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The greatest struggle between a debtor and a secured creditor in bankruptcy is determining the appropriate fair market value of collateral. At best, this struggle is quickly remedied at
the meeting of the creditors, or through stipulation, where both sides come to an agreement on the fair market value of the collateral. At worst, both sides end up before the bankruptcy
court, putting forth evidence. In such cases, the debtor risks the court either granting the creditor's motion for "relief from the automatic stay" or ultimately denying the
debtor's plan for reorganization. The creditor risks court costs and more attorney fees, both of which add to the loss if the judge decides in the debtor's favor.
Background
When bankruptcy is filed, ¤ 362(a) of the Bankruptcy Code ("Code") stays most actions by creditors against the debtor or the estate, including "any act
to collect, assess, or recover a claim... that arose before the commencement of the case." ¤362(a)(6). The creditor, however, can file a proof of claim stating what it believes are
the unsecured, unsecured priority, and secured portions of the total amount owing "as of the date of the filing of the petition." Bankr. Rule ("Rule") 3002(c) and Code
¤¤ 501(a), 502(b), 506(a), and 507. A creditor has a secured claim to the extent of the value of bankruptcy estate's interest in the collateral. Any claim amount above that value is
unsecured. Code ¤ 506.
The debtor asserts what he or she believes are the unsecured, unsecured priority, and secured portions of the creditors' claims in the plan for reorganization. Code ¤ 1322. A conflict
arises when the creditor's claim amounts do not comport with the debtor's plan amounts.
If the debtor and creditor are unable to stipulate to the secured amount and interest rate, the Code provides three avenues for resolution: the debtor may surrender the collateral, thereby
satisfying the secured portion the creditor is seeking (¤ 1325(a) (5)(C)); the court may deny confirmation of the debtor's plan and dismiss the case (¤ 1307(c)(5)); or, the debtor can
invoke the "cram down" power of Code ¤ 1325(a)(5)(B), and thereby keep the property over the creditor's objection. This last option requires the debtor to ask the court to
determine the value of the collateral (¤ 502(b)) and to confirm the bankruptcy plan as it stands.
In Chapter 13 cases, when the court is asked to determine the appropriate value, some courts require the parties to appear. Other courts, however, allow a Chapter 13 debtor to file a
motion to confirm the plan by consent and resolve the differences of opinion without having to attend a court hearing. The Utah Bankruptcy Court allows this procedure in Standing Order
#3, ¦ 9.
To obtain confirmation by consent in Utah, the debtor files a motion entitled "Motion to Confirm Plan by Consent, Objection to Claims, and Motion for Allowance of Attorney Fees"
and sends a copy to the trustee and all the creditors. The motion must list the secured claims that were filed with the court and contrast those amounts with the debtor's plan amounts.
The motion must also contain a notice that written objections to confirmation must be filed with the clerk within 30 days of the confirmation hearing or the court may confirm the plan as
it stands. After the 30 days, if no objections are filed, the debtor can impose his or her asserted values and interest rates on the secured creditors if the court confirms the debtor's
plan. (Code ¤ 1327(a)). However, when the debtor's and creditor's interests concerning value of the collateral are polarized, the parties usually end up before the court, asking it to
decide which amount is right.
The debtor has many reasons to minimize the secured portion of the creditor's claim. The main reason is to reduce the debtor's payments under the plan. The debtor may not reduce the
secured portion of the creditor's claim, like she can with unsecured non-priority claims. (Code ¤ 1325(a)(5)(B))1. "Thus, a Chapter 13 plan can modify contract terms such as the
time, method and amount of installment payments, and may modify the contract right to accelerate the debt, to repossess, and to sell the collateral...,"2 but it must maintain the
value of the secured claim. Therefore, it is in the debtor's best interest to ensure that the creditor's claim does not overstate the secured amount.
Another reason the debtor wants the creditor's secured claim lower is that once the secured portion of the debt is paid, the creditor must relinquish any title to the collateral, even
though an unsecured portion of that creditor's claim remains to be paid under the plan.3 Thus, the smaller the secured claim, the sooner the debtor is entitled to receive title to the
collateral.
The creditor on the other hand would like to see a higher secured claim. First, any debt above the secured portion of the creditor's claim will be classified as unsecured and thus be
subject to a "cram down." Second, the larger the secured claim, the more interest the creditor will receive Ð which in turn helps compensate for the length of time the debt will
be tied up in bankruptcy. In addition, if the fair market value of the collateral is greater than the total amount owing (i.e. an over-secured claim), then the debtor cannot "cram
down" the interest rate to the market rate, and must pay a higher rate of interest (generally the contract rate of interest) on the creditor's entire claim.4 The creditor will also
be able to seek post-petition attorney fees and costs, and post-petition interest. Code ¤ 506(b). Thus, oversecured creditors receive more of the bankruptcy estate than do undersecured
creditors.
The creditor wants the secured amount to be higher because secured claims are generally paid off before unsecured claims. The more the creditor's claim is secured, the faster the creditor
will receive its money.
