In Capital One Auto Finance v. Osborn, the 8th Circuit heard a case where the Chapter 13 debtors objected to an unsecured deficiency claim filed by the purchase-money motor vehicle lender, and the lender objected to the provision in the debtors’ proposed plan that provided for the surrender of the motor vehicle in which the creditor had an interest in full satisfaction of its PMSI claim.
Undersecured vehicles in Chapter 13
The Bankruptcy Court entered an order sustaining debtors’ objection and overruling the creditor’s objection, based on the effects of the hanging paragraph added to the Code by the 2005 law.
The creditor appealed. The Court of Appeals held that the “hanging paragraph” does not eliminate an under secured creditor’s deficiency claim when, in a Chapter 13 plan, the debtors propose to surrender a 910 car.
The Eight Circuit determined two important legal issues in this case. 1. The debtor’s historically-based disposable income calculation derived from Form B22C is a starting point for determining projected disposable income. However, the final determination can take into consideration the income and expenses reported in Schedules I and J.
2. The “applicable commitment period” was a temporal concept, such that above median debtors must propose and confirm a plan providing payments for a period of 60 months.