Letitia Andrea Lewis

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Case 05-00826-5-ATS Doci12 Filed 06/09/05 Entered 06/09/05 16:23:53 Page 1lof5

UN TED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEI GH Di VI SI ON

IN RE: CASE NO
LETITIA ANDREA LEWS 05- 00826- 5- ATS
DEBTOR

ALLOW NG OBJ ECTT ON TO CONFI RVATTI ON

The natter before the court is the obj ection to confirmation filed
by Coastal Federal Credit Union ("CFCU'). A hearing took pl ace on J une
7, 2005, in Raleigh, North Carolina.

Letitia Andrea Lews fileda petition for relief under chapter 13
of the Bankruptcy Code on Mirch 7, 2005. M. Lews purchased a 2004
Ford Freestar on Novenber 21, 2004, 106 days before she filed her
petition. The purchase price, which was financed by CFCU was $35, 418.
Wtha service contract and GAPinsurance, M. Lews borrowed a total
of $38, 973.56 fromCFCU. Though the bal ance owed is $37, 684. 04, M.
Lew s proposes to "cramdown" CFCUto a secured claimof $19, 175,
payable at the trustee’s rate of interest. CFCU agrees that the
trustee’s interest rate is appropriate, but it contends that the effort
to reduce the value of the secured claimis in bad faith.

M.. Lews testified that she has been rebuil ding her credit on the
heels of a chapter 7 filingin 2002. She was able to purchase a 2002
Mazda, but was conmiting fromFayetteville to Raleigh and accumil at ed

150, 000 mles onthe Mzdainonly 3 years. She needed a newcar, and

1 Ms. Lewis needed to keep her monthly expenses low to qualify for
a first-time home buyer’s program.
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went to a Ford dealership to inquire about purchasing a Ford Focus.
She notified the salesperson that she needed a reliable car, but that
she needed to maintain her payments around $370 with a maximum cap of
$479 per month.1 The salesperson said he could not help her, so she
left. Over the next few days, the salesperson called Ms. Lewis several
times and said the dealership had a new program with CFCU, and that
they could sell her a car and keep her payments at $479. Ms. Lewis was
satisfied with that payment amount, and returned to the dealership
where the salesman explained that Ms. Lewis needed to purchase a
vehicle with a high rebate to qualify for the program with CFCU. He
directed Ms. Lewis to the Ford Freestar, which carried a $5,000 rebate.
Ms. Lewis signed a document that provided she would have a monthly
payment of $479.
The next day, Ms. Lewis returned to pick up the car and expressed
some hesitation over the purchase to the dealership. According to Ms.
Lewis, the representative pointed to some fine print in the purchase
contract and stated that this was a "done deal." Ms. Lewis understood
that she could not rescind the transaction at that point. Ms. Lewis
then contacted her insurance agent to adjust her car insurance, and her
agent expressed concern that the purchase price of the vehicle was too
high. Ms. Lewis did some further investigation and realized that her
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monthly payment was in fact $688, and she could not qualify for the
home buyer’s program. She was also unable to refinance the vehicle,
because there was substantial negative equity in the van once it left
the dealership.
On cross-examination, the terms of the CFCU plan became clear.
Ms. Lewis received a $5,000 rebate on the purchase of the van. The
rebate was deposited into a shares account at CFCU, and each month for
the first 24 months $209 was to be drafted from the account to make up
for the difference between the $688 monthly contract payment and the
$479 that Ms. Lewis agreed to pay. While Ms. Lewis acknowledged that
had she gone forward with this transaction as designed she would have
received the bargain she reached for two years, she contends that the
payments would only have been $479 per month for the first 24 months,
and that was not her agreement. In fact, Ms. Lewis was unable to make
the first payment, and the entire first payment was drafted from the
shares account. Ms. Lewis then decided to leave enough money in the
account to make the first 4 payments in full, but she withdrew
approximately half the rebate funds and used them for personal
expenses. Accordingly, Ms. Lewis made no payments on the vehicle from
her own funds prior to filing her bankruptcy petition, and no funds
remain in the shares account that could make up the difference between
Ms. Lewis’s $479 and the $688 payment.
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Ms. Lewis contends that she finds herself in this predicament not
due to her bad faith, but due to a misleading financing program and a
high-pressure salesman who talked her into a more expensive vehicle
than she could afford. She contends that a cram down is fair under
these circumstances.
It is clear that Ms. Lewis succumbed to high-pressure sales
tactics and purchased a bigger and more expensive vehicle than she
needed. However, these circumstances are not sufficient to justify a
substantial cram down of the lender. A cram down in this case is not
fair to CFCU. The $5,000 is no longer available to make up the payment
differential, and the creative financing has actually harmed the
creditor in this situation. Ms. Lewis is left with two options: she
may pay CFCU’s full secured claim at the trustee’s lower interest rate
and adjust the service contract purchased with the vehicle, or she may
surrender the vehicle, shedding the debt but also leaving her without
a car. Neither option may appeal to the debtor, but the debtor’s
proposal does not protect CFCU.
Based on the foregoing, CFCU’s objection to confirmation is
ALLOWED.
SO ORDERED.
DATED: June 9, 2005
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