Debtor Could Not Cram Down Auto Lender’s Claim by the Amount Equal to the Negative Equity, GAP Insurance and Service Contract that she Financed

Debtor Could Not Cram Down Auto Lender’s Claim by the Amount Equal to the Negative Equity, GAP Insurance and Service Contract that she Financed

On October 7, 2016, Debtor purchased a new Dodge Ram vehicle (the “Dodge”). The price of the Dodge was $43,176.00. She traded in a Chevrolet Silverado (the “Silverado”) for the purchase. She owed more on the Silverado than its trade-in value, resulting in negative equity of $6,343.65. Instead of paying off the loan on the old car, Debtor had the negative equity included in the financing of the Dodge. The negative balance, GAP insurance, a service contract, and taxes were added to the purchase price for the Dodge, resulting in total financing of $44,892.56 after deducting the trade-in and cash down payment.

Debtor filed a voluntary Chapter 13 on January 30, 2017. The Credit Union filed Proof of Claim No. 7 asserting a claim in the amount of $44,006.96. There is no dispute this is the total amount due the Credit Union. Debtor and the Credit Union agree the Dodge was purchased within 910 days of the date of the filing of Manor’s bankruptcy. The parties agree the value of the Dodge is $29,500.00.

The issue in this case is whether Manor can cramdown the value of the Credit Union’s collateral to its value or, alternatively, whether the secured claim of the Credit Union can be reduced by the amounts of the negative equity, GAP insurance, service contract, and taxes that were financed by Debtor.

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