§ 76.4     Valuation in Chapter 13 Cases before Rash
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 76.4, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

Prior to the Supreme Court’s 1997 decision in Associates Commercial Corp. v. Rash,1 the courts debated many different standards for valuing collateral at confirmation in Chapter 13 cases. The heat of these pre-Rash opinions produced little light at enormous cost to debtors and creditors. Discussed in detail below,2 Rash gave us the “replacement value” standard at cram down in a Chapter 13 case—at least with respect to personal property retained by a debtor engaged in business. Unfortunately, this standard was adopted by the Supreme Court without a clear methodology, and the standard itself was festooned with “adjustments” that rekindle the debates littering the pre-Rash landscape. The pre-Rash valuation case law collected in this section retains vitality because how we got where we are will color how the courts interpret and apply Rash in the next generation of valuation litigation.

[2]

Prior to Rash, some courts held that it was appropriate to value collateral for § 1325(a)(5) purposes at what would be realized by the creditor after repossession at a “commercially reasonable disposition.”3 Commercially reasonable disposition, a concept borrowed from the Uniform Commercial Code,4 left much to be desired as a standard for determining the allowed amount of secured claims at confirmation. A bank that is not in the business of owning or managing real or personal property might conduct a commercially reasonable disposition by foreclosure sale or sale at wholesale. A car dealer that carries its own paper might dispose of a repossessed car in a commercially reasonable manner on its own lot at a price at or above the retail value of the car. A rule of commercial reasonableness permitted great discretion for courts and offered little guidance for debtors and creditors.5 It had the salutary effect of encouraging negotiation of the value of collateral because almost any outcome was possible at a contested valuation hearing at which commercial reasonableness was the standard.

[3]

Especially for personal property, many courts adopted the view that wholesale was the value of collateral at confirmation in a Chapter 13 case.6 Led by the U.S. Court of Appeals for the Ninth Circuit,7 these courts reasoned that creditors not in the business of buying and selling collateral would at best realize wholesale value upon hypothetical disposition after repossession.8 One court noted that wholesale was the value against which lenders generally measure their risk.9

[4]

The theory behind the wholesale approach weakens when the creditor is also in the business of buying and selling the collateral. Is a car dealer entitled to a higher value for a car than a commercial bank because the dealer can retail and the bank cannot? Would the allowed amount of a claim secured by a car go up if just before confirmation the claim is traded by an ordinary commercial lender to a “We Tote the Note” car retailer?

[5]

It is not easy to determine the wholesale value of most items of personal property. For example, cars must be valued in almost every Chapter 13 case, but there is little agreement how to determine the wholesale value of a car even among those courts adopting wholesale as the standard. Some courts accept used car guides as reliable indicators of wholesale value.10 Other courts find the guides to be unreliable, or limit the use of published guides at valuation hearings.11 Proving the wholesale value of a used water bed or of a five-year-old bedroom suite is punishment that fits the crime—any debtor or creditor so uncompromising as to force the litigation of such questions deserves to have to find the witness qualified to give an expert opinion on the wholesale value of a used water bed.

[6]

Replacement cost12 and the amount that a seller must pay to a financing institution pursuant to a repurchase agreement13 were rejected as measures of value at confirmation. Replacement cost was avoided as a measure of value at confirmation because replacement cost was understood to mean the value of a new item like the one retained by the debtor. In that sense, replacement cost is not a measure of the value of a creditor’s interest in the estate’s interest in property; rather, it is a measure of the value of a hypothetical new item. Similarly, repurchase agreements between a seller of goods and a financier typically require the seller to repurchase defaulted contracts based on a predetermined formula in which the most important factor is the amount financed, not the age, condition or marketability of the collateral itself.14 Sections 506(a) and 1325(a)(5) focus on the value of the collateral. The amount that a creditor or a seller is willing to lend based on that collateral is relevant for § 506(a) purposes only if the balance of the debt is less than the value of the collateral, in which case the allowed amount of the secured claim is limited to the amount of the debt.

[7]

The Supreme Court ultimately adopted a replacement value standard in Rash.15 But in a note, Justice Ginsburg redefined replacement value to mean something other than new collateral.16

[8]

Several courts, including the U.S. Court of Appeals for the Eighth Circuit, adopted retail value as the standard for valuing cars at confirmation in a Chapter 13 case.17 The Eighth Circuit relied on one of the intermediate opinions by the Fifth Circuit in Associates Commercial Corp. v. Rash (In re Rash)18—the valuation case eventually decided by the Supreme Court.19 The tortured history of Rash is a snapshot of the full valuation drama as it played out in Chapter 13 cases across the country.

[9]

The original panel of the Fifth Circuit in Rash concluded that retail value is closest to replacement cost, and replacement cost is the economic value of a truck to a debtor who intends to continue trucking during the Chapter 13 plan. Putting the argument in terms of § 506(a), the Fifth Circuit panel stated:

We agree that the replacement cost approach is the only one that gives full effect to the language of § 506(a). Under that subsection, we must consider the “purpose of the valuation” and “the proposed disposition or use” of the property by the debtor. “If the first sentence of § 506(a) were interpreted to mean that the value must be fixed at the amount which the creditor would receive on foreclosure, then the last sentence of the statute which provides that the value should be determined in light of the purpose of the valuation and of the proposed disposition or use of the property, would be surplusage.” . . . If the debtor retains the property as part of a reorganization, the proper measurement of the estate’s interest in the property is the “going-concern” value of the collateral to the debtor’s reorganization. The value to the debtor of retaining and using the property can best be measured by what he would have to pay to purchase another truck. . . . Reducing the security interest to its wholesale value would allow parties to use bankruptcy to alter their substantive rights as defined outside bankruptcy. . . . [I]t is argued that profit should be eliminated from calculations of the value of the creditor’s lien. . . . This is incorrect, as what is deemed “profit” is actually the opportunity cost of keeping [the creditor’s] money tied up in [the debtor’s] loan and the normal return on capital, without which the loan will not be made.20
[10]

On rehearing, the original panel of the Fifth Circuit confirmed its retail/replacement cost conclusion, adding “since this case was decided, the law in the various circuits has moved decidedly in the direction we have proposed.”21 A dissenting judge, citing the Ninth Circuit’s decision in GMAC v. Mitchell (In re Mitchell), 22 criticized the majority’s conclusion, noting, “The net effect of the panel’s holding is that . . . a nondealer creditor . . . receives a windfall from Rash’s bankruptcy in the form of a retail mark-up over what it would have been entitled to receive under state law upon repossession and sale of the collateral.”23 This disagreement was shared by enough judges of the Fifth Circuit to produce a rehearing en banc.24

[11]

On rehearing en banc, the Fifth Circuit abandoned the retail/replacement cost approach of its original panel. A majority of the entire Fifth Circuit concluded that “valuation should start with what the creditor could realize”25 by repossession and sale of its collateral. The court explained that the original panel’s adoption of replacement cost was in error:

[R]eplacement cost does not reflect the value of the collateral alone. When hypothetically purchasing a replacement for the collateral from a retail dealer, the debtor would be buying the replacement property and the services provided by a dealer, such as inventory storage, reconditioning, marketing, and warranties of quality. . . . The creditor, however, has a security interest only in the property that would be replaced, and not in the hypothetical dealer’s services. . . . [T]he replacement cost of the collateral to the debtor is not an appropriate measure of the creditor’s allowed secured claim because it includes the value of services in which the creditor does not have a security interest. . . . To the extent that cramdown prevents the creditor from foreclosing, the creditor is already protected because it will receive payments whose present value equals the value of its security interest in the estate’s interest in the property. . . . [T]he Supreme Court has arguably rejected the notion that a creditor should receive additional compensation for its inability to foreclose due to cramdown. [United Savings Ass’n of Texas v. Timbers of Inwood Forest Associates, Ltd., 484 U.S. 365, 108 S. Ct. 626, 98 L. Ed. 2d 740 (1988)] . . . [A] replacement cost valuation will produce a windfall to the creditor in the form of a “cramdown premium.” . . . [T]his windfall would come at the expense of holders of unsecured claims.26
[12]