Thus, for opposing reasons, the creditor and the debtor will frequently battle over the appropriate value of the collateral, and the appropriate method of determining that value.
Fair Market Value Analysis Determining the Value: An Example
Consider the unsecured and secured portions of a creditor's $30,000 claim in Chapter 13 if the collateral is a 3/4
ton, 2000 Ford F-250, XLT, super duty crew cab with a long bed, custom wheels, CD player, four leather captains chairs, tinted windows, having only 5,000 miles, and in excellent
condition. The N.A.D.A. car guidebook may say that average retail is $25,525 and that trade-in value is $22,575. Kelly blue book may say that average retail is $27,980 and average
trade-in is $23,465. Further, the same truck may be for sale at a local dealer for $31,000, and local classified ads may advertise several similar trucks for sale by private parties for
$25,000 to $35,000. How is fair market value determined?
General Rules
Code ¤ 506(a) provides the starting point for valuing collateral. It states that a claim:
secured by a lien on property in which the estate has an interest... is a secured claim to the extent of the value of such creditor's interest ... in such property ... and is an
unsecured claim to the extent that the value of such creditor's interest ... is less than the amount of such allowed claim.
The purpose of limiting the secured claim to the value of the collateral is to place the creditor in the same position it would have been if it had repossessed and sold the collateral at
the time of bankruptcy filing. Two aspects of "value" that the Code does not expressly address are: (1) the date the value should be assessed, and (2) the valuation method that
should be used.
The date of valuation is a matter of disagreement among bankruptcy courts. Moreover, the appropriate date may depend on the different legal issues being addressed. Courts generally agree
that, in the cram down context, collateral should be valued as of the effective date of the plan. However, there is less agreement on the relevant time in other contexts. For example, in
motions to determine adequate protection payments, courts are divided on whether to use the petition date, the request date, the motion date, or the hearing date. The same disagreement is
found in motions for relief from the automatic stay. (See generally 4 Collier on Bankruptcy, ¦506.03 [10], 506-100 (15th ed. 1997)).
Even more controversy exists over method of valuing collateral when a debtor seeks to "cram down" a secured creditor's claim in a Chapter 13 plan. Code 506(a) states that
"[s]uch value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property, and in conjunction with any hearing on such
disposition or use or on a plan affecting such creditor's interest." Despite these seemingly simple requirements, several different methods of valuation have existed throughout the
history of bankruptcy law.
Omnibus Bankruptcy Improvements Act of 1983
In 1983, Senate Bill 445, entitled "Omnibus Bankruptcy Improvements Act of 1983," was introduced to provide the method for
valuing collateral. The Committee on the Judiciary of the Senate issued an accompanying report expressing concern:
The Committee, after review of the testimony detailing experience with the valuation provisions of the 1978 Code, has concluded that the courts have, in too many cases, undervalued
collateral property.... Problems of proof which creditors face are compounded by judicial confusion over what standard should be employed - wholesale or retail, resale or straight
line depreciation. [T]he original intent of the Congress in this regard has not uniformly been carried into practice by the courts.
S. Rep. No. 98-65, 98th Cong., 1st Sess. 5-6 (1983). The Committee suggested that changes to ¤506 would bring about uniformity and predictability in assessing value. The suggested changes
entailed a "preference... for use of a resale market standard, with the choice of wholesale [sic] or retail measurements of value to be determined by reference to the condition of
the property and the debtor's proposed use or disposition thereof." Id. That bill was never enacted into law. A year later, however, the Committee's recommendations for changes to ¤
506(b) & (d) were incorporated into the Bankruptcy Amendments and Federal Judgeship Act of 1984. Yet, Congress rejected a proposed amendment to section 506(a), which would have
expressly adopted a "replacement cost" standard.
Split in the Circuit Courts
Since 1984, the circuit courts have developed three different standards for valuing collateral when the debtor's plan proposes to cram-down and keep
the collateral over the creditor's objection: a Replacement Value standard, a Split-the-Difference standard, and a Foreclosure Value standard.5
The First, Fourth, Sixth, Eighth, and Ninth Circuits6 each adopted a variation of the "Replacement Value" standard. These courts decided that because the debtor "propose[d]
to retain and use the collateral, it should not be valued as if it were being liquidated."7 Therefore, under the "replacement value" standard, the court values of the
collateral "Ôin light of' the debtor's proposal to retain it and ascribe to it its going-concern or fair market value with no deduction for hypothetical costs of sale."8
The Seventh Circuit adopted the "Split-the-Difference" standard: "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."9 The Second Circuit approved a lower court's decision to use the
Split-the-Difference standard, but it chose not to adopt a specific standard for every case.10
The Fifth Circuit adopted the "Foreclosure Value" standard: a court should first "start with what a creditor would realize if it repossessed and sold the collateral pursuant
to its security agreement, taking into account the purpose of the valuation and the proposed disposition or use of the collateral."11
United States Supreme Court and Rash
On appeal in Associates Commercial Corp. v. Rash12 from the Fifth Circuit, the United States Supreme Court attempted to resolve the
split among the circuit courts and to settle the valuation issue. To understand the Supreme Court's analysis in Rash, let us first review the facts. In 1989, Mr. Rash purchased a Kenworth
tractor truck for $73,700 to use in his business. The seller financed the purchase with a sixty-month installment loan and a purchase-money security interest. Associates Commercial
Corporation ("ACC") purchased the loan from the seller. In 1992, Mr. and Mrs. Rash filed a joint Chapter 13 Bankruptcy. The debtors listed ACC in their schedules as a secured
creditor holding a claim for $41,171. Rashes' Chapter 13 plan proposed to retain the collateral for use in the debtors' business and invoked the cram down power of Code ¤ 1325(a)(5)(B).
