6:11-bk-62129•Randall Parke Craver and Kathleen Ann Craver
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UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF OHIO EASTERN DIVISION IN RE: RANDALL PARKE CRAVER AND KATHLEEN ANN CRAVER, Debtors. ) ) ) ) ) ) ) ) ) ) ) CHAPTER 13 CASE NO. 11-62129 JUDGE RUSS KENDIG MEMORANDUM OF OPINION (NOT FOR PUBLICATION) In this matter, the court is called upon to determine the chapter 7 liquidation value of this chapter 13 case. Toby L. Rosen, chapter 13 trustee (“Trustee”), objects to Debtors’ plan, arguing Debtors’ proposed liquidation value of $4,000.00 is too low and therefore does not meet the requirement of 11 U.S.C. § 1325(a)(4). The court has jurisdiction of this case under 28 U.S.C. § 1334 and the general order of reference entered in this district on July 16, 1984. In accordance with 28 U.S.C. § 1409, venue in this district and division is proper. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(L). This opinion is not intended for publication or citation. The availability of this opinion, in electronic or printed form, is not the result of a direct submission by the court. FACTS Debtors filed a joint chapter 13 petition on June 24, 2011. On August 29, 2011, they filed an amended plan which states that the chapter 7 value of the case is $4,000.00. 1 The court incorporates by reference in this paragraph and adopts as the findings and orders of this court the document set forth below. This document was signed electronically at the time and date indicated, which may be materially different from its Dated: 02:02 PM January 31, 2012 11-62129-rk Doc 39 FILED 01/31/12 ENTERED 01/31/12 14:43:07 Page 1 of 18
On Schedule D, Debtors list the following assets, the heart of the parties’ dispute: Asset Mileage Owner Value 1974 Volkswagen Beetle 53,000 W $1,500.00 2004 Jeep Liberty 119,000 W $6,765.00 1994 Honda del Sol 99,000 W $1,000.00 1995 Ford Ranger 110,000 W $1,400.00 1989 Chevy Cavalier 110,000 W $ 500.00 2007 Utility trailer n/a H $ 500.00 Debtors claimed exemptions totaling $4,600.00 in the Jeep Liberty and $500.00 in the utility trailer. All of the assets are owned free and clear. LAW AND ANALYSIS For a plan to be confirmable, it must provide unsecured creditors with an amount equal to the amount which would be paid in a hypothetical chapter 7 liquidation. 11 U.S.C. § 1325(a)(4). This satisfies what is known as the “best interest of creditors” test. See, e.g., Hardy v. Cinco Fed. Credit Union (In re Hardy), 755 F.2d 75 (6th Cir. 1985). Paying anything less renders a plan unconfirmable. Debtor’s bear the ultimate burden of proving the confirmation requirements of § 1325(a) are met. Shaw v. Aurgroup Fin. Credit Union, 552 F.3d 447 (6th Cir. 2009). To determine whether Debtors meet this burden, the court must start by estimating the amount that the unsecured creditors would receive under a hypothetical chapter 7 liquidation. To calculate the liquidation value, the court must first decide the appropriate valuation to use for the vehicles. Neither party has presented any argument on this point. Debtors are using a variety of valuations from multiple sources. For example, for one vehicle, they rely on an appraisal from a local auctioneer. For another vehicle, they utilize the dealer retail from edmunds.com and for a third vehicle, they utilize a hybrid of Kelley Blue Book trade-in values and an edmunds.com dealer retail value. Trustee is more consistent in her approach, using an average of two NADA values: the clean retail/high retail and the average trade-in/low retail. Liquidation value is typically equated with wholesale value. See, e.g., In re Hoskins, 102 F.3d 311 (7th Cir. 1996), overruled by Assoc. Commercial Corp. v. Rash, 520 U.S. 953 (1997). As Judge Posner identified in Hoskins, “the price obtained in a liquidation is usually wholesale rather than a retail price.” Hoskins, 102 F.3d at 312. Other courts equate the wholesale value to the foreclosure or trade-in value.1 See, e.g., In re Neal, 314 B.R. 198, 200 (Bankr. N.D. Iowa 2004) (citing multiple cases); In re Bouzek, 311 B.R. 239, 241 (Bankr. E.D. Wis. 2004). “The liquidation value is what a secured creditor would expect to recover on repossession and sale by auction or other wholesale means.” Neal, 314 B.R. at 200. While Rash clearly overruled use of liquidation value in cramdown situations, and adopted replacement value, the court finds nothing in Rash to obviate use of the wholesale value in this context. Rash involved the valuation of a secured claim in a cramdown scenario under 11 1 From this point forward, the court will use “wholesale” as synonymous with “trade-in” value. 2 11-62129-rk Doc 39 FILED 01/31/12 ENTERED 01/31/12 14:43:07 Page 2 of 18
U.S.C. § 1325(a)(5), which required calculation of the secured claim pursuant to 11 U.S.C. § 506(a). That situation is not present here and therefore Rash does not squarely apply. See also In re Delbrugge, 347 B.R. 536, 539-40 (Bankr. N.D. W. Va. 2006) (finding “Rash is not applicable to the best interest of the creditors test of § 1325(a)(4)”); In re Dick, 2008 WL 294583, *2 (Bankr. D. Kan. 2008) (unpublished) (stating “the valuation standard employed in making this determination is what a chapter 7 trustee might get–liquidation, foreclosure, or forced sale value–as opposed to what a secured creditor might be entitled to recover under § 506(a) and Rash.”) Under § 1325(a)(4), the court is directly instructed to consider a hypothetical chapter 7 liquidation. While Rash adopted replacement value for cramdown purposes, it stopped short of adopting a particular benchmark, instead emphasizing that the facts of a given case drive a bankruptcy court’s ultimate determination of the replacement value. “Whether replacement value is the equivalent of retail value, wholesale value, or some other value will depend on the type of debtor and the nature of the property.” FirstMerit N.A./Citizens Nat’l Bank v. Getz (In re Getz), 242 B.R. 916, 919 (B.A.P. 6th Cir. 2000) (citing Rash, 520 U.S. 965 n. 6). While replacement value may reflect a wholesale value, it may also reflect something different. What is clear from Rash is that the facts of the case are paramount. Since a factual inquiry should drive adoption of a liquidation valuation standard, the court must look at the relevant circumstances of this case. In this court, the typical chapter 7 liquidation mechanism for vehicles is an auction. Thus, the