§ 130.4 — 11 U.S.C. § 506: Extent of Secured Claims
Revised: August 12, 2009
Prior to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)1 it was conventional wisdom in Chapter 13 cases that allowed claims were secured claims to the extent of the value of the collateral for the claim or to the extent of a creditor’s right to setoff. Allowed claims were split into secured and unsecured components by § 506(a), with consequences for eligibility in and confirmation of a Chapter 13 case. To the extent that a lien secured a claim that was not an allowed secured claim, the lien was void under § 506(d) unless the underlying claim was not allowed only because of the failure of any entity to file a proof of claim under § 501. BAPCPA changed the rules with respect to the allowance of secured claims in two important ways: New § 506(a)(2) provides that valuation of personal property in Chapter 13 cases is based on replacement value with a retail merchant bias;2 the 2005 Act prevents bifurcation of claims secured by purchase money security interests in motor vehicles purchased for personal use within 910 days of bankruptcy or secured by other things of value purchased within one year of the petition.3
1 Pub. L. No. 109-8, 119 Stat. 23 (2005).
2 See 11 U.S.C. § 506(a)(2), as amended by Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8, 119 Stat. 23 (2005), discussed in § 450.1 [ New Valuation Standards ] § 76.7 Valuation after BAPCPA.
3 See 11 U.S.C. § 1325(a), as amended by Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8, 119 Stat. 23 (2005), discussed beginning at § 75.1 In General: Modification Without § 506 and § 87.7 910-Day PMSI Car Claims after BAPCPA: A Reprise.