section 50610 of the Code if the claim is “secured
by a lien on property in which the estate has an interest.” 11 U.S.C. § 506(a). Once
DaimlerChrysler repossesses and sells the vehicle, the Trustee argues, the lien on estate property is
extinguished.
DaimlerChrysler defends the lower courts’ application of Nolan to the present case,
contending that the factual distinctions between this case and Nolan are insignificant. It argues that
even though DaimlerChrysler was the moving party procedurally in this case, in actuality Debtor
brought DaimlerChrysler’s action upon himself when he defaulted on his payments to the Trustee.
DaimlerChrysler argues that the Trustee’s objection to DaimlerChrysler’s request to treat any
deficiency following the repossession as a secured claim was essentially a motion to reclassify the
deficiency as an unsecured claim and essentially a motion to modify the Plan under section 1329.
Therefore, DaimlerChrysler argues, Nolan forbids reclassification of the deficiency in this
circumstance.
We believe that whether the Trustee technically made a motion under section 1329 is not
the key to the question of whether reclassification of secured claims post-confirmation is allowed
in Chapter 13 bankruptcies. Nolan’s holding was not based solely on the language of section 1329.
As discussed above, Nolan relied heavily on the language of sections 1325 and 1327.

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DaimlerChrysler emphasizes that section 1327 provides that once a plan is confirmed, its provisions
bind the debtor and each creditor. Indeed, confirmation of a plan has been described as “res judicata
of all issues that could or should have been litigated at the confirmation hearing.” In re Cameron,
274 B.R. 457, 460 (Bankr. N.D. Tex 2002).
Because all issues addressed during a plan confirmation are given preclusive effect,
the bifurcation of a creditor’s claim into a secured and an unsecured claim is likewise
given preclusive effect. Thus if a creditor has an allowed secured claim of x dollars,
which must be paid during the life of the plan, that issue has been litigated and
cannot be altered.
In re Coffman, 271 B.R. 492, 495 (Bankr. N.D. Tex. 2002) (citations omitted).
The Nolan decision was also anchored on the provisions of section 1325(a)(5)(B), holding
that this provision “mandates that a secured claim is fixed in amount and status and must be paid in
full once it has been allowed.” 232 F.3d at 533. “For section 1325(a)(5)(B)(ii) to provide any
protection to the creditor when the debtor chooses to retain her collateral, the secured claim must
not be subject to modification throughout the life of the plan.” Id. at 533 n.8 (emphasis added). In
Nolan, this Court found that the debtor’s proposed surrender and reclassification did not adequately
protect a secured creditor because it allowed the debtor to shift the burden of depreciation she
originally accepted when she chose to retain her collateral from herself to the secured creditor. This
burden-shifting is especially unfair in those cases where the secured creditor has already borne the
burden of depreciation resulting from a cram down of the secured claim over the creditor’s
objection. “The Code’s cram down option displaces a secured creditor’s state-law right to obtain
immediate foreclosure upon a debtor’s default.” Assocs. Commercial Corp. v. Rash, 520 U.S. 953,
964 (1997).
“When a debtor surrenders the property, a creditor obtains it immediately, and is free
to sell it and reinvest the proceeds. . . . If a debtor keeps the property and continues
to use it, the creditor obtains at once neither the property nor its value and is exposed
to double risks: The debtor may again default and the property may deteriorate from
extended use.”
Id. at 962. The “adequate protection” interest payments made to the secured creditor for retention
of the collateral do not always offset these risks. See id. at 963.
In the present case, allowing a reclassification following a repossession caused by Debtor’s
default also would allow the Debtor to shift the burden of depreciation back to the secured creditor,
and possibly lead to a double reduction of Debtor’s debt. Therefore, we believe Nolan’s ban against
post-confirmation reclassifications equally applies to cases in which the Debtor’s actions (i.e.,
default) have provided cause for the secured creditor to have the automatic stay lifted so the creditor
may repossess the collateral.

