Siding with Minority, Bankruptcy Court Rules the 365-Day Anti-Modification Rule of Section 1325(a)(9) Applies to Vehicles

Siding with Minority, Bankruptcy Court Rules the 365-Day Anti-Modification Rule of Section 1325(a)(9) Applies to Vehicles

Within one year of filing his chapter 13, the Debtor jointly purchased a vehicle and cosigned a note with his son. The son does not live with the Debtor and the Debtor has not used the vehicle.

At filing, the Debtor proposed to cram down the total amount owed to the value of the vehicle. The Debtor argued that the 730-day anti-modification provision in the hanging paragraph of Section 1325(a)(9) doesn’t apply because the vehicle was not purchased for his benefit.

The Creditor argued that the 365-day anti-modification section of Section 1325(a)(9) applied as a vehicle is included as “any other thing of value.”

The Debtor countered with the argument that the 365-day rule doesn’t apply to vehicles.

Section 1325(b)(9)(“hanging paragraph”) states:

For purposes of [11 U.S.C. § 1325(a)(5), the subsection addressing treatment of secured claims in a Chapter 13 plan,] section 506 shall not apply to a claim described in that paragraph if the creditor has a purchase money security interest securing the debt that is the subject of the claim, the debt was incurred within the 910-day period preceding the date of the filing of the petition, and the collateral for that debt consists of a motor vehicle (as defined in section 30102 of title 49) acquired for the personal use of the debtor, or if collateral for that debt consists of any other thing of value, if the debt was incurred during the 1-year period preceding that filing.

11 U.S.C. § 1325(a)(9). The court reviewed the competing views.

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