The retail/replacement value approach was also rejected by the U.S. Court of Appeals for the Ninth Circuit in GMAC v. Mitchell (In re Mitchell).27 As the Ninth Circuit explained, that the debtor intends to keep and use a car during the Chapter 13 plan does not entitle the creditor to retail value because what is valued for § 506(a) purposes is the creditor’s interest in the collateral—an interest that is measured by what the creditor would do with the collateral, not by what the debtor proposes to do with the collateral. The Ninth Circuit left open the possibility that in “an unusual case” a secured claim holder might show that it is entitled to “going concern or replacement cost”; but in the usual case, wholesale value best approximates the allowed amount of a claim secured by an automobile in a Chapter 13 case.28

[13]

The Ninth Circuit in Mitchell and the en banc decision of the Fifth Circuit in Rash were well reasoned. Retailers certainly expect a return on their invested capital. However, retail price is a complicated calculation only one aspect of which is the use value of the seller’s money. Lenders and sellers build the risk of default and the risk of bankruptcy into the interest rates they charge, the prices at which they sell and the transaction costs that they charge. To allow sellers and financiers to recover the retail value of personal property in Chapter 13 cases twice compensates for the risk of nonpayment. Lienholders in Chapter 13 cases are already guaranteed present value at confirmation under § 1325(a)(5)(B)(ii).29 Chapter 13 is supposed to be a rehabilitative chapter, favored by Congress over other forms of consumer bankruptcy. This purpose is lost entirely in the analysis of §§ 506(a) and 1325(a)(5) in the original panel decision by the Fifth Circuit in Rash.

[14]

Several courts, including the U.S. Courts of Appeals for the Second and Seventh Circuits, concluded that valuation at confirmation in Chapter 13 cases was appropriately based on an averaging of different standards and methodologies. In In re Hoskins,30 the Seventh Circuit approved the average of retail and wholesale values explained in economic terms as the resolution of a “bilateral monopoly”:

[W]e hesitate to read section 506(a) as designed to give either the debtor or the unsecured creditors a substantive advantage they would not have if they were trying to enforce their rights outside of bankruptcy. . . . The term “bilateral monopoly” refers to a situation in which two persons can bargain over some thing of value only with each other; neither can rely on competition to determine the price of the thing. . . . [W]hile the bank would not agree to forgive or stretch out the loan for less than a package of rights worth as much as the wholesale price of the car, the Hoskinses would not agree to refinance the loan on the basis of a value of the car greater than its retail value. At any price between these two valuations, both parties would be better off than if the bank repossessed the car . . . . The midpoint is what game theorists call a “focal point,” a natural point to which bargaining parties will gravitate if they don’t want to waste a lot of time in bluffing and haggling. . . . So the midpoint of the bargaining range, which is the point that the bankruptcy court chose in this case, is a reasonable approximation of the likely average valuation of the debtor’s automobile that the secured creditor and defaulting debtor would agree upon . . . . Since it is desirable to have a rule for determining value in those low-value cases rather than a flabby standard, and since the midpoint rule is superior from the standpoint of the underlying economics of the situation to either of the alternative rules—wholesale value or retail value—we hold that in Chapter 13 cases involving automobiles and similar assets used to produce income for the debtor the value of the secured interest is the average of the retail and the wholesale value of the collateral.31
[15]

Similarly, in an opinion rejecting all inflexible valuation standards, the Second Circuit in GMAC v. Valenti (In re Valenti)32 approved a local bankruptcy rule that valued cars in Chapter 13 cases at the midpoint between wholesale and retail value:

[N]o fixed value, whether it be retail, wholesale, or some combination of the two, should be imposed . . . . [A]s long as bankruptcy courts consider both the purpose of the valuation and the proposed use and disposition of the property, we believe that they have satisfied the requirements of § 506(a) . . . . [T]he Local Rule applied by the bankruptcy judge in the instant case provides a good guidepost . . . , implicitly accounts for the dual considerations contained in § 506(a) by taking the average of the vehicle’s wholesale and retail values. . . . [I]t gives the bankruptcy court the flexibility to depart from this middle ground whenever circumstances warrant.33
[16]

Then there were quite a number of decisions claiming fair market value as the appropriate standard for valuation in Chapter 13 cases.34 These decisions reject retail, wholesale and replacement value but generally end up confessing that fair market value is enough flexible to embrace any or all of the other theories on the right facts. As explained by one district court:

[T]he legislative history of § 506(a) makes clear that “value” “does not necessarily contemplate forced sale or liquidation value of the collateral; nor does it always imply a full going concern value. Courts will have to determine value on a case-by-case basis, taking into account the facts of each case and the competing interest in the case.” . . . A fixed “wholesale” or “retail” standard for § 1325(a)(5)(B)(ii) valuations is inconsistent with § 506(a)’s aversion to standardized procedure. . . . [T]he Bankruptcy Code nowhere implies that NADA “wholesale” and “retail” values should operate as any sort of a standard for measuring compliance with § 1325(a)(5)(B)(ii). To the contrary, exclusive reliance on industry averages may contradict the Court’s duty under § 506(a) to determine the value of the specific collateral in the case before it. Instead, the parties should attempt to prove and the Court should determine the property’s fair market value. . . . Fair market value is “[t]he amount at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts.” . . . Ascertaining “fair market value” is an objective broad enough to permit use of NADA guidebooks and similar authoritative sources as evidence of value, but without implying that the valuation determination is limited to those sources.35
[17]

If there has been a recent sale of the collateral, the amount paid at the recent sale may be the best evidence of value.36 One court accepted as the value of real property the amount bid at a recent sheriff’s sale.37 Another court faced with a debtor who had recently purchased an automobile held that the purchase price paid by the debtor would be “prima facie” evidence of value.38

[18]

If the plan surrenders property to a creditor, the value of that property for confirmation purposes should be the value if sold by the creditor, not what the property would be worth if sold by the debtor.39 Under § 506(a) it is the value of the “creditor’s interest” that determines the allowed amount of a secured claim.

[19]

The evidence at a contested valuation hearing in a Chapter 13 case too often consists of a creditor’s estimate of value squared off against a debtor’s testimony, without expert opinion from either side. The reported decisions, some accepting and some rejecting creditors’ and debtors’ estimated values, are a study in the evidentiary problems of determining value.40 Neither creditors nor debtors can expect good outcomes at valuation hearings if a swearing match between equally interested witnesses is all that is presented to the court. Sometimes the stakes are too small to justify the expense of hiring experts. If the stakes are that small, the matter should have been resolved by agreement.

[20]

Out of frustration and dissatisfaction with other methods, some courts have attempted to fix valuation rules for personal property that apply to all cases. For example, soon after the 1978 Code became effective, one bankruptcy court reported a decision setting out a table of values based on age and percentage of original cost for many categories of personal property, including furniture and hi-fi equipment.41 An across-the-board “percentage-of-cost” approach is obviously not tailored to the facts of individual cases, but even an arbitrary rule eliminates many unnecessary hearings.

[21]

When the value of a business determines the allowed amount of a secured claim, the courts have generally adopted going concern rather than liquidation as the standard in Chapter 13 cases.42

[22]

In some jurisdictions, the Chapter 13 trustee has a preferred method of valuation for certain kinds of collateral. For example, it may be the trustee’s view that wholesale value from a particular used car guide for the month and the geographic region is the general rule for cars. Some Chapter 13 trustees have an appraiser on staff available for no or a nominal fee to appraise furniture, appliances, electronic equipment and the like.