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11Courts outside this circuit that have agreed with our approach in Nolan include In re Barclay, 276 B.R. 276,
282 (Bankr. N.D. Ala. 2001); In re Coffman, 271 B.R. 492 (Bankr. N.D. Tex. 2002); and In re Wilcox, 295 B.R. 155
(Bankr. W.D. Okla. 2003).
12For example, in Bank One v. Leuellen, the district court found that section 1329 contemplated post-
confirmation reclassifications of secured claims because section 1329(b) referenced section 1323(c). 322 B.R. at 656.
Section 1323(c) addresses the procedure for a secured creditor’s acceptance or rejection of a proposed pre-confirmation
modification that changes the secured creditor’ rights from what they were before the proposed pre-confirmation
modification. In Nolan, however, we held that section 1329(b) does not apply until a proposed post-confirmation first
complies with section 1329(a). Because, Nolan found, section 1329(a) does not expressly allow modifications that
reclassify secured claims to unsecured claims, section 1329(b) does not apply to a proposed post-confirmation
reclassification.
Other courts have interpreted the term “payment” in section 1329(a) more broadly than we did in Nolan. See
Knappen, 281 B.R. at 717 (“The language of § 1329(a)(1) of the Code explicitly allows the debtor to ‘reduce the amount
of payments on claims of a particular class . . . .’ Since each secured claim is general treated as a separate class, reducing
to nothing the amount of payments on Ford’s secured claim fits within the language of the statute.”) (internal citations
omitted).
13The Johnson court based the requirements of good faith and an equitable result on section 502(j)’s provision
that “[a] reconsidered claim may be allowed or disallowed according to the equities of the case,” section 1329(b)’s
requirement that modified plans be made in good faith, and section 1325(a)(3) good-faith requirement for confirmation
of proposed plan. 247 B.R. at 908-09.
14The Johnson court, however, recognized that reclassification under section 502(j) could unfairly allow debtors
to shift unexpected depreciation of the value of the collateral to the secured creditor. Therefore, it suggested that a
secured creditor could seek to have the deficiency considered as an administrative expense with priority over the other
unsecured creditors. 247 B.R. at 909 (citing 11 U.S.C. § 507(a)(1), (b)).
D. Other court decisions that disagree with Nolan
We recognize that courts outside this circuit remain split on the issue following our decision
in Nolan.11 Those courts that have disagreed with Nolan have done so for differing reasons. Some
courts simply disagree with Nolan’s interpretation of section 1329.12 See, e.g., Bank One, NA, v.
Leuellen (In re Leuellen), 322 B.R. 648, 654-55 (S.D. Ind. 2005); In re Knappen, 281 B.R. 714, 717
(Bankr. D.N.M. 2002); In re Townley, 256 B.R. 697, 699 (Bankr. D.N.J. 2000). Other courts agree
that the language of section 1329 does not allow modifications that would reclassify a secured claim
to an unsecured claim, but they disagreed with having a “secured claim” exist after the sale of the
original collateral, pointing to section 506(a)’s characterization of an allowed claim as a “secured
claim to the extent of the value of such creditor's interest in the estate's interest in such property.”
See, e.g., In re Zieder, 263 B.R. 114, 117 (Bankr. D. Ariz. 2001); In re Taylor, 297 B.R. 487, 491
(Bankr. E.D. Tex. 2003); In re Mason, 315 B.R. 759, 764 (Bankr. N.D. Cal. 2004). These latter
decisions have thus advocated using 11 U.S.C. § 502(j) to reconsider the secured claim. Section
502(j) provides, in relevant part, “A claim that has been allowed or disallowed may be reconsidered
for cause. A reconsidered claim may be allowed or disallowed according to the equities of the case.”