appropriate valuation measure for these vehicles is one that approximates what a chapter 7 trustee would be likely to obtain for the vehicles if they were auctioned. Trustee’s average of the dealer trade in and retail reflects the starting point for determining the replacement value of a vehicle. FirstMerit N.A./Citizens Nat’l Bank v. Getz (In re Getz), 242 B.R. 916, 920 (B.A.P. 6th Cir. 2000). Since replacement value does not generally equal the liquidation value, the court rejects this approach. Cf. In re Gallup, 194 B.R. 851 (Bankr. W.D. Mo. 1996) (adopting replacement value as the chapter 7 liquidation value). The court concludes that the wholesale value of the vehicles, with any appropriate adjustments, generally reflects the chapter 7 liquidation value of the vehicles. The court does not blindly accept the wholesale value for every conceivable § 1325(a)(4) analysis. Not all assets can be, or should be, auctioned. For example, in the Dick case, the court was confronted with a § 1325(a)(4) issue based on an inventory of helicopter parts. 2008 WL 294583. A local auctioneer testified that he would probably be able to auction the parts for $3,500 to $4,500, which was basically their scrap value. Id. An aircraft service mechanic testified that he could probably sell the parts, over the course of a year, for $130,000 to $156,000. Id. at *2. The court ultimately found that the preponderance of the evidence supported the lower figure: The court accords weight and respect to [the aircraft service mechanic’s] expertise, but concludes that he did not testify about a liquidation sale of the party similar to that which a chapter 7 trustee might perform. Nor did he consider the re-certification of these parts and that attendant cost. Id. at *3. The chapter 7 liquidation value should consider the typical disposition of like assets by a chapter 7 trustee as well as the markets available for the assets. 3 11-62129-rk Doc 39 FILED 01/31/12 ENTERED 01/31/12 14:43:07 Page 3 of 18
Individual facts may also dictate use of an alternate valuation standard or adjustments to the wholesale. For example, the wholesale book value for an older vehicle may undervalue that vehicle if it has been maintained in mint condition. Basically, the wholesale value is a presumptive figure that may be rebutted. However, on these facts and in many cases, wholesale will reflect a hypothetical liquidation value. Establishing the value of the asset is not the only step to determining the chapter 7 liquidation amount. Most courts also allow certain deductions from the asset’s value, including chapter 7 administrative fees and expenses. See Goldman & Assoc., P.C. v. Kattouah (In re Kattouah), 452 B.R. 604 (E.D. Mich. 2011) (identifying the liquidation analysis confirmed by the bankruptcy court to be the fair market value of the property, less liens, any applicable exemption amounts and administrative expenses and costs); Fluharty v. Fluharty (In re Fluharty), 7 B.R. 677 (N.D. Ohio 1980) (allowing a reduction based on all chapter 7 administrative expenses); In re Delbrugge, 347 B.R. 536, 539 (Bankr. N.D. W. Va. 2006) (permitting deductions for chapter 7 trustee fees, the costs of sale, exemptions, and capital gains taxes) (citations omitted); Dick, 2008 WL 294583 (deducting trustee’s § 326 compensation and suggesting that, if the evidence had been proffered on the auctioneer’s fee, it would have also been allowed). Liquidation value is the wholesale/trade-in value of the asset reduced by necessary and proper administrative expenses. In this case, both parties have adjusted for any exemptions in the property and allowed a flat ten percent for the cost of sale/administrative cost. The court recognizes the utility of a flat rate and accepts this rate. The ten percent flat rate will generally favor unsecured creditors. When chapter 7 assets total $50,000 or less, the trustee’s statutory compensation alone is at least ten percent, not including any expenses related to liquidation. As an example of administrative costs, at present this court is approving sliding fee scale fees for auctioneers, starting at ten percent of the first $5,000, and reduced for proceeds in excess of $5,000, plus expenses. Based solely on the trustee’s compensation and the auctioneer’s fees, the ten percent flat rate is more than reasonable and beneficial to the unsecured creditors. Consequently, for the purposes of § 1325(a)(4), the liquidation value will be reduced by a ten percent flat rate for administrative fees, expenses, and costs of sale. With this understanding of the chapter 7 liquidation value, the court now turns to the evidence presented by the parties. 1. 2004 Jeep Liberty Renegade First, a question of fact is apparent from the parties’ valuations. Trustee’s value is based on a two wheel drive vehicle, while Debtors appraisal identifies the vehicle as a 4x4. Since Debtors’ appraisal is based on a personal inspection by an auctioneer, the court finds the vehicle is a four wheel drive vehicle, not a two wheel drive. Debtors’ appraisal places a value of $6,000 on the vehicle, but does not specify whether this amount is a retail, trade-in, auction or wholesale value. The auctioneer does identify two items affecting condition: the need for cleaning and repair of a dent in the driver’s door. Looking at both nadaguides.com and kbb.com trade-in values for this vehicle, the values range from $4,900 for a rough trade-in to $6,750 for a clean trade-in (NADA) and $4,187 for a fair trade-in to $5,587 for an excellent trade-in (Kelley Blue Book). Exhibit A. Based on the damage and cleaning noted by the auctioneer, and the explanations of condition ratings by NADA and Kelley Blue Book, it is clear that the car would not have 4 11-62129-rk Doc 39 FILED 01/31/12 ENTERED 01/31/12 14:43:07 Page 4 of 18