[23]

The courts have struggled with the question whether the value of collateral should be reduced by the costs of liquidation to determine the allowed amount of secured claims at confirmation in Chapter 13 cases. For example, if real property is worth $50,000 but a creditor would have to pay a 6 percent real estate commission to sell it, is the creditor’s secured claim $50,000 or $47,000 at confirmation? A majority of courts, including the U.S. Courts of Appeals for the Fourth, Sixth, Eighth and Ninth Circuits, have held that value should not be reduced to reflect disposition costs for purposes of § 506(a) when the Chapter 13 debtor proposes to retain mortgaged property.43 These courts reason that if the debtor keeps the collateral, it would be “contradictory to allow the debtor to keep the home but value the secured portion based upon a hypothetical sale of the residence.”44 Applying this logic, the Fourth Circuit concluded that when property worth $95,500 was subject to a first mortgage of $82,000 and a second mortgage of $9,504, both mortgages were fully secured notwithstanding that real estate commissions of 6 to 7 percent and two discount points would customarily be deducted upon sale of such property.45 The Ninth Circuit’s view on this issue is not consistent with its earlier holding that wholesale value is appropriate for cars when the Chapter 13 plan proposes to keep the car because it is the “creditor’s interest” that is valued for § 506(a) purposes.46 The Sixth Circuit refused to deduct hypothetical liquidation costs at confirmation in Chapter 13 cases based on the Supreme Court’s opinions in United Savings Ass’n of Texas v. Timbers of Inwood Forest Associates, Ltd., 47 United States v. Ron Pair Enterprises, Inc.48 and Nobelman v. American Savings Bank:49

[T]he Court has consistently viewed the “creditor’s interest” as equal to the lesser of the amount of the lien or the value of the collateral. . . . [T]he creditor “receives” all of the proceeds of the sale. This amount is applied to the debtor’s obligation which, by that time, includes the outstanding principal and accrued interest plus, almost-universally as a matter of contract, the creditor’s costs, fees and expenses connected with the foreclosure. There is no basis, however, for assuming that the costs of sale are paid with the “first dollar” of the sale proceeds rather than being added to the debtor’s deficiency. . . . [W]e adopt the construction of § 506(a) employed by the Supreme Court in other contexts and hold that, where the debtor proposes to retain the collateral under a reorganization plan, § 506(a) does not require or permit a reduction in the creditor’s secured claim to account for purely hypothetical costs of sale.50
[24]

In other contexts where § 506(a) applies, the reported decisions generally do not deduct costs of liquidation in the valuation calculus. For purposes of bifurcating an undersecured mortgage into its secured and unsecured portions under § 506(a), several courts have refused to deduct the costs of sale when the debtor retains the property through the plan.51 For eligibility purposes, the U.S. Court of Appeals for the Fourth Circuit held that the hypothetical costs of liquidating collateral are not deducted to determine the portion of an undersecured claim that is counted toward the unsecured debt limitation.52

[25]

A few courts have read § 506(a) to require deduction of the hypothetical costs of liquidation to determine the amount of an allowed secured claim at confirmation in a Chapter 13 case.53 As explained by the bankruptcy court in In re Weber:54

[R]eduction of collateral value for costs of sale or transfer reflects a creditor’s expectation that realization on its security requires associated costs. . . . Only when the creditor is in the business of selling the type of collateral which secures its debt can a creditor in a consumer case seriously argue that recourse to its collateral to satisfy its debt will result in actual costs of transfer or sale which would be less than approximately 10% of the collateral’s value. . . . The language in sentence two of § 506(a) does not change this reality. Although the value of the collateral and, correspondingly, the amount of the creditor’s allowed secured claim may vary according to the intended use of the property or the purpose for which the valuation is made, the nature or relative extent of the creditor’s interest in that property does not change . . . “such value” as used in sentence two of § 506(a) refers to the value of the property serving as collateral, but not to the extent of the creditor’s interest in the property. . . . [T]he extent of the creditor’s interest in that property will never exceed the value of the property, under any appropriate standard, minus costs associated with selling or transferring the property and the amount of any senior liens. . . . It is the amount the creditor should reasonably be expected to realize if forced to look to its collateral that an allowed secured claim represents. That is expressed in sentence one of § 506(a). The changing standard of value recognized by the second sentence of that statute does not alter that result. . . . [N]o legitimate policy would be advanced by permitting a secured creditor to improve its position with regard to realization of its collateral value merely because its debtor has filed a bankruptcy reorganization case. . . . [A] creditor’s claim secured by a lien against property . . . must reflect transfer or sale costs which would always occur were the creditor forced to resort to the property for repayment.55
[26]

The disagreement in these cases stems from the difficult language of § 506(a), which instructs that value “shall be determined in light of the purpose of the valuation and the proposed distribution or use of such property.”56 If the debtor proposes to keep property subject to a lien, no sale is contemplated and lienholders have argued forcefully that it is inappropriate to reduce the value of collateral to reflect hypothetical liquidation costs. On the other hand, § 506(a) states that an allowed claim is a secured claim “to the extent of the value of such creditor’s interest in the estate’s interest in such property.”57 This layered language indicates that Congress recognized that a “creditor’s interest” and the “estate’s interest” might be different. As pointed out in the quotation from Weber, a creditor’s interest does not change based on what the debtor decides to do with the collateral—the creditor’s interest has the same value whether the debtor keeps the property or surrenders the property. Few of the reported decisions analyze § 506(a) this carefully.

[27]

The logic behind many of the wholesale value and commercially reasonable disposition cases discussed above is that a lienholder in a Chapter 13 case is entitled to an allowed secured claim equal to the economic value of the collateral in the creditor’s hands. If the creditor would incur disposition costs, then the value of its collateral should be reduced by those costs. Even a creditor with in-house capacity to dispose of repossessed collateral incurs expenses to liquidate the property. Valuing property without deduction for the cost of liquidation has the same effect as valuing property at retail—it permits the secured claim holder in Chapter 13 cases to recover a present value through the plan that is greater than the creditor’s interest in the collateral upon surrender or repossession.


 

1  520 U.S. 953, 117 S. Ct. 1879, 138 L. Ed. 2d 148 (1997).

 

2  See § 109.1 [ Rash and Valuation ] § 76.5  Rash and Valuation.

 

3  In re Frost, 47 B.R. 961 (D. Kan. 1985) (Trash-hauling routes should be valued based on simulated disposition in the most commercially reasonable manner practicable under the circumstances. It is error to apply “forced sale” value.); In re Johnson, 117 B.R. 577, 581 (Bankr. D. Idaho 1990) (“Value, for purposes of determining an allowed secured claim in a cramdown situation will be set, after consideration of the facts of each case, at an appropriate amount which equates with what the creditor could expect to receive were the collateral repossessed and sold in a commercially reasonable manner.”). Accord In re Ridner, 102 B.R. 247 (Bankr. W.D. Okla. 1989); In re Petry, 76 B.R. 651 (Bankr C.D. Ill. 1987); Schiavoni v. Beneficial Consumer Discount Co., 19 B.R. 51 (Bankr. E.D. Pa. 1982); Virginia Nat’l Bank v. Jones, 5 B.R. 736 (Bankr. E.D. Va. 1980); Savloff v. Continental Bank, 4 B.R. 285 (Bankr. E.D. Pa. 1980).

 

4  See U.C.C. § 9-504 (1972).

 

5  See, e.g., In re Johnson, 117 B.R. 577, 581 (Bankr. D. Idaho 1990) (“Value . . . equates with what the creditor could expect to receive were the collateral repossessed and sold in a commercially reasonable manner. There are no hard and fast rules to be applied, . . . replacement costs may be an appropriate standard where the collateral is essential to the effectuation of a debtor’s proposed plan . . . wholesale value may be appropriate where the collateral is simply incidental to the success of the plan. ‘Wholesale value’ . . . is not necessarily the wholesale value referred to in the market reports, such as NADA. . . . NADA reports constitute a relevant general guide. . . . [T]he value proposed in the plan, whether based upon NADA or some other source, will be subject to review and all parties will have the right to submit other relevant evidence of value, including expert testimony.”).

 

6  See GMAC v. Mitchell (In re Mitchell), 954 F.2d 557 (9th Cir. 1992) [Mitchell may have been modified by Taffi v. United States (In re Taffi), 96 F.3d 1190 (9th Cir. 1996) (en banc)]; In re Malody, 102 B.R. 745 (B.A.P. 9th Cir. 1989); In re Maddox, 200 B.R. 546 (D.N.J. 1996); Grubbs v. National Bank of S.C. (In re Grubbs), 114 B.R. 450 (D.S.C. 1990); In re Byington, 197 B.R. 130 (Bankr. D. Kan. 1996); In re Ferguson, 149 B.R. 625 (Bankr. D. Idaho 1993); In re Rossow, 147 B.R. 1 (Bankr. W.D.N.Y. 1992); In re Goldner, 142 B.R. 926 (Bankr. D. Idaho 1992); Ford Motor Credit Co. v. Phillips (In re Phillips), 142 B.R. 15 (Bankr. D.N.H. 1992); In re Owens, 120 B.R. 487 (Bankr. E.D. Ark. 1990); Johnson v. GMAC (In re Johnson), 115 B.R. 515 (Bankr. D.S.C. 1988); In re Cook, 38 B.R. 870 (Bankr. D. Utah 1984); In re Klein, 20 B.R. 493 (Bankr. N.D. Ill. 1982); In re Klein, 10 B.R. 657 (Bankr. E.D.N.Y. 1981); Chrysler Credit Corp. v. Van Nort, 9 B.R. 218 (Bankr. E.D. Mich. 1981); In re Crockett, 3 B.R. 365 (Bankr. N.D. Ill. 1980); In re Adams, 2 B.R. 313 (Bankr. M.D. Fla. 1980).