11 U.S.C. 502(j).
These cases, along with a number of cases that preceded our decision in Nolan, see, e.g., In
re Johnson, 247 B.R. 904 (Bankr. S.D. Ga. 1999), hold that the deficiency from a post-confirmation
sale of collateral cannot be considered a “secured” claim and must be treated equally with other
secured claims. In applying section 502(j), these cases interpret the portion of that statute which
provides that “[a] claim that has been allowed or disallowed may be reconsidered for cause” as
permitting the court to reconsider the classification of a claim as secured or unsecured. If the request
for reconsideration was made in good faith and led to an equitable result,13 the court will generally
reclassify the deficiency remaining on a secured claim as an unsecured claim.14 See, e.g., Johnson,
247 B.R. at 909.

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15In 2005, Congress amended section 1325(a)(5)(B) to specifically provide that the holder of a secured claim
“retain[s] the lien securing such claim until the earlier of (aa) the payment of the underlying debt determined under
nonbankruptcy law; or (bb) discharge under section 1328.” The new 1325(a)(5)(B)(i) also provides that if a chapter 13
case is “dismissed or converted without completion of the plan, such lien shall also be retained by such holder to the
extent recognized by applicable nonbankruptcy law.” BAPCPA, Pub. L. No. 109-8, §§ 306(a), 1501, 119 Stat. 80, 216.
16See, e.g., 8 C OLLIER ON B ANKRUPTCY ¶ 1329.04[1], 1329-8 through 1329-9 (15th ed. rev. 2004). But see 5
N ORTON B ANKR . L. & PRAC . 2D § 124:3, n. 94 (“Mere dismissal of the applicability of the rule of res judicata to a
secured claim dealt with by a confirmed plan is unconvincing, for it appears that both creditor and debtor should be able
to rely on the confirmed plan’s treatment of the claim, subject only to possible modification of the ‘amount’ or the ‘time’
of payments on the secured claim.”).
However, as one bankruptcy court has noted, the literal language of section 502(j) addresses
only the “allowance” or “disallowance” of claims, not the reclassification of an already-allowed
claim. See Coffman, 271 B.R. at 497. Therefore, we cannot agree with the dissent’s
recommendation that the case be remanded for consideration under section 502(j). Furthermore, the
dissent’s view that § 506(a) counsels a different result is not relevant to our reasoning. The dissent’s
reliance on that section is made necessary only through the use of § 502(j), which we have stated
is not applicable in this case.
Another case cited by the Trustee has allowed a reclassification of a secured claim following
a post-confirmation sale of repossessed collateral without looking to either section 1329 or section
502(j). See In re White, 169 B.R. 526, 529 (Bankr. W.D.N.Y. 1994). Explicitly rejecting either
provision and relying on what it termed as “common sense, common law, and custom and practice,”
id. at 529, the White court found that “[t]he lien that the secured creditor retains by virtue of 11
U.S.C. § 1325(a)(5)(B) is precisely what a lien is expected to be at common law.” Id. at 530.
“When a 11 U.S.C. § 362(d) motion [to lift the automatic stay] is properly made and granted, it is
usually explicitly recognized (and always implicitly recognized) that the grant of the motion
relegates the parties to their State Law rights.” Id. at 529. Therefore, the White court found that any
deficiency resulting from the post-confirmation sale of repossessed collateral was automatically
converted to an unsecured claim, that a creditor’s claims under the confirmation plan are “deemed
amended.” Id. at 530.
The White court, however, cited no authority for these holdings. We do not find it “obvious”
that the secured creditor who retains a lien under pre-BAPCPA section 1325(a)(5)(B)15 enjoys the
same creditor rights he did prior to the debtor’s bankruptcy filing. See Rash, 520 U.S. at 964 (“In
allowing Chapter 13 debtors to retain and use collateral over the objection of secured creditors,
however, the Code has reshaped debtor and creditor rights in marked departure from state law.”).
Moreover, the White court’s logic explicitly allows a secured creditor to retain any appreciated gain
remaining from the sale of repossessed collateral, id. at 530, a result that no other court has
recognized. See, e.g., Nolan, 232 F.3d at 534 (criticizing Jock for creating “an inequitable situation
where the secured creditor could not seek to reclassify its claim in the event that collateral
appreciated, even though the debtor could revalue or reclassify the claim whenever the collateral
depreciated.”) (emphasis in original). Therefore, we do not find White persuasive.