the peak values. As a result, it appears that the auctioneer’s value is clearly within the range of the trade-in values and the court accepts his $6,000 figure as the value for the Jeep Liberty Renegade. This amount is to be reduced by Debtors’ exemption of $4,600 and the ten percent flat rate for administrative expenses ($600), resulting in a chapter 7 liquidation value of $800.00. 2. 1994 Honda Civic del Sol According to Debtors, the Honda del Sol has over 100,000 miles and is in average condition. There is no evidence in the record supporting these claims, but neither is there evidence disputing it. Trustee has based her appraisal on the Si model with 120,000 miles. Debtors, on the other hand, have adjusted for 99,000 miles. 2 Upon review of nadaguides.com, the average trade-in value for a 1994 Honda Civic del Sol Si coupe is $3,100.00; kbb.com shows a trade-in value for this vehicle, in good condition, as $1,826.00. Exhibit B. Without any other information or guidance from the parties, the court will merely split the difference at $2,463.00. After reducing for administrative fees and expenses, the chapter 7 liquidation value is $2,217. 3. 1995 Ford Ranger In their brief, Debtors state the Ford Ranger is in average condition and has 110,000 miles. Debtors used two sources to obtain their value of the vehicles. Exhibit C. The first page indicates the truck is a regular cab short bed. The second page indicates it is an STX model. From Trustee’s exhibits, the truck is identified as a regular cab, 1/2 ton, V-6 pick-up. Based on the incomplete and non-cohesive information presented, as well as the paucity of information on the model, equipment and features, the court cannot determine the value of the Ford Ranger. The court will provide the parties additional time to either resolve the value of the Ford Ranger between themselves or submit additional information for review. 4. 1989 Chevy Cavalier Debtors claim, and Trustee does not dispute, that the Cavalier is inoperable and its value is in the scrap. Debtors contend they would obtain $225 and $300, for an average of $262.50, for scrapping the vehicle. According to Debtors, they “may be able to get up to $450.00 if they could deliver the vehicle directly to the junkyard.” (Debtors’ brief, p. 3). However, Debtors allege since the vehicle is inoperable, they would need to tow the vehicle, so the lower amount is appropriate. Trustee has valued the vehicle at $500. None of these values is supported anywhere in the record, nor is any towing fee itemized. With an incomplete record, the court cannot ascertain the value of the Cavalier. The parties will be given an opportunity to reach an agreement as to value or to present additional evidence to the court. 5. 1974 Volkswagen Beetle Debtors value the Beetle at $1,500. They state that they have unsuccessfully 2 Looking at the very top of Debtors’ Exhibit B, it appears that Debtors are also submitting values for the del Sol Coupe Si, so the court will base its figures on this model. In the event this is erroneous, either party may petition for further review of this finding. 5 11-62129-rk Doc 39 FILED 01/31/12 ENTERED 01/31/12 14:43:07 Page 5 of 18
attempted to sell this vehicle for $1,500 from their front yard. They indicate they are willing to surrender the Beetle if it is worth more than $1,500. According to Trustee’s exhibit, the average retail for this vehicle is $5,375. The court finds Debtors’ valuation unreliable. First, Debtors have not provided any evidence, such as an affidavit, to support their statement. Second, an unadvertised sale from a front yard is not a good indicator of the value of this vehicle, especially when absolutely no information is provided about the length of time it was offered for sale, the nature of the traffic in front of the house, how it was displayed, and similar facts. There is nothing in the record about condition or mileage. 3 Further, a valuation must be based on a concrete market. Debtors provide no information on how they arrived at the figure they attach to the vehicle. While the court recognizes that Trustee’s value is a retail value, it is inherently more reliable than Debtors’ pie-in-the sky number. The court therefore accepts Trustee’s valuation. Since this value exceeds $1,500, it appears Debtors have agreed to surrender the vehicle for sale, with the proceeds to be paid in to the chapter 13 plan. 6. 2007 small open utility trailer Trustee has presented no arguments concerning the value of this asset. Debtors value the trailer at $500 and have claimed an exemption of $1,150 in the trailer. Adopting these figures, the court finds that there is no non-exempt equity in the trailer and the asset would not be subject to liquidation in a chapter 7 case. It therefore has no liquidation value for the purposes of § 1325(a)(4). CONCLUSION In order to confirm a plan, a court must find that the plan meets the best interest of creditors test under 11 U.S.C. § 1325(a)(4). In other words, the plan must pay a minimum dividend to unsecured creditors based on the amount the unsecured creditors would receive if the case where administered under chapter 7. This liquidation value is based on the value of the assets less administrative expenses. In asset chapter 7 cases, where the assets are vehicles, liquidation is generally accomplished through an auction. As a result, the appropriate liquidation value is based on the wholesale or trade-in value of the vehicle, less a ten percent flat fee to account for the administrative expenses. On the facts presented in this case, the court finds that the liquidation value of the 2004 Jeep Liberty Renegade is $800.00 and the del Sol’s liquidation value is $2,217. The trailer has no liquidation value. The parties failed to provide sufficient evidence or information to calculate the values of the 1995 Ford Ranger and the 1989 Chevy Cavalier and are instructed to provide additional information. An order in accordance with this decision will be issued immediately. # # # 3 A grainy picture included in Trustee’s exhibits may indicate the vehicle is in above average condition for its age. 6 11-62129-rk Doc 39 FILED 01/31/12 ENTERED 01/31/12 14:43:07 Page 6 of 18
SERVICE LIST Toby L Rosen 400 W Tuscarawas St Charter One Bank Bldg 4th Floor Canton, OH 44702 Nicole L. Rohr Thrush & Rohr LLC 4410 22nd Street NW Canton, OH 44708 7 11-62129-rk Doc 39 FILED 01/31/12 ENTERED 01/31/12 14:43:07 Page 7 of 18
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OCR transcription for search; preserved printed pages are authoritative
The court incorporates by reference in this paragraph and adopts as the findings and
orders of this court the document set forth below. This document was signed
electronically at the time and date indicated, which may be materially different from its
Vee. bez
Russ Kendig
United States Bankruptcy Judge
Dated: 02:02 PMJ anuary 31, 2012
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
IN RE: CHAPTER 13
RANDALL PARKE CRAVER AND CASE NO. 11-62129
KATHLEEN ANN CRAVER,
JUDGE RUSS KENDIG
Debtors.
