The opinion of the court was delivered by: Michael M. Mihm United States District Judge
This matter is now before the Court on Appellants Clarence and Betty Powell (the "Powells"), Appeals from the Orders of the Bankruptcy Court denying the Debtors' confirmation plan and granting the Motion for Relief From Stay by Ford Motor Credit Company. For the reasons stated herein, the decisions of the Bankruptcy Court are AFFIRMED.
On September 22, 2008, the Powells commenced their bankruptcy proceeding by filing a Voluntary Petition pursuant to Chapter 13 of the Bankruptcy Code. An Amended Chapter 13 Plan was filed on October 27, 2008, in which the Powells proposed to pay Ford Motor Credit Company ("Ford"), a secured creditor, the sum of $24,000.00 plus interest on a 2007 Lincoln Town Car. The balance owed on the car was actually $50,139.82 plus interest. Ford then filed an objection to the Amended Plan seeking compensation for the entire balance owed. Following a trial, the Bankruptcy Court held that the Powells had failed to sustain their burden of proof to establish that the car was not acquired for personal use. As a result, Ford's objection was sustained and the Powell's Amended Plan was denied confirmation.
On April 7, 2009, the Powells filed a Second Amended Plan proposing to surrender the car to Ford. Ford then filed a Motion for Relief from Stay, asserting that Mr. Powell was in default under the terms and provisions of their agreement by failing to make the required monthly payments and that relief was necessary to prevent irreparable damage to Ford. A Notice of Hearing was issued for hearing on May 11, 2009. No objections were filed prior to the hearing, and no objection was made during the hearing. The Bankruptcy Court then granted the Motion and lifted the automatic stay as to Ford's claim for the car.
The Powells responded by filing two appeals. The first appeal challenges the denial of their Amended Plan, while the second appeal contests the lifting of the automatic stay with respect to the car. This Order follows.
Jurisdiction and Standard of Review
This Court has jurisdiction to review the decision of the Bankruptcy Judge pursuant to 28 U.S.C. § 158(a). District courts are to apply a dual standard of review when considering a bankruptcy appeal. The findings of fact of the Bankruptcy Judge are reviewed for clear error, while the conclusions of law are reviewed de novo. In re Midway Airlines, 383 F.3d 663, 668 (7th Cir. 2003); In re Smith, 286 F.3d 461, 465 (7th Cir. 2002); In re Yonikus, 996 F.2d 866, 868 (7th Cir. 1993); In re Ebbler Furniture and Appliances, Inc., 804 F.2d 87, 89 (7th Cir. 1986); see also, Bankruptcy Rule 8013 (West 1995).
The Powells present two issues on appeal: (1) whether the bankruptcy court erred in denying confirmation of their Amended Plan, and (2) whether the bankruptcy court erred in granting Ford's Motion for Relief From Stay. Each issue will be addressed in turn.
At trial, the Bankruptcy Court made the following findings of fact. Mr. Powell is an over-the-road truck driver and also occasionally serves as a private pilot. Mrs. Powell works as a security guard and also has an unspecified part-time job. Within 910 days of filing bankruptcy, Mr. Powell purchased a new 2007 Lincoln Town Car, financing the purchase with Ford. After accounting for a down payment and negative equity on a trade-in, the amount financed was $54,329.78 plus 7.9% interest for 72 months. The Certificate of Title names Mr. Powell as the sole owner and lists his address and the Powell's residence.
In their Schedules submitted in connection with their Amended Plan, the Powells value the car at $24,000. Ford filed a claim on the car loan asserting a balance of $50,139.82 as of the petition date. The Amended Plan proposed to bifurcate Ford's claim into a secured claim for $24,000 plus 7% interest, with the remaining balance owed as an unsecured claim. Ford objected to this treatment as contrary to the unnumbered hanging paragraph located immediately following § 1325(a)(9) of the Bankruptcy Code, which prohibits the bifurcation or strip-down of an under secured loan, leaving the parties to their rights and obligations under the contract.
Section 506(a) of the Bankruptcy Code provides for a division of loans into secured and unsecured portions, with the unsecured portion representing the amount by which the debt exceeds the current value of the collateral. In re Wright, 492 F.3d 829, 830 (7th Cir. 2007). Section 1325 of the Bankruptcy Code specifies the circumstances under which a Chapter 13 repayment plan can be confirmed. The so-called "hanging paragraph" of ...