We recognize the frustration certain commentators have with our allowing a secured claim
to remain classified as “secured” following the sale of the underlying collateral.16 However, as
explained above, we find that there exists no provision in the Code applicable to this case that would
allow a reclassification of the deficiency given the “binding effect” of the confirmed plan under 11
U.S.C. § 1327. Therefore, in accordance with our prior decision in Nolan, we find that where the
Debtor’s actions (i.e., default) provide cause for lifting the automatic stay under section 362(d), the

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17We share the Trustee’s concern that there may be cases in which a portion of the deficiency is the result of
damage done to the collateral by the creditor or its agents in the course of, or following, repossession of the collateral.
The Trustee believes DaimlerChrysler’s repossession of the Neon caused the broken steering column and led to the
vehicle being sold at auction for only $800, but there is no evidence in the record before us proving this. However,
secured creditors should not assume that our decision herein allows them to “run up” the amount of the remaining
deficiency through the reckless or careless actions of a repossession agent. We decline to rule whether the bankruptcy
court may take damage done to collateral during and after repossession by the creditor into account in reviewing a
creditor’s amended Proof of Claim after the collateral’s sale.
Debtor or Trustee generally cannot move to reclassify the deficiency resulting from the sale of the
underlying repossessed collateral as an unsecured claim.17
III. CONCLUSION
For the foregoing reasons, the decision of the district court is AFFIRMED.

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________________
DISSENT
________________
KAREN NELSON MOORE, Circuit Judge, dissenting. Because I do not believe that Nolan
is controlling in this instance, I respectfully dissent. In Nolan, we held that a Chapter 13 debtor
cannot modify a confirmed plan under 11 U.S.C. § 1329(a) by voluntarily surrendering the property
securing the debt to the creditor, requiring the creditor sell that collateral and apply the sale proceeds
toward its secured claim, and classifying any deficiency as an unsecured claim. Chrysler Fin. Corp.
v. Nolan (In re Nolan), 232 F.3d 528, 535 (6th Cir. 2000). Our decision in Nolan was motivated by
our belief that debtors should not have “wide latitude to subject the creditor to their whims
throughout the life of the plan” nor the ability to “reap a windfall by employing a subterfuge” by
unfairly shifting the costs of depreciation to the creditor. Id. at 534. Our holding in Nolan was
narrowly tailored to the particular facts and circumstances of that case, and therefore I disagree with
the majority’s decision to extend its holding beyond those boundaries. Because in this case the
collateral was involuntarily taken from the debtor by the creditor’s conscious decision to seek relief
from stay and to sell the collateral to satisfy its secured claim, I must dissent from the majority’s
decision to extend Nolan. See In re Goos, 253 B.R. 416, 419 n.5 (Bankr. W.D. Mich. 2000)(stating
that a creditor-initiated sale may require a different legal analysis than a debtor-initiated surrender).
Our decision in Nolan rejected “a sizable minority” of lower courts that followed the
rationale set forth in In re Jock, 95 B.R. 75 (Bankr. M.D. Tenn. 1989), which allowed a debtor to
initiate surrender of collateral and for any deficiency to be deemed an unsecured claim. In Nolan
we explained five “fundamental deficiencies” of following the Jock line of cases in that situation,
each of which stemmed from our concern about the debtor’s manipulation of the Bankruptcy Code
to surrender the collateral after the collateral has depreciated, thereby unfairly shifting the risk of
depreciation to the creditor. Three of the deficiencies that necessitated our conclusion in Nolan
related to our disagreement with Jock’s interpretation of § 1329. Nolan, 232 F.3d at 532-35. That
provision of the code is not involved here. DaimlerChrysler’s suggestion that a § 1329 modification
is implicitly at issue here — that the Trustee’s objection to its attempt to maintain a secured claim
after the sale of the collateral is essentially an attempt to modify the plan without a formal § 1329
motion — is not persuasive. Appellee Br. at 25. This case arose not from an attempted modification
brought by the debtor or Trustee through a § 1329 motion, but rather from DaimlerChrysler’s § 362
motion to lift the stay and its request therein that any deficiency be classified as a secured claim.