MEMORANDUM OF OPINION
(NOT FOR PUBLICATION)
)
In this matter, the court is called upon to determine the chapter 7 liquidation value
of this chapter 13 case. Toby L. Rosen, chapter 13 trustee (“Trustee”), objects to Debtors’
plan, arguing Debtors’ proposed liquidation value of $4,000.00 is too low and therefore does
not meet the requirement of 11 U.S.C. § 1325(a)(4).
The court has jurisdiction of this case under 28 U.S.C. § 1334 and the general order
of reference entered in this district on July 16, 1984. In accordance with 28 U.S.C. § 1409,
ig? i -_ astict and division is proper. This is a core proceeding pursuant to 28 U.S.C.
§ 157(b)(2)(L).
This opinion is not intended for publication or citation. The availability of this
opinion, in electronic or printed form, is not the result of a direct submission by the court.
FACTS
Debtors filed a joint chapter 13 petition on June 24, 2011. On August 29, 2011,
they filed an amended plan which states that the chapter 7 value of the case is $4,000.00.
1
AUTHENTICATED
U.S. GOVERNMENT
INFORMATION
On Schedule D, Debtors list the following assets, the heart of the parties’ dispute:
Asset Mileage Owner Value
1974 Volkswagen Beetle 53,000 W $1,500.00
2004 Jeep Liberty 119,000 W $6,765.00
1994 Honda del Sol 99,000 W $1,000.00
1995 Ford Ranger 110,000 W $1,400.00
1989 Chevy Cavalier 110,000 W $ 500.00
2007 Utility trailer n/a H $ 500.00
Debtors claimed exemptions totaling $4,600.00 in the Jeep Liberty and $500.00 in the
utility trailer. All of the assets are owned free and clear.
LAW AND ANALYSIS
For a plan to be confirmable, it must provide unsecured creditors with an amount
equal to the amount which would be paid in a hypothetical chapter 7 liquidation. 11
U.S.C. § 1325(a)(4). This satisfies what is known as the “best interest of creditors” test.
See, e.g., Hardy v. Cinco Fed. Credit Union (In re Hardy), 755 F.2d 75 (6th Cir. 1985).
Paying anything less renders a plan unconfirmable. Debtor’s bear the ultimate burden of
proving the confirmation requirements of § 1325(a) are met. Shaw v. Aurgroup Fin.
Credit Union, 552 F.3d 447 (6th Cir. 2009). To determine whether Debtors meet this
burden, the court must start by estimating the amount that the unsecured creditors would
receive under a hypothetical chapter 7 liquidation.
To calculate the liquidation value, the court must first decide the appropriate
valuation to use for the vehicles. Neither party has presented any argument on this point.
Debtors are using a variety of valuations from multiple sources. For example, for one
vehicle, they rely on an appraisal from a local auctioneer. For another vehicle, they
utilize the dealer retail from edmunds.com and for a third vehicle, they utilize a hybrid of
Kelley Blue Book trade-in values and an edmunds.com dealer retail value. Trustee is
more consistent in her approach, using an average of two NADA values: the clean
retail/high retail and the average trade-in/low retail.
Liquidation value is typically equated with wholesale value. See, e.g., In re
Hoskins, 102 F.3d 311 (7th Cir. 1996), overruled by Assoc. Commercial Corp. v. Rash,
520 U.S. 953 (1997). As Judge Posner identified in Hoskins, “the price obtained in a
liquidation is usually wholesale rather than a retail price.” Hoskins, 102 F.3d at 312.
Other courts equate the wholesale value to the foreclosure or trade-in value.1 See, e.g., In
re Neal, 314 B.R. 198, 200 (Bankr. N.D. Iowa 2004) (citing multiple cases); In re
Bouzek, 311 B.R. 239, 241 (Bankr. E.D. Wis. 2004). “The liquidation value is what a
secured creditor would expect to recover on repossession and sale by auction or other
wholesale means.” Neal, 314 B.R. at 200. While Rash clearly overruled use of
liquidation value in cramdown situations, and adopted replacement value, the court finds
nothing in Rash to obviate use of the wholesale value in this context.
Rash involved the valuation of a secured claim in a cramdown scenario under 11
1 From this point forward, the court will use “wholesale” as synonymous with “trade-in”
value.
2
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U.S.C. § 1325(a)(5), which required calculation of the secured claim pursuant to 11
U.S.C. § 506(a). That situation is not present here and therefore Rash does not squarely
apply. See also In re Delbrugge, 347 B.R. 536, 539-40 (Bankr. N.D. W. Va. 2006)
(finding “Rash is not applicable to the best interest of the creditors test of
§ 1325(a)(4)”); In re Dick, 2008 WL 294583, *2 (Bankr. D. Kan. 2008) (unpublished)
(stating “the valuation standard employed in making this determination is what a chapter
7 trustee might get–liquidation, foreclosure, or forced sale value–as opposed to what a
secured creditor might be entitled to recover under § 506(a) and Rash.”) Under
§ 1325(a)(4), the court is directly instructed to consider a hypothetical chapter 7
liquidation.
While Rash adopted replacement value for cramdown purposes, it stopped short
of adopting a particular benchmark, instead emphasizing that the facts of a given case
drive a bankruptcy court’s ultimate determination of the replacement value. “Whether
replacement value is the equivalent of retail value, wholesale value, or some other value
will depend on the type of debtor and the nature of the property.” FirstMerit
N.A./Citizens Nat’l Bank v. Getz (In re Getz), 242 B.R. 916, 919 (B.A.P. 6th Cir. 2000)
(citing Rash, 520 U.S. 965 n. 6). While replacement value may reflect a wholesale
value, it may also reflect something different. What is clear from Rash is that the facts of
the case are paramount.
Since a factual inquiry should drive adoption of a liquidation valuation standard,
the court must look at the relevant circumstances of this case. In this court, the typical
chapter 7 liquidation mechanism for vehicles is an auction. Thus, the appropriate
valuation measure for these vehicles is one that approximates what a chapter 7 trustee
would be likely to obtain for the vehicles if they were auctioned. Trustee’s average of
the dealer trade in and retail reflects the starting point for determining the replacement
value of a vehicle. FirstMerit N.A./Citizens Nat’l Bank v. Getz (In re Getz), 242 B.R.