 

7  See GMAC v. Mitchell (In re Mitchell), 954 F.2d 557 (9th Cir. 1992). The Ninth Circuit retreated somewhat from Mitchell. See Taffi v. United States (In re Taffi), 68 F.3d 306, 309 (9th Cir. 1995) (In a Chapter 11 case, residence should be valued to determine the amount of a secured claim at its “fair market” value, not its “forced sale” value, and hypothetical costs of the sale should not be subtracted. “Mitchell determined that the wholesale value is the best approximation of a creditor’s interest in an automobile. The wholesale value and retail value of an automobile are not the same as the fair market value and forced sale value of a residence. Neither a wholesale nor retail sale is ‘forced.’ Rather, the terms ‘wholesale’ and ‘retail’ represent two different fair market values for an automobile. The forced sale value of a residence, by contrast, does not represent a fair market value at all. The fact that the wholesale value is less than the retail value does not indicate that either are the product of anything other than ‘arms length’ transactions involving rational, informed, and willing parties. There is nothing ‘forced’ about either transaction. . . . The wholesale value of an automobile might be the best approximation of a creditor’s interest in that automobile, but that tells us nothing about what value best approximates the IRS’s interest in this case. In our view, it is the fair market value.”), aff’d, 96 F.3d 1190, 1192–93 (9th Cir. 1996) (en banc) (“When a Chapter 11 debtor or a Chapter 13 debtor intends to retain property subject to a lien, the purpose of a valuation under section 506(a) is not to determine the amount the creditor would receive if it hypothetically had to foreclose and sell the collateral. Neither the foreclosure value nor the costs of repossession are to be considered because no foreclosure is intended. . . . [T]he purpose of the valuation is to determine how much the creditor will receive for the debtor’s continued possession. . . . The foreclosure value is not relevant because no foreclosure is intended by the Plan. . . . Consequently, the value has to be the fair market value of what the debtors are using. The fair market value is not ‘replacement value’ because the House is not being replaced. The fair market value is the price which a willing seller under no compulsion to sell and a willing buyer under no compulsion to buy would agree upon after the property has been exposed to the market for a reasonable time. . . . We overrule [GMAC v. Mitchell (In re Mitchell),] 954 F.2d 557 (9th Cir. 1992), to the extent that it held the valuation under section 506(a) should be based on determining ‘what the creditor would obtain if the creditor were to make a reasonable disposition of the collateral.’ . . . We make no judgment whether the fair market value of an automobile is high blue book or low blue book or some other value; that value is to be determined by the facts presented to the bankruptcy court.”).

 

8  See, e.g., GMAC v. Mitchell (In re Mitchell), 954 F.2d 557 (9th Cir. 1992) (Wholesale value based on “Kelley Blue Book” most nearly approximates what the creditor would obtain upon reasonable disposition of collateral; therefore, wholesale price best approximates the allowed amount of a claim secured by an automobile in a Chapter 13 case. That the debtor intends to keep and use the car during the plan does not entitle the creditor to going-concern or replacement cost, because what is valued for § 506 purposes is the “creditor’s interest” in the collateral. In an unusual case, the creditor might show that going-concern or replacement cost is appropriate when the collateral is used as part of a going concern or is particularly beneficial.) [Mitchell may have been overruled by Taffi v. United States (In re Taffi), 96 F.3d 1190 (9th Cir. 1996) (en banc)]; Grubbs v. National Bank of S.C. (In re Grubbs), 114 B.R. 450 (D.S.C. 1990) (Property should be valued at an amount that could be derived from its disposition in a commercially reasonable manner. Claims of creditors secured by cars and mobile homes when the creditor is not in the business of selling the particular collateral should be valued at wholesale rather than at retail on the presumption that a creditor will dispose of collateral by sale to a dealer unless the creditor presents evidence that it has the capacity to retail the collateral itself. It is error for the bankruptcy court to use retail value even when the creditor had a repurchase agreement that would result in retail disposition by a dealer after recourse.); Ford Motor Credit Co. v. Phillips (In re Phillips), 142 B.R. 15 (Bankr. D.N.H. 1992) (Wholesale value of a car at the filing is the present value for cramdown purposes because a secured creditor is most likely to dispose of a car through an auction, and wholesale value most nearly reflects what the creditor would receive at an auto auction.); Johnson v. GMAC (In re Johnson), 115 B.R. 515, 516 (Bankr. D.S.C. 1988) (“[T]he relevant figure in valuing a secured creditor’s security interest in a debtor’s automobile is the wholesale value, where the creditor is not an automobile dealer and the collateral’s value to the creditor is only what it could get for it by selling it at wholesale to a dealer.”); In re Cook, 38 B.R. 870 (Bankr. D. Utah 1984).

 

9  In re Crockett, 3 B.R. 365 (Bankr. N.D. Ill. 1980).

 

10  See, e.g., GMAC v. Mitchell (In re Mitchell), 954 F.2d 557 (9th Cir. 1992) (Wholesale value based on “Kelley Blue Book” most nearly approximates what the creditor would obtain upon reasonable disposition of a car.) [Mitchell may have been overruled on other grounds by Taffi v. United States (In re Taffi), 96 F.3d 1190 (9th Cir. 1996) (en banc)]; In re Madison, 186 B.R. 182, 184 (Bankr. E.D. Pa. 1995) (“[T]he starting point for valuing automobiles in Chapter 13 should be the average of the wholesale and retail values of the automobiles published in a well-recognized guide, for example, the NADA. . . . A party may request an evidentiary hearing if it believes certain factors necessitate a higher or lower value.”); In re Myers, 178 B.R. 518, 519 n.3 (Bankr. W.D. Okla. 1995) (“NADA are primarily relied upon in this district.”); In re Ferguson, 149 B.R. 625, 626 (Bankr. D. Idaho 1993) (Applying GMAC v. Mitchell (In re Mitchell), 954 F.2d 557 (9th Cir. 1992), automobiles in Chapter 13 plans are “generally valued at wholesale rather than retail value.” Resolving a conflict between the Kelley Blue Book value and the NADA Appraisal Guide value, “[a] valuation of $5,000 is reasonable given the $5,575 Kelly [sic] book value and the $4,075 NADA book value, and additionally takes into account the possible frame damage.”); In re Rossow, 147 B.R. 1 (Bankr. W.D.N.Y. 1992) (NADA “trade in” or “wholesale” is prima facie evidence of value for cramdown of an automobile under § 1325(a)(5)(B)(ii).); In re Klein, 20 B.R. 493 (Bankr. N.D. Ill. 1982); Chrysler Credit Corp. v. Cooper, 7 B.R. 537 (Bankr. N.D. Ga. 1980).

 

11  See, e.g., Johnson v. GMAC (In re Johnson), 165 B.R. 524, 529–30 (S.D. Ga. 1994) (“[T]he Bankruptcy Code nowhere implies that NADA ‘wholesale’ and ‘retail’ values should operate as any sort of a standard for measuring compliance with § 1325(a)(5)(B)(ii). . . . Ascertaining ‘fair market value’ is an objective broad enough to permit use of NADA guidebooks and similar authoritative sources as evidence of value, but without implying that the valuation determination is limited to those sources.”); In re Byington, 197 B.R. 130, 138 (Bankr. D. Kan. 1996) (With respect to NADA and other market guides, “[t]he court cannot place exclusive reliance on market guides, since, as another court stated ‘exclusive reliance on industry averages . . . contradict[s] the Court’s duty under § 506(a) to determine the value of the specific collateral in the case before it.’ . . . Properly, market reports should be used in conjunction with expert testimony based on an actual inspection of the property. However, the use of a market report on its own is not favored.”); In re Maddox, 194 B.R. 762, 770 (Bankr. D.N.J.) (“As a rule of practice, we conclude that the wholesale value will control as the appropriate measurement for vehicle valuation. Upon appropriate evidentiary showing, however, this measurement of value may be adjusted in a particular case. For instance, a creditor may show that upon repossession and sale, it can achieve a greater return than the wholesale value for the vehicle as indicated in the N.A.D.A. book.”), aff’d, 200 B.R. 546, 553–55 (D.N.J. 1996); In re Johnson, 117 B.R. 577, 581 (Bankr. D. Idaho 1990) (“‘Wholesale value’ . . . is not necessarily the wholesale value referred to in the market reports, such as NADA. . . . NADA reports constitute a relevant general guide.”); In re Smith, 42 B.R. 198 (Bankr. N.D. Ga. 1984); In re Crockett, 3 B.R. 365 (Bankr. N.D. Ill. 1980).

