722 Redemption Quarterly Newsletter

A Guide to Fighting Redemption Objections

By: Steven Elmer

Redemption motions are often filed without a response by creditors. However, in those rare cases where an objection arises, it is based solely off the valuation of the automobile.   Despite § 506(a)(2) stating the contrary, creditors demand full retail for the deteriorating asset.  In order to assist you in fighting this battle, 722 Redemption has developed a detailed vehicle analysis based off of the bankruptcy code and applicable case law.

The starting point in the process involves determining the retail valuation under either NADA, KBB or Edmunds.  Next, 722 will discuss all the flaws and defects of the vehicle with your clients. Once these are determined, 722 works with experts to determine the “retail” cost of repairs necessary to make the car “market ready.”  Finally, the “retail” cost for the repairs is subtracted from NADA, KBB or Edmund.  What remains is the true and accurate replacement value of your clients’ vehicle, under the guidance of § 506(a)(2).

722’s process is based off of judicial interpretation of § 506(a)(2).  Courts have concluded it is appropriate to subtract the “retail” cost of repairs from the NADA, KBB or Edmunds “retail” valuation.  See In Re: Morales, 387 B.R. 36 (Bankr.CD.Cal 2008); and In Re: Ortiz, 06-16243-BKRBR (Bankr.S.D.Fla.Fed.27 2007).   “These cases suggest that the emergent approach to valuation under § 506(a)(2) requires bankruptcy courts to reduce the NADA Guide retail value, or other appropriate retail value, by an amount appropriate in light of evidence concerning the vehicles condition.”  In Re: Morales, 387 B.R. at 42-3.  What underlies this reasoning is the divergent definitions of “retail” between the Bankruptcy Code than that of KBB or Nada.  “The Bankruptcy Code’s definition of ‘retail’ includes an adjustment for the age and condition of the vehicle; KBB defines ‘retail’ as the price for a vehicle that is in ‘excellent condition’ with the proviso that less than 5% of vehicles for sale qualify as ‘excellent.’ Clearly these two are not equivalent and…reliance on KBB retail value is misplace.” Id.

Despite what creditors argue, deductions to the retail valuation are allowed and should be used in all cases.  The chances are great that your clients’ car falls well within the 95% of vehicles that do not qualify as “excellent”.  This makes accuracy crucial in the process.  Let the experts at 722 help you and your clients determine the true value of their automobile.

Please watch local Iowa Attorney Mike Jankins discuss the benefit to his clients of working with 722 Redemption to redeem their automobiles:

2016 Chapter 7 – Quarter 2 (Apr-Jun) Filing List Available Now!

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Conferences and Seminars

722 Redemption will be attending the upcoming events. We hope to see you there.

CEC Fall Consumer Bankruptcy Seminar – October 28th, 2016, Columbus, OH

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