916, 920 (B.A.P. 6th Cir. 2000). Since replacement value does not generally equal the
liquidation value, the court rejects this approach. Cf. In re Gallup, 194 B.R. 851 (Bankr.
W.D. Mo. 1996) (adopting replacement value as the chapter 7 liquidation value). The
court concludes that the wholesale value of the vehicles, with any appropriate
adjustments, generally reflects the chapter 7 liquidation value of the vehicles.
The court does not blindly accept the wholesale value for every conceivable
§ 1325(a)(4) analysis. Not all assets can be, or should be, auctioned. For example, in the
Dick case, the court was confronted with a § 1325(a)(4) issue based on an inventory of
helicopter parts. 2008 WL 294583. A local auctioneer testified that he would probably
be able to auction the parts for $3,500 to $4,500, which was basically their scrap value.
Id. An aircraft service mechanic testified that he could probably sell the parts, over the
course of a year, for $130,000 to $156,000. Id. at *2. The court ultimately found that the
preponderance of the evidence supported the lower figure:
The court accords weight and respect to [the aircraft service
mechanic’s] expertise, but concludes that he did not testify
about a liquidation sale of the party similar to that which a
chapter 7 trustee might perform. Nor did he consider the
re-certification of these parts and that attendant cost.
Id. at *3. The chapter 7 liquidation value should consider the typical disposition of like
assets by a chapter 7 trustee as well as the markets available for the assets.
3
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Individual facts may also dictate use of an alternate valuation standard or
adjustments to the wholesale. For example, the wholesale book value for an older
vehicle may undervalue that vehicle if it has been maintained in mint condition.
Basically, the wholesale value is a presumptive figure that may be rebutted. However, on
these facts and in many cases, wholesale will reflect a hypothetical liquidation value.
Establishing the value of the asset is not the only step to determining the chapter 7
liquidation amount. Most courts also allow certain deductions from the asset’s value,
including chapter 7 administrative fees and expenses. See Goldman & Assoc., P.C. v.
Kattouah (In re Kattouah), 452 B.R. 604 (E.D. Mich. 2011) (identifying the liquidation
analysis confirmed by the bankruptcy court to be the fair market value of the property,
less liens, any applicable exemption amounts and administrative expenses and costs);
Fluharty v. Fluharty (In re Fluharty), 7 B.R. 677 (N.D. Ohio 1980) (allowing a reduction
based on all chapter 7 administrative expenses); In re Delbrugge, 347 B.R. 536, 539
(Bankr. N.D. W. Va. 2006) (permitting deductions for chapter 7 trustee fees, the costs of
sale, exemptions, and capital gains taxes) (citations omitted); Dick, 2008 WL 294583
(deducting trustee’s § 326 compensation and suggesting that, if the evidence had been
proffered on the auctioneer’s fee, it would have also been allowed). Liquidation value
is the wholesale/trade-in value of the asset reduced by necessary and proper
administrative expenses.
In this case, both parties have adjusted for any exemptions in the property and
allowed a flat ten percent for the cost of sale/administrative cost. The court recognizes
the utility of a flat rate and accepts this rate. The ten percent flat rate will generally favor
unsecured creditors. When chapter 7 assets total $50,000 or less, the trustee’s statutory
compensation alone is at least ten percent, not including any expenses related to
liquidation. As an example of administrative costs, at present this court is approving
sliding fee scale fees for auctioneers, starting at ten percent of the first $5,000, and
reduced for proceeds in excess of $5,000, plus expenses. Based solely on the trustee’s
compensation and the auctioneer’s fees, the ten percent flat rate is more than reasonable
and beneficial to the unsecured creditors. Consequently, for the purposes of §
1325(a)(4), the liquidation value will be reduced by a ten percent flat rate for
administrative fees, expenses, and costs of sale.
With this understanding of the chapter 7 liquidation value, the court now turns to
the evidence presented by the parties.
1. 2004 Jeep Liberty Renegade
First, a question of fact is apparent from the parties’ valuations. Trustee’s value is
based on a two wheel drive vehicle, while Debtors appraisal identifies the vehicle as a
4x4. Since Debtors’ appraisal is based on a personal inspection by an auctioneer, the
court finds the vehicle is a four wheel drive vehicle, not a two wheel drive. Debtors’
appraisal places a value of $6,000 on the vehicle, but does not specify whether this
amount is a retail, trade-in, auction or wholesale value. The auctioneer does identify two
items affecting condition: the need for cleaning and repair of a dent in the driver’s door.
Looking at both nadaguides.com and kbb.com trade-in values for this vehicle, the
values range from $4,900 for a rough trade-in to $6,750 for a clean trade-in (NADA) and
$4,187 for a fair trade-in to $5,587 for an excellent trade-in (Kelley Blue Book). Exhibit
A. Based on the damage and cleaning noted by the auctioneer, and the explanations of
condition ratings by NADA and Kelley Blue Book, it is clear that the car would not have
4
11-62129-rk Doc 39 FILED 01/31/12 ENTERED 01/31/12 14:43:07 Page 4 of 18
the peak values. As a result, it appears that the auctioneer’s value is clearly within the
range of the trade-in values and the court accepts his $6,000 figure as the value for the
Jeep Liberty Renegade. This amount is to be reduced by Debtors’ exemption of $4,600
and the ten percent flat rate for administrative expenses ($600), resulting in a chapter 7
liquidation value of $800.00.
2. 1994 Honda Civic del Sol
According to Debtors, the Honda del Sol has over 100,000 miles and is in average
condition. There is no evidence in the record supporting these claims, but neither is there
evidence disputing it. Trustee has based her appraisal on the Si model with 120,000
miles. Debtors, on the other hand, have adjusted for 99,000 miles. 2 Upon review of
nadaguides.com, the average trade-in value for a 1994 Honda Civic del Sol Si coupe is
$3,100.00; kbb.com shows a trade-in value for this vehicle, in good condition, as
$1,826.00. Exhibit B. Without any other information or guidance from the parties, the
court will merely split the difference at $2,463.00. After reducing for administrative fees
and expenses, the chapter 7 liquidation value is $2,217.