 

12  In re Cook, 38 B.R. 870 (Bankr. D. Utah 1984) (Replacement cost is not the appropriate standard.).

 

13  Chrysler Credit Corp. v. Cooper, 7 B.R. 537 (Bankr. N.D. Ga. 1980) (Repurchase agreements are not indicia of market value because they are predetermined contract formulas without regard to age, general condition, public demand, or retail marketability.). Accord Grubbs v. National Bank of S.C. (In re Grubbs), 114 B.R. 450 (D.S.C. 1990); In re Klein, 20 B.R. 493 (Bankr. N.D. Ill. 1982); In re Beranek, 9 B.R. 864 (Bankr. D. Colo. 1981); Chrysler Credit Corp. v. Van Nort, 9 B.R. 218 (Bankr. E.D. Mich. 1981). Contra In re Stumbo, 7 B.R. 939 (Bankr. D. Colo. 1981).

 

14  See Chrysler Credit Corp. v. Cooper, 7 B.R. 537 (Bankr. N.D. Ga. 1980).

 

15  See § 109.1 [ Rash and Valuation ] § 76.5  Rash and Valuation.

 

16  Associates Commercial Corp. v. Rash, 520 U.S. 953, 959 n.2, 117 S. Ct. 1879, 138 L. Ed. 2d 148 (1997) (“By using the term ‘replacement value’ we do not suggest that a creditor is entitled to recover what it would cost the debtor to purchase the collateral brand new. . . . By replacement value, we mean the price a willing buyer in the debtor’s trade, business, or situation would pay a willing seller to obtain property of like age and condition.”). See § 109.1 [ Rash and Valuation ] § 76.5  Rash and Valuation.

 

17  Metrobank v. Trimble (In re Trimble), 50 F.3d 530, 531–32 (8th Cir. 1995) (“We adopt the reasoning of the Fifth Circuit in In re Rash, [as decided by the original panel at 31 F.3d 325 (5th Cir. 1994),] and . . . we now conclude that the value of Metrobank’s lien interest is properly based on the retail value of the collateral without deduction for costs of sale. We agree with the Fifth Circuit that the retail valuation method is the only method that gives full effect to the entire language of section 506(a). . . . Under the wholesale valuation method, the creditor’s interest would always be valued at the amount the creditor would receive upon disposition of the collateral, regardless of the purposes of the valuation or of the proposed disposition or use of the property. The wholesale method would not be affected by whether the debtor intended to release the property or intended, instead, to retain and use the property. Rather, where a debtor intends to retain and use the collateral, the purpose of the valuation is to determine the amount an undersecured creditor will be paid for the debtor’s continued possession and use of the collateral, not to determine the amount such creditor would receive if it hypothetically had to repossess and sell the collateral. . . . [W]e conclude the amount of Metrobank’s secured claim is the lesser of the principal balance of the debt or the retail value of the encumbered vehicle, without deduction for costs of repossession or sale.”); In re Gallup, 194 B.R. 851, 852 (Bankr. W.D. Mo. 1996) (Applying Metrobank v. Trimble (In re Trimble), 50 F.3d 530 (8th Cir. 1995), retail value is appropriate measure of what debtor must pay to satisfy the best-interests-of-creditors test with respect to an unencumbered car. “If the debtor retains possession of the collateral, the debtor must pay (whether it be to an oversecured or undersecured creditor, or to the standing Chapter 13 Trustee for 11 U.S.C. § 1325(a)(4) considerations) the retail value.”); In re Dews, 191 B.R. 86, 89–91 (Bankr. E.D. Va. 1995) (“[W]e hold that retail value is the standard most consistent with 11 U.S.C. § 506(a) . . . . This Court agrees with the line of cases that hold that to be faithful to the meaning of the statute, the debtor’s actual, not hypothetical, use of the collateral must be considered. . . . Retail value may be established by reference to the NADA Guide which is a generally recognized authority in the Commonwealth and in this Court. . . . However, the Court may consider other credible evidence when determining value, such as an evaluation or an appraisal.”); In re Arnette, 156 B.R. 366, 368 (Bankr. D. Conn. 1993) (Citing In re Arpaia, 143 B.R. 587 (Bankr. D. Conn. 1992), NADA retail value is the appropriate “fair market value” for a Chapter 13 debtor’s car at cramdown where the debtor intends to keep the car and pay for the car through the plan. “[W]here debtors propose to retain property pursuant to a chapter 13 plan . . . they cannot insist on liquidation values to be paid to the creditor. . . . [I]n a § 506(a) determination, an asset to be retained by a debtor under a chapter 13 plan should be valued at the price the debtor could get for it in a free and open market, i.e., its fair market value.”); In re Green, 151 B.R. 501, 503–05 (Bankr. D. Minn. 1993) (The proper method for valuing an undersecured creditor’s allowed secured claim for purposes of confirmation of a Chapter 13 plan where the debtor proposes to keep the creditor’s car is retail value not reduced by liquidation costs. “One line of cases interpreting section 506(a) determines that the critical language of section 506(a) is the language of the first sentence which provides that the creditor’s claim is secured to the extent of the value of such creditor’s interest in the estate’s interest in such property. . . . Such reasoning generally results in two conclusions: First, the appropriate value for the lien interest should be based on the wholesale value of the collateral rather than its retail value, since the creditor is generally not considered a ‘dealer’, in the collateral and therefore could not sell it at retail; and second, costs of sale should be deducted from the value of the collateral to arrive at the value of the lien interest, since such costs would have to be incurred by the creditor in taking possession of and selling the collateral. . . . A second line of cases . . . focuses instead on the language of the second sentence of section 506(a) which provides that the creditor’s lien interest must be valued in light of the purpose of the valuation and the proposed disposition or use of the collateral. . . . [C]ontrary to the courts that focus on the first sentence, . . . [t]he value of the lien should be based on the retail value of the collateral since such is the replacement value to the debtor, and the costs associated with sale of the collateral should not be deducted since no sale is contemplated. . . . [T]he latter approach is the better reasoned. . . . It is the only approach that gives meaning to all of the terms of section 506(a). . . . Furthermore, valuation based on a hypothetical sale ignores the purpose of the valuation which is to determine the amount an undersecured creditor will be paid for the debtor’s continued possession. . . . [T]he formulation used in [GMAC v. Mitchell (In re Mitchell), 954 F.2d 557 (9th Cir. 1992)] gives inadequate deference to the ‘purpose and use’ language of the second sentence of section 506(a).”).

 

18  31 F.3d 325 (5th Cir. 1994).

 

19  See § 109.1 [ Rash and Valuation ] § 76.5  Rash and Valuation.

 

20  Associates Commercial Corp. v. Rash (In re Rash), 31 F.3d 325, 329–31 (5th Cir. 1994).

 

21  Associates Commercial Corp. v. Rash (In re Rash), 62 F.3d 685, 689 (5th Cir. 1995) (on reh’g).

 

22  954 F.2d 557 (9th Cir. 1992). Mitchell may have been overruled by the later decision of the Ninth Circuit in Taffi v. United States (In re Taffi), 96 F.3d 1190 (9th Cir. 1996) (en banc).

 

23  Associates Commercial Corp. v. Rash (In re Rash), 62 F.3d 685, 689 (5th Cir. 1995) (on reh’g).

 

24  Associates Commercial Corp. v. Rash (In re Rash), 68 F.3d 113 (5th Cir. 1995) (reh’g en banc granted).

 

25  Associates Commercial Corp. v. Rash (In re Rash), 90 F.3d 1036, 1044 (5th Cir. 1996) (en banc).

 

26  90 F.3d at 1051–55. The en banc decision of the Fifth Circuit in Rash was reversed by the Supreme Court. See § 109.1 [ Rash and Valuation ] § 76.5  Rash and Valuation.