Unlike in Nolan, where the creditor would have preferred to continue to receive payments for its
secured claim through the plan rather than have the collateral sold, here the creditor was the party
moving to initiate the sale. Believing that its interests were not being adequately served through the
plan, DaimlerChrysler moved to lift the stay preventing it from repossessing the collateral, thus
enabling it to pursue its state-law remedies outside the plan.
The other two deficiencies cited in Nolan were also specific to the debtor-initiated surrender
attempted in that case. There we were concerned that the debtor seeking a § 1329 modification in
those circumstances may contravene the requirements in §§ 1325(a)(5)(B) and 1327(a) that govern
a plan’s confirmation and its res judicata effect. Nolan, 232 F.3d at 533-34. In this case, the debtor
did not seek to surrender the collateral nor to disturb the confirmed plan. Instead it was the creditor
who decided its interests were better served by obtaining its state-law remedies to repossess the
collateral, and therefore the creditor moved to redeem its secured claim outside the plan.
In extending the holding in Nolan to allow a creditor who initiated sale of the collateral to
recover any deficiency as a secured claim, the majority entirely relieves the creditor of any
obligation to protect its own interests against anticipated depreciation in its pre-confirmation
dealings. On the contrary, I believe that “the creditor has the obligation to ensure that as time goes

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by and, as in this case, payments are not made and it repossesses the collateral, the value of the
collateral when liquidated will equal the amount of the remaining claim.” In re Knappen, 281 B.R.
714, 719 (Bankr. D.N.M. 2002). Placing the risk of depreciation loss completely on the debtor, as
the majority does:
denies that the creditor has an obligation to look out for its own interests, and invites
unscrupulous creditors to argue value at their whim after the confirmation hearing.
In effect, therefore, the creditor needs to assure that the plan provides for a stream
of payments such that at any time the value of the collateral, subject to normal wear
and tear, when returned to it and liquidated, will equal the remaining amount of the
secured claim.
Id. at 719. DaimlerChrysler had the opportunity to object to confirmation of the plan if it believed
that the plan payments, coupled with the sale value of the collateral if repossession became
necessary, would be insufficient to cover the costs of normal depreciation. If DaimlerChrysler
incurred a loss due to normal depreciation upon the subsequent sale of its collateral, which unlike
the creditor in Nolan, it instigated at the timing of its choice, that loss occurred not because the
burden of depreciation had been shifted to it, but because it failed to meet its own burden of
objecting to confirmation of a plan that did not provide protection from the normal depreciation of
the collateral. See In re Zieder, 263 B.R. 114, 118-19 (Bankr. D. Ariz. 2001).
In addition to relieving creditors of their obligations to protect their own interests pre-
confirmation, the majority’s holding creates a second disincentive for creditors to act diligently. By
guaranteeing creditors the payment of the entire amount deemed secured at the time of confirmation
regardless of what the sale of collateral brings, the majority eliminates any incentive for creditors
who force a sale of collateral to take care to protect the value of the collateral throughout the
repossession process. Applying Nolan to the facts in this case allows a creditor to shift the risk of
loss totally to the debtor, thereby turning the debtor into a guarantor. Debtors, not creditors, will
bear the costs of reckless or careless repossession agents hired by the creditors.