3. 1995 Ford Ranger
In their brief, Debtors state the Ford Ranger is in average condition and has
110,000 miles. Debtors used two sources to obtain their value of the vehicles. Exhibit C.
The first page indicates the truck is a regular cab short bed. The second page indicates it
is an STX model. From Trustee’s exhibits, the truck is identified as a regular cab, 1/2
ton, V-6 pick-up. Based on the incomplete and non-cohesive information presented, as
well as the paucity of information on the model, equipment and features, the court cannot
determine the value of the Ford Ranger. The court will provide the parties additional
time to either resolve the value of the Ford Ranger between themselves or submit
additional information for review.
4. 1989 Chevy Cavalier
Debtors claim, and Trustee does not dispute, that the Cavalier is inoperable and
its value is in the scrap. Debtors contend they would obtain $225 and $300, for an
average of $262.50, for scrapping the vehicle. According to Debtors, they “may be able
to get up to $450.00 if they could deliver the vehicle directly to the junkyard.” (Debtors’
brief, p. 3). However, Debtors allege since the vehicle is inoperable, they would need to
tow the vehicle, so the lower amount is appropriate. Trustee has valued the vehicle at
$500. None of these values is supported anywhere in the record, nor is any towing fee
itemized. With an incomplete record, the court cannot ascertain the value of the
Cavalier. The parties will be given an opportunity to reach an agreement as to value or to
present additional evidence to the court.
5. 1974 Volkswagen Beetle
Debtors value the Beetle at $1,500. They state that they have unsuccessfully
2 Looking at the very top of Debtors’ Exhibit B, it appears that Debtors are also
submitting values for the del Sol Coupe Si, so the court will base its figures on this
model. In the event this is erroneous, either party may petition for further review of this
finding.
5
11-62129-rk Doc 39 FILED 01/31/12 ENTERED 01/31/12 14:43:07 Page 5 of 18
attempted to sell this vehicle for $1,500 from their front yard. They indicate they are
willing to surrender the Beetle if it is worth more than $1,500. According to Trustee’s
exhibit, the average retail for this vehicle is $5,375.
The court finds Debtors’ valuation unreliable. First, Debtors have not provided
any evidence, such as an affidavit, to support their statement. Second, an unadvertised
sale from a front yard is not a good indicator of the value of this vehicle, especially when
absolutely no information is provided about the length of time it was offered for sale, the
nature of the traffic in front of the house, how it was displayed, and similar facts. There
is nothing in the record about condition or mileage. 3 Further, a valuation must be based
on a concrete market. Debtors provide no information on how they arrived at the figure
they attach to the vehicle. While the court recognizes that Trustee’s value is a retail
value, it is inherently more reliable than Debtors’ pie-in-the sky number. The court
therefore accepts Trustee’s valuation. Since this value exceeds $1,500, it appears
Debtors have agreed to surrender the vehicle for sale, with the proceeds to be paid in to
the chapter 13 plan.
6. 2007 small open utility trailer
Trustee has presented no arguments concerning the value of this asset. Debtors
value the trailer at $500 and have claimed an exemption of $1,150 in the trailer.
Adopting these figures, the court finds that there is no non-exempt equity in the trailer
and the asset would not be subject to liquidation in a chapter 7 case. It therefore has no
liquidation value for the purposes of § 1325(a)(4).
CONCLUSION
In order to confirm a plan, a court must find that the plan meets the best interest
of creditors test under 11 U.S.C. § 1325(a)(4). In other words, the plan must pay a
minimum dividend to unsecured creditors based on the amount the unsecured creditors
would receive if the case where administered under chapter 7. This liquidation value is
based on the value of the assets less administrative expenses. In asset chapter 7 cases,
where the assets are vehicles, liquidation is generally accomplished through an auction.
As a result, the appropriate liquidation value is based on the wholesale or trade-in value
of the vehicle, less a ten percent flat fee to account for the administrative expenses.
On the facts presented in this case, the court finds that the liquidation value of the
2004 Jeep Liberty Renegade is $800.00 and the del Sol’s liquidation value is $2,217.
The trailer has no liquidation value. The parties failed to provide sufficient evidence or
information to calculate the values of the 1995 Ford Ranger and the 1989 Chevy Cavalier
and are instructed to provide additional information.
An order in accordance with this decision will be issued immediately.
# # #
3 A grainy picture included in Trustee’s exhibits may indicate the vehicle is in above
average condition for its age.
6
11-62129-rk Doc 39 FILED 01/31/12 ENTERED 01/31/12 14:43:07 Page 6 of 18
SERVICE LIST
Toby L Rosen
400 W Tuscarawas St
Charter One Bank Bldg
4th Floor
Canton, OH 44702
Nicole L. Rohr
Thrush & Rohr LLC
4410 22nd Street NW
Canton, OH 44708
7
11-62129-rk Doc 39 FILED 01/31/12 ENTERED 01/31/12 14:43:07 Page 7 of 18
Jeep Liberty 2004 - Car Standard Equipment - NADAguides.com Of... http://www.nadaguides.com/Cars/2004/Jeep/Liberty-V6-4WD/Utilit...
=) The Power of Vehicle Information Close Window
NADAguides.com 1/27/2012
2004 Jeep Liberty
Utility 4D Renegade 4WD
NADAguides.com Price Report
Rough Average Clean Clean
Trade-in Trade-In Trade-In Retail
Base Price $5,300 $6,325 $7,150 $9,850
Mileage: 124,511 miles -$525 -$525 -$525 -$525
Options:
Aluminum/Alloy Wheels Std. Std. Std. Std.