 

27  954 F.2d 557 (9th Cir. 1992).

 

28  954 F.2d 557 (9th Cir. 1992). Mitchell may have been overruled by Taffi v. United States (In re Taffi), 96 F.3d 1190, 1192–93 (9th Cir. 1996) (en banc) (In the context of a Chapter 11 case dealing with the valuation of real estate, “We overrule [GMAC v. Mitchell (In re Mitchell),] 954 F.2d 557 (9th Cir. 1992), to the extent that it held the valuation under section 506(a) should be based on determining ‘what the creditor would obtain if the creditor were to make a reasonable disposition of the collateral.’ . . . We make no judgment whether the fair market value of an automobile is high blue book or low blue book or some other value; that value is to be determined by the facts presented to the bankruptcy court.”).

 

29  See § 111.1 [ “Value, As of the Effective Date of the Plan” Means Interest ] § 77.1  “Value, As of the Effective Date of the Plan” Means Interest.

 

30  102 F.3d 311 (7th Cir. 1996).

 

31  102 F.3d at 314–16.

 

32  105 F.3d 55 (2d Cir. 1997).

 

33  105 F.3d at 62–63. Accord In re Sharon, 200 B.R. 181, 195 (Bankr. S.D. Ohio 1996) (The average between wholesale and retail values “reflects general market conditions for a vehicle, which is conceded to be subject to continual depreciation.” Average of NADA wholesale and retail on the petition date is the rule of choice under local rules. Parties have option to present evidence of factors indicating a higher or lower value.), aff’d, 243 B.R. 676 (B.A.P. 6th Cir. 1999); In re Mitchell, 191 B.R. 957, 961–62 (Bankr. M.D. Ga. 1995) (“In the past, this court has valued vehicles for Chapter 13 plan confirmation purposes by calculating the average of the average wholesale/trade-in N.A.D.A. book value and the average retail N.A.D.A. book value, and then giving the parties the opportunity to have such amount increased or decreased by presenting evidence of special circumstances. . . . The averaging between wholesale and retail values of the vehicle provides the court with the flexibility to give meaning to both the first and second sentences of § 506(a) of the Code and will provide an equitable result in a vast majority of cases. . . . [T]he court does not find any evidence of special circumstances to warrant the adjustment upward or downward.” Debtor purchased van on December 30, 1994, for $16,796.78. Debtor made two payments and then filed Chapter 13 on May 12, 1995. NADA retail was $15,650; wholesale value was $13,175; average picked by the court was $14,412.50.); In re Madison, 186 B.R. 182, 184 (Bankr. E.D. Pa. 1995) (“Generally, a debtor’s automobile will have some infirmity, which will serve to reduce the value of the automobile below retail. . . . [T]he starting point for valuing automobiles in Chapter 13 should be the average of the wholesale and retail values of the automobiles published in a well-recognized guide, for example, the NADA. . . . A party may request an evidentiary hearing if it believes certain factors necessitate a higher or lower value.”); In re Myers, 178 B.R. 518, 519–24 n.3 (Bankr. W.D. Okla. 1995) (“‘Value’ does not necessarily contemplate forced sale or liquidation value of the collateral; nor does it always imply a full going concern value. Courts will have to determine value on a case by case basis, taking into account the facts of each case and the competing interests in the case. . . . NADA are primarily relied upon in this district. . . . To use NADA wholesale value alone ignores the creditor’s risks under a Chapter 13 plan. To use NADA retail valuation would compel the debtor to pay an amount far in excess of what the creditor would receive at repossession with immediate sale. The most equitable approach in such a situation would seem to this court to be to average the two figures. . . . This court is of the view that the importance of the second sentence of § 506(a) in the context of valuations of personal automobiles sought to be retained in Chapter 13 cases has been overemphasized by the courts which have addressed this issue. The only reason for a § 506(a) valuation of a personal automobile in a Chapter 13 case is to establish the amount of the creditor’s secured claim in order to permit debtor to retain and use the property and provide for the secured claim in the Chapter 13 plan in accordance with § 1325(a)(5)(B). . . . [T]he creditor is entitled to, and should therefore receive, no more than the value of the collateral. Those courts which have sought to provide creditors with substantial additional protection, in the form of providing valuation of the collateral at retail, as do [In re Green, 151 B.R. 501 (Bankr. D. Minn. 1993) and [Associates Commercial Corp. v. Rash (In re Rash), 31 F.3d 325 (5th Cir. 1994)] and by analogy, [Brown & Co. Securities Corp. v. Balbus (In re Balbus), 933 F.2d 246 (4th Cir. 1991)] are in effect engaging in judicial legislation and imposing their view of appropriate bankruptcy policy upon litigants within their jurisdiction. . . . [T]he courts which have adopted retail value as the value . . . have failed to consider the fact that it is the creditor’s interest in the estate’s interest in the vehicle which is being valued, not the estate’s or the debtors’ interest alone, and that under no reasonable scenario could the creditor be expected to realize from the vehicle its full retail value, even if granted immediate possession of it. It also appears that those courts are bent upon punishing debtors for doing what the Code specifically authorizes them to do—retain the property and pay to the creditor over time an amount, discounted to the present, equal to the amount which the creditor would realize if permitted to liquidate the property immediately.”); GMAC v. Chapman (In re Chapman), 135 B.R. 11, 14 (Bankr. M.D. Pa. 1990) (“I think the fairest position to take is the average between the wholesale and retail value as found in N.A.D.A. book with the appropriate adjustments for the various options and mileage on the automobile . . . . If a party wishes to challenge a valuation made according to this method, then that party will have the burden of proving a different valuation.”); Dominion Bank v. Thayer (In re Thayer), 98 B.R. 748 (Bankr. W.D. Va. 1989) (Absent evidence of extreme deterioration or unusually good condition, the average of trade-in value or retail value will control at confirmation.); In re Farrell, 71 B.R. 627 (Bankr. S.D. Iowa 1987) (Retail/wholesale averaging based on NADA used car guide for geographic area wherein debtor will be using car.); Ford Motor Credit v. Miller, 4 B.R. 392 (Bankr. S.D. Cal. 1980) (Where the book value of automobile is $4,780 at retail and $3,650 at wholesale, $4,300 is the appropriate value because creditors are not entitled to the entire retail value which includes overhead and sales costs.).

 