Because I believe that our decision in Nolan does not require us to hold that the post-sale
deficiency in this case must be a secured claim, I would instead hold that after a creditor-initiated
sale of collateral, any deficiency claim should be reconsidered under 11 U.S.C. § 502(j). Section
502(j) states that “[a] claim that has been allowed or disallowed may be reconsidered for cause. A
reconsidered claim may be allowed or disallowed according to the equities of the case.” Bankruptcy
courts have wide discretion to determine what constitutes cause for reconsideration of claims under
§ 502(j). Colley v. Nat’l Bank of Texas (In re Colley), 814 F.2d 1008, 1010 (5th Cir.)(calling a
bankruptcy court’s discretion to reconsider a claim under § 502(j) “virtually plenary”), cert. denied,
484 U.S. 898 (1987). I believe that the sale of the collateral at the instigation of the secured creditor
is adequate cause to reconsider a previously allowed secured claim under § 502(j). See In re Mason,
315 B.R. 759, 761 (Bankr. N.D. Cal. 2004)(“liquidation of the collateral by the secured creditor is
adequate cause to reconsider a previously allowed secured claim” under § 502(j)); In re Dykes, 287
B.R. 298, 303 (Bankr. S.D. Ga. 2002)(granting relief from automatic stay to repossess and sell
collateral is sufficient “cause” to reconsider under § 502(j)); Zieder, 236 B.R. at 117. I would
therefore reverse the district court’s decision, and remand to the bankruptcy court to treat as a
§ 502(j) motion for reconsideration the Trustee’s objection to the lifting of the stay and classification
of the deficiency as a secured claim.
When reconsidering a claim under § 502(j), a court may readjust the claim in any fashion that
the equities of the case deem necessary. Id. Reconsideration under § 502(j) can occur even after
a plan is confirmed. See Int’l Yacht & Tennis, Inc. v. Wasserman (In re Int’l Yacht & Tennis, Inc.),
922 F.2d 659, 662 n.5 (11th Cir. 1991)(stating that the probable intent of a 1984 amendment to
§ 502(j) was to allow claims to be reconsidered after a case has been closed and reopened); Dykes,

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287 B.R. at 303 (stating that after confirmation, a “§ 502(j) ‘motion to reconsider’ is the only means
by which a claim’s continued validity may be questioned”); In re Gomez, 250 B.R. 397, 400 (Bankr.
M.D. Fla. 1999)(stating that § 502(j) creates a narrow exception to the res judicata effect of § 1327
that allows reconsideration after confirmation). A § 502(j) analysis of a deficiency can also account
for a debtor who contributed to depreciation loss in bad faith. A bankruptcy court can determine that
the deficiency amount can only be treated as an unsecured claim if the request is in good faith and
leads to an equitable result. Zieder, 263 B.R. at 119 (stating if excess depreciation is due to fault
of debtor, creditor may object to § 502(j) modification for lack of good faith); In re Johnson, 247
B.R. 904, 908-09 (Bankr. S.D. Ga. 1999). Furthermore, when a reconsideration under § 502(j)
renders a deficiency as unsecured, a creditor may be entitled to an administrative-expense claim for
failure of adequate protection, which “has priority over unsecured claims and is paid in full. 11
U.S.C. § 507(a)(1) & (b).” Id. at 909.
Finally, I believe that the plain language of § 506(a) necessitates the conclusion that any
deficiency remaining after the secured creditor has initiated a sale of collateral must not be treated
as a secured claim, and therefore must be reconsidered under § 502(j). Section 506(a) provides:
An allowed claim of a creditor secured by a lien on property in which the estate has
an interest, or that is subject to setoff under section 553 of this title, is a secured
claim to the extent of the value of such creditor’s interest in the estate’s interest in
such property, or to the extent of the amount subject to setoff, as the case may be,
and is an unsecured claim to the extent that the value of such creditor’s interest or
the amount so subject to setoff 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.
11 U.S.C. § 506(a) (emphasis added). The Supreme Court has repeatedly cited § 506(a) as the basis
for the tenet that a claim is secured only to the extent that it is secured by an interest in collateral.
See, e.g., Till v. SCS Credit Corp., 541 U.S. 465, 470 n.5 (2004); Assocs. Commercial Corp. v. Rash,
520 U.S. 953, 956, 960 (1997). To hold otherwise, as the majority does, would turn the definition
of a secured claim on its head. The majority does not explain why § 506(a)’s definition of a secured
claim can be ignored in these circumstances. Here DaimlerChrysler initiated the sale of the
collateral that secured its claim, and therefore by definition, its claim is no longer secured. There
is no provision in the Bankruptcy Code that gives a creditor a secured claim without any collateral.
See Zieder, 263 B.R. at 117. I respectfully dissent.

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