Towing/Camper Pkg $125 $125 $125 $150
TOTAL PRICE $4,900 $5,925 $6,750 £$9,475
Standard Equipment
Standard Equipment Details
Engine Specifications
Type: Gas V6
Size: 3.7L/226
Horsepower: 210 @ 5200 RPM
Torque: 235 @ 4000 RPM
Max Towing Capacity: 3500
Drive Train
Drive Train: 4-Wheel Drive
Transmission: 5 speed HD Manual w/OD
Safety
Air Bag-Frontal-Driver
Air Bag-Frontal-Passenger
Air Bag-Side Body-Front
Brakes-ABS
Brakes-Type-4 Wheel DISC
Engine Immobilizer
Security System
Comfort & Convenience
Air Conditioning-Front
Auto-Dimming Rearview Mirror
Cruise Control
Keyless Entry
Max Seating Capacity: 5
Mirror(s)-Power
Mirrors-Vanity-Driver
Mirrors-Vanity-Driver Illumination
Mirrors-Vanity-Passenger
Mirrors-Vanity-Passenger Illumination
Power Locks
Reading Lamps-Front Gyan 2p ees eters ae ey
Seat Trim-Cloth : EXHIBIT
Seat Trim-Leatner oh
Seat Trim-Vinyl ae
Seat-Power Driver Ey
Seat-Power Passenger fa
Seat-Rear Pass-Through
L of 3 11-62129-rk Doc 39 FILED 01/31/12 ENTERED 01/31/12 14:43:07 Page 82082 11:03 AM
Jeep Liberty 2004 - Car Standard Equipment - NADAguides.com Of... http://www.nadaguides.com/Cars/2004/Jeep/Liberty-V6-4WD/Uulit...
Seats-Front Bucket
Steering Wheel-Adjustable
Steering Wheel-Audio Controls
Steering Wheel-Leather
Steering-Power
Trip Computer
Universal Garage Door Opener
Windows-Power
Music & Entertainment
Audio-AM/FM Stereo
Audio-Cassette Player
Audio-CD Changer
Audio-CD Player
Audio-Upgrade Sound System
Interior
Auxiliary Pwr Outhet
Floor Mats
Exterior
Doors: 4
Fog Lamps
Luggage Rack/Roof Rack
Mirror(s)-Heated
Rear Window Defogger
Roof-Generic-Sun/Moon
Roof-Sun/Moen
Tow Hitech
Tow Hoaks
Windows-Deep Tinted
Wipers-Intermittent
Wipers-Variable Speed Intermittent
Tires
Front Tire Size: P235/70R16
Rear Tire Size: P235/70R16
Spare Tire Size: P235/70Ri6
Wheels
Front Wheel Material: Aluminum
Rear Wheel Materiai: Aluminum
Back to top
Rough Trade-In: $4,900
Rough Trade-in values reflect a vehicle in rough condition. Meaning a vehicle with significant mechanical defects requiring
repairs in order to restore reasonable running condition. Paint, body and wheel surfaces have considerable damage to their
finish, which may include dull or faded (oxidized) paint, small to medium size dents, frame damage, rust or obvious signs of
previous repairs. Interior reflects above average wear with inoperable equipment, damaged or missing trim and heavily soiled
{permanent imperfections on the headliner, carpet, and upholstery. Vehicle may have a branded title and un-true mileage.
Vehicle will need substantial reconditioning and repair to be made ready for resale. Some existing issues may be difficult to
restore. Because individual vehicle condition varies greatly, users of NADAguides.com may need to make independent
adjustments for actual vehicle condition.
Average Trade-In: $5,925
The Average Trade-In values on nadaguides.com are meant to reflect a vehicle in average condition. A vehicle that is
mechanically sound but may require some repairs/servicing to pass all necessary inspections; Paint, body and wheei surfaces
have moderate imperfections and an average finish and shine which can be improved with restorative repair; Interior reflects
some soiling and Wear in relation to vehicle age, with all equipment operable or requiring minimal effort to make operable;
Clean title history; Vehicle will need a fair degree of reconditioning to be made ready for resale. Because individual vehicle
condition varies greatly, users of nadaguides.com may need to make independent adjustments for actual vehicle condition.
Clean Trade-In: $6,750
Clean Trade-In values reflect a vehicle in clean condition. This means a vehicle with ne mechanical defects and passes all
necessary inspections with ease, Paint, body and wheels have minor surface scratching with a high gloss finish and shine.
Interior reflects minimal soiling and wear with all equipment in complete working order. Vehicle has a clean title history,
Vehicle will need minimal reconditioning to be made ready for resale. Because individual vehicle condition varies greatly,
users of NADAguides.com may need to make independent adjustments for actual vehicle condition.
Clean Retail: $9,475
2 of 3 11-62129-rk Doc39 FILED 01/31/12 ENTERED 01/31/12 14:43:07 Page 9/6#/482 11:03 AM
Jeep Liberty 2004 - Car Standard Equipment - NADAguides.com Of... hitp://www.nadaguides.com/Cars/2004/Jeep/Liberty-V6-4WD/Utilit...
Clean Retail values reflect a vehicle in clean condition. This means a vehicle with no mechanical defects and passes all
necessary inspections with ease. Paint, body and wheels have minor surface scratching with a high gloss finish and shine.
Interior reflects minimal soiling and wear with all equipment in complete working order, Vehicle has a clean title history.
Because individual vehicle condition varies greatly, users of NADAguides.com may need to make independent adjustments
for actual vehicle condition. Note: Vehicles with low mileage that are in exceptionally good condition and/or include a
manufacturer certification can be worth a significantly higher value than the Clean Retail price shown.
The consumer values on NADAguides.com are based on the Consumer Edition of the NADA Official Used Car Guide® and should not be
utilized for Industry purposes. The consumer values may vary from the NADA Official Used Car Guide@ values presented to you by
insurance companies, banks, credit unions, government agencies and car dealers due to vehicle condition, regional market differences and
frequency of updates.
ADVERTISEMENT
© Copyright 2012 National Appraisal Guides Inc. All Rights Reserved.
3 of3 11-62129-rk Doc 39 FILED 01/31/12 ENTERED 01/31/12 14:43:07 Page 1?d#4¢8 11:03 AM
2004 Jeep Liberty Renegade Sport Utility 4D Trade In Values - Kell... http:/Avww.kbb.com/jeep/liberty/2004-jeep-liberty/renegade-sport-ut....