34  See Taffi v. United States (In re Taffi), 68 F.3d 306, 309 (9th Cir. 1995) (In a Chapter 11 case, residence should be valued for purposes of determining the amount of a secured claim at its “fair market” value, not its “forced sale” value, and hypothetical costs of the sale should not be subtracted. “[GMAC v. Mitchell (In re Mitchell), 954 F.2d 557 (9th Cir. 1992)] determined that the wholesale value is the best approximation of a creditor’s interest in an automobile. The wholesale value and retail value of an automobile are not the same as the fair market value and forced sale value of a residence. Neither a wholesale nor retail sale is ‘forced.’ Rather, the terms ‘wholesale’ and ‘retail’ represent two different fair market values for an automobile. The forced sale value of a residence, by contrast, does not represent a fair market value at all. The fact that the wholesale value is less than the retail value does not indicate that either are the product of anything other than ‘arms length’ transactions involving rational, informed, and willing parties. There is nothing ‘forced’ about either transaction. . . . The wholesale value of an automobile might be the best approximation of a creditor’s interest in that automobile, but that tells us nothing about what value best approximates the IRS’s interest in this case. In our view, it is the fair market value.”), aff’d, 96 F.3d 1190, 1192–93 (9th Cir. 1996) (en banc) (“When a Chapter 11 debtor or a Chapter 13 debtor intends to retain property subject to a lien, the purpose of a valuation under section 506(a) is not to determine the amount the creditor would receive if it hypothetically had to foreclose and sell the collateral. Neither the foreclosure value nor the costs of repossession are to be considered because no foreclosure is intended. . . . [T]he purpose of the valuation is to determine how much the creditor will receive for the debtor’s continued possession. . . . The foreclosure value is not relevant because no foreclosure is intended by the Plan. . . . Consequently, the value has to be the fair market value of what the debtors are using. The fair market value is not ‘replacement value’ because the House is not being replaced. The fair market value is the price which a willing seller under no compulsion to sell and a willing buyer under no compulsion to buy would agree upon after the property has been exposed to the market for a reasonable time. . . . We overrule [GMAC v. Mitchell (In re Mitchell),] 954 F.2d 557 (9th Cir. 1992), to the extent that it held the valuation under section 506(a) should be based on determining ‘what the creditor would obtain if the creditor were to make a reasonable disposition of the collateral.’ . . . We make no judgment whether the fair market value of an automobile is high blue book or low blue book or some other value; that value is to be determined by the facts presented to the bankruptcy court.”); Johnson v. GMAC (In re Johnson), 165 B.R. 524 (S.D. Ga. 1994) (Fair market value is the appropriate value for a car at cramdown in a Chapter 13 case. ); In re Chrapliwy, 207 B.R. 469, 474–75 (Bankr. M.D.N.C. 1996) (Decided before Associates Commercial Corp. v. Rash, 520 U.S. 953, 117 S. Ct. 1879, 138 L. Ed. 2d 148 (1997), used furniture is valued at fair market value, not “retail value” that creditor would offer the furniture for after repossession and reconditioning. The debtors bought a sofa and recliner for $1,023.94. Fifteen months later, Avco argued that it would offer the sofa and recliner for resale after repossession and reconditioning at 90% of original retail value. “In the present case there was no evidence of any published price guideline which provides wholesale or retail prices for used household furniture. . . . At the very least, the retail figure used by Avco’s witness would have to be reduced by the cost of cleaning the furniture and repairing the broken spring in the sofa in order to arrive at a value for the Debtors’ furniture since it has not been cleaned and has not been repaired. . . . [T]he Debtors established that their furniture has been subjected to considerably more than ordinary wear and tear. . . . There are sources from which one may acquire used household furniture other than from a furniture retailer who cleans and reconditions the furniture before offering it for sale. It may be purchased at a yard sale . . . at flea markets . . . in response to an advertisement placed in the newspaper . . . . Stated another way, the market value of an item is the price which a willing buyer would pay and a willing seller would accept . . . .  To replace the furniture in question with equivalent furniture the Debtors would not go to Colfax Furniture and purchase professionally cleaned and reconditioned furniture. If they did so, they would be upgrading . . . . [T]o purchase comparable or equivalent furniture the Debtors most likely would resort to a different segment of the market place such as a yard sale, flea market or a furniture store or consignment shop where comparable furniture is available. . . . The court is satisfied from the evidence that the market value of the furniture in this case does not exceed the $690.00 figure utilized in Debtors’ plan.”); Hobbs v. Gurley Motor Co. (In re Hobbs), 204 B.R. 994, 998–99 (Bankr. D. Ariz. 1997) (Applying Taffi v. United States (In re Taffi), 68 F.3d 306 (9th Cir. 1995) before Associates Commercial Corp. v. Rash, 520 U.S. 953, 117 S. Ct. 1879, 138 L. Ed. 2d 148 (1997), court cannot choose between “high or low blue book value” for a car without an evidentiary hearing. “The fair market value of the vehicle should be based upon market conditions, not the unique position of the creditor in the market. To focus on the creditor’s position transforms a relatively objective test of valuation into a subjective analysis: What could this specific creditor receive if it were permitted to dispose of the vehicle? . . . . [A] creditor normally does not suffer a loss during the course of the debtor’s plan, because the debtor maintains insurance on the vehicle, the vehicle has routine maintenance, and the debtor is also providing payments to the creditor through the plan, all of which equal the depreciation on the vehicle over the course of the plan. . . . Therefore, the debtor’s retention of the vehicle should not necessarily dictate a high blue book value for the property. . . . The fair market value of the vehicle is rarely the low blue book, or wholesale, value or the high blue book, or retail, value. . . . [T]his Court must conduct an evidentiary hearing to resolve the factual and legal issues outlined herein.”).

 

35  Johnson v. GMAC (In re Johnson), 165 B.R. 524, 529–30 (S.D. Ga. 1994).

 

36  In re Schenk, 67 B.R. 137 (Bankr. D. Mont. 1986); In re Walkup, 28 B.R. 225 (Bankr. N.D. Ind. 1983); In re Erwin, 25 B.R. 363 (Bankr. D. Minn. 1982); In re Reynolds, 17 B.R. 489 (Bankr. N.D. Ga. 1981). But see In re Hill, 96 B.R. 809 (Bankr. S.D. Ohio 1989) (1986 sale price is not a useful indicator of value at a 1989 valuation hearing.).

 

37  In re Erwin, 25 B.R. 363 (Bankr. D. Minn. 1982).

 

38  In re Reynolds, 17 B.R. 489 (Bankr. N.D. Ga. 1981). Accord In re Barnes, 191 B.R. 963 (Bankr. M.D. Ga. 1996) (Where the debtor filed Chapter 13 case 105 days after buying used car, it is inequitable to value the car at anything less than the full amount of the secured creditor’s claim.).

 

39  See In re Claypool, 122 B.R. 371 (Bankr. W.D. Mo. 1991) (Value of real property to be surrendered to a secured creditor under the plan should be value if sold by the creditor. Debtor proposed to surrender property at value in bank’s previous appraisal. The court accepted the bank’s argument that its previous appraisal was based on a sale of the property by debtor and that the value of the real property should be reduced by 15 to 20% below the previous appraisal if the property were tendered to the bank and sold by the bank.).

 

40  See In re Crowder, 179 B.R. 571 (E.D. Ark. 1995) (Debtor’s assertion that car is worth $4,000 is rejected in favor of value closer to $9,000 offered by an officer of the credit union.); In re Zersen, 189 B.R. 732 (Bankr. W.D. Wis. 1995) (After a battle of appraisers, accepts debtor’s appraiser’s valuation of homestead with a slight adjustment.); In re Marshall, 181 B.R. 599 (Bankr. N.D. Ala. 1995) (Creditor’s expert was closer to the average of NADA trade-in and retail values and thus “seems reasonably accurate.” Debtors’ expert valued the car below NADA trade-in or wholesale value, and there was no corroborating testimony.); In re Kennedy, 177 B.R. 967 (Bankr. S.D. Ala. 1995) (Court accepts debtors’ valuation of 1987 Mercury Marquis where only debtors have driven the car, the debtors testified to transmission problems, and the creditor’s representative based its valuation on “book” value.); Midlantic Nat’l Bank v. Kouterick (In re Kouterick), 161 B.R. 755, 760 (Bankr. D.N.J. 1993) (That the debtor valued real property at $105,000 in Chapter 7 schedules filed in February of 1991 is not binding on the debtor in a subsequent Chapter 13 case filed in May of 1992. “Under Code section 506(a), valuation for one purpose in a case is not even binding for other purposes in the same case, let alone in subsequent cases.” Debtor’s $70,000 valuation in the Chapter 13 case had to be challenged by mortgage holder at confirmation in the Chapter 13 case and could not be attacked as “fraudulent understatement” in a complaint to revoke confirmation under § 1330(a).); Oglesby v. Associates Nat’l Mortgage Co. (In re Oglesby), 150 B.R. 620, 626 (Bankr. E.D. Pa. 1993) (Debtor is not estopped to assert a $60,000 appraised value for her house, notwithstanding $100,000 value by the debtor in the schedules in this bankruptcy case and in the schedules in several prior bankruptcy cases. “[I]t is difficult to conceive of any ulterior motive which the Debtor may have had for over-estimating the value of the Home in the course of this and her prior cases. Concomitantly, it is difficult to envision any manner in which Associates or any other party could have relied upon the Debtor’s previous declarations of value to their detriment. . . . Justified reliance upon the action of a party against whom estoppel is asserted is a necessary ingredient for invocation of estoppel. . . . [E]stoppel cannot be applied in favor of Associates and against the Debtor here as to the issue of valuation of the Home.”); In re Robertson, 135 B.R. 350 (Bankr. E.D. Ark. 1992) (Creditor’s expert’s testimony was more persuasive than the appraisal offered by the debtor.); Blakey v. Pierce (In re Blakey), 76 B.R. 465 (Bankr. E.D. Pa. 1987) (Debtor’s testimony of value of real estate is competent and entitled to some weight. HUD liquidation report appears to be an unbiased and qualified valuation of the property and was admissible as a component of the valuation process.), amended in part, vacated in part, 78 B.R. 435 (Bankr. E.D. Pa. 1987); In re Mendenhall, 54 B.R. 44 (Bankr. W.D. Ark. 1985) (Creditor failed to carry its burden to establish value of mobile home.); In re Smith, 42 B.R. 198 (Bankr. N.D. Ga. 1984) (Court accepts testimony of creditor’s expert witness.); In re Russell, 29 B.R. 332 (Bankr. E.D.N.Y. 1983) (Values assigned by the debtors are res judicata upon entry of the order of confirmation and cannot subsequently be challenged by a creditor.); In re Williams, 3 B.R. 728 (Bankr. N.D. Ill. 1980) (Court accepts debtor’s estimates in the schedules.).

