Case Number 06-10872-WHD.United States Bankruptcy Court, N.D. Georgia, Newnan Division.
August 3, 2006
IN PROCEEDINGS UNDER CHAPTER 13 OF THE BANKRUPTCY CODE
W. DRAKE JR., Bankruptcy Judge
ORDER
Before the Court is a request by Danco Financial, Inc. (hereinafter “Danco”) to increase pre-confirmation adequate protection payments. The request arises in connection with the voluntary Chapter 13 petition filed by Tiana Combs (hereinafter the “Debtor”). The Debtor opposes the Motion. This matter constitutes a core proceeding, over which this Court has subject matter jurisdiction. See 28 U.S.C. § 157(b)(2)(M); § 1334.
FINDINGS OF FACT
1. The Debtor filed a voluntary petition under Chapter 13 of the Bankruptcy Code on June 1, 2006.
2. In February 2006, the Debtor purchased a 2000 Chevrolet Malibu (hereinafter the “Vehicle”) from Danco. Danco financed the purchase, and the Debtor granted Danco a security interest in the Vehicle.
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3. Prior to filing the petition, the Debtor made only one payment on the loan secured by the Vehicle.
4. The Debtor’s proposed Chapter 13 plan indicates the Debtor’s intent to pay pre-confirmation adequate protection payments of $75 per month to Danco.
5. The confirmation hearing on the Debtor’s proposed Chapter 13 plan was held on July 27, 2006. At that time, Danco objected to confirmation on the basis, among others, that the preconfirmation adequate protection payments were insufficient.
6. The Debtor announced during the confirmation hearing her intent to convert her case to one under Chapter 7.
CONCLUSIONS OF LAW
Section 1326(a)(1) of the Bankruptcy Code provides that:
Unless the court orders otherwise, the debtor shall commence making payments not later than 30 days after the date of the filing of the plan or the order for relief, whichever is earlier, in the amount —
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that provides adequate protection directly to the creditor holding an allowed claim secured by personal property to the extent the claim is attributable to the purchase of such property by the debtor for that portion of the obligation that becomes due after the order for relief, reducing the [plan] payments by the amount so paid and providing the trustee with evidence of such payment, including the amount and date of payment.
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11 U.S.C. § 1326(a)(1)(C).[1] The Court, “subject to section 363 may, upon notice and a hearing, modify, increase, or reduce the payments required under this subsection pending confirmation of a plan.” 11 U.S.C. § 1326(a)(3).[2]
Under section 363(e), a secured creditor, whose interest in property of the estate is not adequately protected, can move the court to prohibit the use of that property or to condition its use on the provision of adequate protection. See 11 U.S.C. § 363(e). In this regard, section 361 states that “when adequate protection is required under section 362,363, or 364 of this title of an interest of an entity in property, such adequate protection may be provided by . . . requiring . . . a cash payment or periodic cash payments to such entity, to the extent that the stay under section 362 . . ., use, sale, or lease under section 363 . . ., or any grant of a lien under section 364 . . . results in a decrease in the value of such entity’s interest in such property.” 11 U.S.C. § 361. Although section 361 does not directly reference section 1326, the adequate protection payments required by section 1326 are
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clearly intended to provide for the protection of the creditor’s interest while the debtor is using the property and is benefitting from the protection of the automatic stay. Without adequate protection, the secured creditor would be entitled to move for either relief from the stay or for the provision of adequate protection as a condition to the continued use of the property. See, e.g., COLLIER ON BANKRUPTCY, ¶ 1326.02[1][c]. Accordingly, it is appropriate to seek guidance from section 361 to determine the proper amount of adequate protection payments to be made in accordance with section 1326. See In re Bufford, 343 B.R. 827, 838-39 (Bankr. N.D. Tex. 2006).
For purposes of section 361, the phrase “value of such entity’s interest in such property” means “the value of the collateral.”See In re Delta Resources, Inc., 54 F.3d 722, 728 (11th Cir. 1995) (quoting United Savs. Ass’n v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 365 (1988)). Accordingly, the Court must determine what amount of money would compensate the lienholder for the decrease in the value of the collateral from the existence of the stay or the use of the property by the debtor during the time between the filing of the case and confirmation, or, in this case, the surrender of the Vehicle. See In re Brown, Case No. 05-86731-JB at 18 (Bankr. N.D. Ga. July 24, 2006).
Unfortunately, Danco has provided the Court with absolutely no evidence regarding the value of the vehicle or the rate of depreciation. Instead, Danco relied solely on its contention that the Debtor filed her petition in bad faith. The Debtor’s bad faith or lack of good faith is certainly relevant to whether the Debtor’s plan is confirmable or whether the
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Debtor’s case should be dismissed. Neither of those issues is before the Court, however, and the Court has no relevant evidence upon which to determine whether $75 per month provides adequate protection for Danco’s interest in the Vehicle. For this reason, Danco’s request must be, and hereby is, DENIED.
IT IS SO ORDERED.
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