© ZIP CODE: 44706 | Sign in {or Sign up}
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lof 11-62129-rk Doc39 FILED 01/31/12 ENTERED 01/31/12 14:43:07 Page IéPdlg 11:05 AM
2004 Jeep Liberty Renegade Sport Utility 4D Trade In Values - Kell...
2004 Jeep Liberty
Renegade Sport Utility 4D
edit options | change style ;
Mileage: 1245 1 change
Private Party Value
Trade-In Value
http:/Avww.kbb.com/jeep/liberty/2004-jeep-liberty/renegade-sport-ut...
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MPG: City 22 / Hwy 32 MPG: City 22 / Hwy 32 MPG: City 22 / Hwy 32
Engine: 4-Cyl, 2.4L Engine: 4-Cyl, 244 Engine: 4-Cyl, Flexibie
Consumer Rating: 4.1 Consumer Rating: 3.9 Fuel, 244
Consumer Rating: 4.2
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@ 2012 Kelley Slue Book Co., Inc. All rights reserved. 1/27/2012-2/2/2012 Edition far Ohio 44706, The specific information required to determine the value for this particular vebicla was supplied
by the person generating this report. Vehicle valuations are opinions and may vary fram vehicte to vehicte. Actual valations will vary based upon market conditions, specifications, vehicte
condition or other particular circumstances pertinent to this particular vehicle or the transaction ar the parties to the transaction, This report is intended far the individual use of Ure parson
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1994 Honda Prices, Values & Specs - NADAguides http://www.nadaguides.com/Cars/1994/Honda/Civie-Del-Sol/Coup...
The Pewer of Vehisie Information & Close Window
NADAguides.com 1/27/2042
1994 Honda Civic Del Sal
Coupe 2D Si
NADAguides.com Price Report
Rough Average Clean Clean
Trade-In Trade-In Trade-In Retail
Base Price $1,225 $1,900 $2,450 $3,650
Mileage: 100,000 miles $1,200 $1,200 $1,200 $1,200
TOTAL PRICE $2,425 $3,100 $3,650 $4,850
values
Back to top
Rough Trade-In: $2,425 :
Rough Trade-in values reftect a vehicle in rough condition. Meaning a vehicle with significant mechanical defects requiring
repairs in order to restore reasonable running condition, Paint, body and wheel surfaces have considerable damage to their
finish, which may include dull or faded (cxidized) paint, small to medium size dents, frame damage, rust or obvious signs of
previous repairs. Interior reflects above average wear with inoperable equipment, damaged or missing trim and heavily soiled
{permanent imperfections on the headliner, carpet, and upholstery. Vehicle may have a branded title and un-true mileage,
Vehicle will need substantial reconditioning and repair to be made ready for resale. Some existing issues may be difficult to
restore, Because individual vehicle condition varies greatly, users of NADAguides.com may need to make independent
adjustments for actual vehicle condition.
Average Trade-In: $3,100
The Average Trade-In values on nadaguides.com are meant to reflect a vehicle in average condition. A vehicle that is
mechanically sound but may require some repairs/servicing to pass all necessary Inspections; Paint, body and wheel surfaces
have moderate imperfections and an average finish and shine which can be improved with restorative repair; Interior reflects
some soiling and wear in relation to vehicle age, with all equipment operable or requiring minimal effort to make operable;
Clean title history; Vehicle will need a fair degree of reconditioning to be made ready for resale. Because individual vehicle
condition varles greatly, users of nadaguides.com may need ta make independent adjustments for actual vehicle condition.
Clean Trade-In: $3,650
Clean Trade-In values reflect a vehicle in clean condition. This means a vehicle with no mechanical defects and passes all
necessary inspections with ease. Paint, body and wheels have minor surface scratching with a high gloss finish and shine.
Interior reflects minimal soiling and wear with all equipment in complete working order. Vehicle has a clean title history.
Vehicle will need minimal reconditioning to be made ready for resale. Because Individual vehicle condition varies greatly,
users of NABAguides.com may need to make independent adjustments for actual vehicle condition.
Clean Retail: $4,850
Clean Retail values reflect a vehicle in clean condition. This means a vehicle with no mechanical defects and passes all
necessary inspections with ease, Paint, body and wheels have minor surface scratching with a high gloss finish and shine.
Interior reflects minimal soiling and wear with all equipment in complete working order, Vehicle has a clean titte history.
Because individual vehicle condition varies greatly, users of NADAguides.com may need to make independent adjustments
for actual vehicle condition. Note; Vehicles with low mileage that are in exceptionally good condition and/or include a
manufacturer certification can be worth a significantly higher value than the Clean Retail price shown.
The consumer values on NADAguides.com are based on the Consumer Edition of the NADA Official Used Car Guide@ and should not be
utilized for industry purposes. The consumer values may vary from the NADA Official Used Car Guide® values presented to you by
insurance companies, banks, credit unions, government agencies and car dealers due to vehicle cendition, regional market differences and
frequency of updates.
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1994 Honda del Sol Si Coupe 2D Trade In Values - Kelley Blue Book hitp://www.kbb.com/honda/del-sol/1994-honda-del-sol/si-coupe-2d/...
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1994 Honda del Sol Si Coupe 2D Trade In Values - Kelley Blue Book —_http://www.kbb.com/honda/del-sol/ 1994-honda-del-sol/si-coupe-2d/...
1994 Honda del Sol
Si Coupe 2D
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$1,976
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$1,476 :
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1994 Honda del Sol Si Coupe 2D Trade In Values - Kelley Blue Book
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© 2012 Kelley Blug Sook Co., ine. All rights reserved, 1/27/2012-2/2/2022 Edition for Ohle 44706, Tha specific information required to determine the valve for this particular vehicle was suppired
by the person generating this report. Vehicle valuations are opinions and may vary from vehicie to vahicte, Actual valuations will vary based upon market conditions, specifications, vehicle
condition or other particuiar circumstances pertinant to this particutar vehicta or the transaction or the parties ta the transaction, This report is Intended for the individual use of the person
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