 

41  GMAC v. Willis (In re Willis), 6 B.R. 555 (Bankr. N.D. Ill. 1980).

 

42  In re Matthews, 75 B.R. 379 (Bankr. E.D. Mo. 1987) (Going-concern value is appropriate for valuation of liquor store equipment, inventory, and proceeds.); Blobaum v. Blobaum, 34 B.R. 962 (Bankr. W.D. Mo. 1983) (Valuation of hardware inventory would be sale in the ordinary course of business followed by price reductions and then an auction.). See Ardmor Vending Co. v. Kim (In re Kim), 130 F.3d 863, 865–66 (9th Cir. 1997) (Citing Taffi v. United States (In re Taffi), 96 F.3d 1190 (9th Cir. 1996) (en banc), cert. denied, 521 U.S. 1103, 117 S. Ct. 2478, 138 L. Ed. 2d 987 (1997), and without mention of Associates Commercial Corp. v. Rash, 520 U.S. 953, 117 S. Ct. 1879, 138 L. Ed. 2d 148 (1997), bankruptcy court and BAP incorrectly valued dry cleaning equipment separate from security interest in lease. “In light of Taffi, the bankruptcy court erred in accepting the off location valuation of the equipment, which does not take into account the actual use of the property. The Kims are continuing to operate the business, not removing the equipment and selling it. Consequently, the valuation should have been based on the equipment’s worth on location, not off location, taking into account the fact that appellants hold security interests in both the equipment and the lease. . . . Holding both the lease and equipment gave appellants a package that was worth more than if the two were valued separately.”).

 

43  Metrobank v. Trimble (In re Trimble), 50 F.3d 530 (8th Cir. 1995); Huntington Nat’l Bank v. Pees (In re McClurkin), 31 F.3d 401 (6th Cir. 1994); Lomas Mortgage USA v. Wiese (In re Wiese), 980 F.2d 1279 (9th Cir. 1992); Coker v. Sovran Equity Mortgage Corp. (In re Coker), 973 F.2d 258 (4th Cir. 1992); In re Byington, 197 B.R. 130 (Bankr. D. Kan. 1996); In re Huff, 159 B.R. 262 (Bankr. W.D. Mo. 1993); In re Jones, 152 B.R. 155 (Bankr. E.D. Mich. 1993); In re Green, 151 B.R. 501 (Bankr. D. Minn. 1993); In re Robertson, 135 B.R. 350 (Bankr. E.D. Ark. 1992). Accord Taffi v. United States (In re Taffi), 68 F.3d 306 (9th Cir. 1995) (In a Chapter 11 case, distinguishing GMAC v. Mitchell (In re Mitchell), 954 F.2d 557 (9th Cir. 1992), liquidation costs are not subtracted to value a residence.), aff’d, 96 F.3d 1190, 1192 (9th Cir. 1996) (en banc) (“When a Chapter 11 debtor or a Chapter 13 debtor intends to retain property subject to a lien, the purpose of a valuation under section 506(a) is not to determine the amount the creditor would receive if it hypothetically had to foreclose and sell the collateral. Neither the foreclosure value nor the costs of repossession are to be considered because no foreclosure is intended.”).

 

44  Lomas Mortgage USA v. Wiese (In re Wiese), 980 F.2d 1279, 1286 (9th Cir. 1992).

 

45  Coker v. Sovran Equity Mortgage Corp. (In re Coker), 973 F.2d 258 (4th Cir. 1992).

 

46  See GMAC v. Mitchell (In re Mitchell), 954 F.2d 557 (9th Cir. 1992), discussed above in this section. Mitchell may have been overruled by Taffi v. United States (In re Taffi), 96 F.3d 1190 (9th Cir. 1996) (en banc).

 

47  484 U.S. 365, 108 S. Ct. 626, 98 L. Ed. 2d 740 (1988).

 

48  489 U.S. 235, 109 S. Ct. 1026, 103 L. Ed. 2d 290 (1989).

 

49  508 U.S. 324, 113 S. Ct. 2106, 124 L. Ed. 2d 228 (1993).

 

50  Huntington Nat’l Bank v. Pees (In re McClurkin), 31 F.3d 401, 404–05 (6th Cir. 1994). See also In re Jones, 152 B.R. 155, 186–88 (Bankr. E.D. Mich. 1993) (Hypothetical liquidation costs are not deducted from the value of collateral to determine the extent of an allowed secured claim under § 506(a). “If such costs were deducted, then the valuation process would be unfairly slanted against the secured creditors, as only the creditor’s potential expenses would be factored into the equation, with liens being systematically undervalued as a result. . . . The House report indicates that pursuant to § 506(a), an undersecured creditor ‘has a secured claim to the extent of the value of his collateral.’ . . . [T]he implication is that a creditor’s allowed secured claim is determined without reference to hypothetical foreclosure-related costs. . . . The conclusion that valuation under § 506(a) is made without reference to foreclosure costs also fosters uniformity and certainty. . . . Restricting the § 506(a) inquiry to the value of the collateral and the amount of liens encumbering the collateral . . . reduces the likelihood of litigation, and lowers the cost of litigating those disputes which do arise.”).

 

51  Bellamy v. Federal Home Loan Mortgage Corp. (In re Bellamy), 122 B.R. 856 (Bankr. D. Conn.), aff’d, 132 B.R. 810 (D. Conn. 1991), aff’d, 962 F.2d 176 (2d Cir. 1992); In re Claypool, 122 B.R. 371 (Bankr. W.D. Mo. 1991); Cobb v. Mortgage Default Servs. (In re Cobb), 122 B.R. 22 (Bankr. E.D. Pa. 1990).

 

52  Brown & Co. Sec. Corp. v. Balbus (In re Balbus), 933 F.2d 246 (4th Cir. 1991).

 

53  United States v. Coby, 126 B.R. 593, 595 (D. Nev. 1991) (For purposes of § 1325(a)(5), the value of collateral should be discounted for the hypothetical costs of sale when the debtor retains property that is not central to effectuation of the plan. “Income producing property, if not retained by the debtor, would have to be replaced or an additional source of income would have to be developed for payments under the plan to be feasible. In that situation, then, calculation of the value of the interests involved under § 506(a) is appropriately measured as the replacement value of the property. . . . In contrast, here, . . . the property whose valuation is at issue is not income producing property. . . . Alternatives [to the debtor’s residence] such as apartment rental are available. Home ownership is not central to the bankruptcy plan. Therefore, if debtor were not retaining her residence, it is unlikely that the bankruptcy plan would contemplate funds for debtor to buy a new home. . . . In this situation, . . . the value of the government’s lien should be calculated according to the value of that lien to the United States. The value thus calculated should reflect the hypothetical costs of selling the home on the open market.”); In re Weber, 140 B.R. 707 (Bankr. S.D. Ohio 1992) [probably overruled on this issue by Huntington Nat’l Bank v. Pees (In re McClurkin), 31 F.3d 401 (6th Cir. 1994)]. See Atlantic Fin. Fed. v. Frost (In re Frost), 123 B.R. 254 (S.D. Ohio 1990) [probably overruled on this issue by Huntington Nat’l Bank v. Pees (In re McClurkin), 31 F.3d 401 (6th Cir. 1994)] (Court affirms without discussion valuation of real property reduced “by a cost of sale figure” for purposes of claim splitting under § 506(a) in the context of a motion to modify a confirmed plan to change a fully secured claim holder to a partially secured claim holder.).

 

54  140 B.R. 707 (Bankr. S.D. Ohio 1992) [probably overruled on this issue by Huntington Nat’l Bank v. Pees (In re McClurkin), 31 F.3d 401 (6th Cir. 1994)].

 

55  140 B.R. at 710–11.

 

56  11 U.S.C. § 506(a).

 

57  11 U.S.C. § 506(a).