The plan provided pro rata payments over 58 months to ACC to equal the present value of the truck, which was listed at $28,500. ACC filed a proof of claim alleging it was fully secured
for $41,171, objected to the plan, and moved to lift the automatic stay. In response, the Rashes objected to ACC's proof of claim.
At the evidentiary hearing, ACC argued the tractor should be valued at the price the debtors would have to pay for the same truck in the retail market. ACC's expert testified that amount
was $41,000. The debtors argued the tractor should be valued by the net amount ACC would receive in a foreclosure sale. The debtors' expert testified that amount was $31,875. The
Bankruptcy Court agreed with the debtors and confirmed the plan. The district court affirmed. The Fifth Circuit BAP reversed. The Fifth Circuit, on rehearing en banc, affirmed the
district court's decision that the proper standard was the net amount the creditor would receive in foreclosure. ACC appealed to the Supreme Court, which granted certiorari.
The Supreme Court rejected the Seventh Circuit's split-the-difference approach, stating that the Code did not warrant such a complex standard since it "calls for the value the
property possesses in light of the ‘disposition or use’ in fact ‘proposed,’ not the various dispositions or uses that might have been proposed."13
The Supreme Court also rejected the Fifth Circuit's decision that the first sentence of Code ¤ 506(a) mandates the foreclosure standard because the first few words in that sentence
("the creditor's interest in the estate's interest in such property") did not impart a valuation method but only what a court must evaluate.14 However, "[t]he second
sentence of ¤ 506(a) does speak to the how question." "Such value... shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such
property." Therefore, "by deriving a foreclosure-value standard from ¤ 506(a)'s first sentence, the Fifth Circuit rendered inconsequential the sentence that expressly address
how Ôvalue shall be determined.'" The Court went on to say that the foreclosure standard does not attribute any "significance to the different consequences of the debtor's
choice to surrender the property or retain it [under ¤ 1325(a)(5)(B) and (C)]. A replacement-value standard, on the other hand, distinguishes retention from surrender and renders
meaningful the key words Ôdisposition or use.'"15
The Supreme Court then held that the replacement value standard was the appropriate16 standard when the debtor proposed to keep the collateral over a creditor's objection and rely upon the
"cram down" power of ¤ 1325(a)(5)(B). "In such a Ôcram down' case... the value of the property (and thus the amount of the secured claim under ¤ 506(a)) is the price a
willing buyer in the debtor's trade, business, or situation would pay to obtain like property from a willing seller." Therefore, "the Ôproposed disposition or use' of the
collateral is of paramount importance to the valuation question." "In sum..., the Ôcram down' option is the cost the debtor would incur to obtain a like asset for the same
Ôproposed... use[].'"17 However, the Rash Court also said:
That replacement value, in this context, should not include certain items. For example, where the proper measure of the replacement value of a vehicle is its retail value, an
adjustment to that value may be necessary: A creditor should not receive portions of the retail price, if any, that reflect the value of items the debtor does not receive when he
retains his vehicle, items such as warranties, inventory storage, and reconditioning... [n]or should the creditor gain from modifications to the property Ñ e.g., the addition of
accessories to a vehicle - to which a creditor's lien would not extend under state law.18
Post Rash
After the Supreme Court's 1997 opinion in Rash, numerous articles19 appeared, many of which questioned whether Rash actually resolved the issue of "value" and
whether it had provided a "predictable and uniform rule of valuation."20 Although Rash moved the debate one step closer to resolution, a continuing valuation problem stems from what the Court wrote in its second and sixth footnotes.
In the second footnote, Rash defined replacement value as the fair market value, i.e. 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. However, in footnote six the Court wrote:
Our recognition that the replacement-value standard... governs in cram down cases leaves to bankruptcy courts, as triers of fact, identification of the best way of ascertaining
replacement value on the basis of the evidence presented. Whether replacement value is the equivalent of retail value, wholesale value, or some other value
will depend on the type of debtor and the nature of the property. [Emphasis added]
Although the Supreme Court resolved the split between Circuits on what standard should apply in ¤ 506(a) and ¤ 1325(a)(5)(B) by adopting the replacement value standard, the Court only
vaguely defined "replacement value" and consequently "created uncertainty as to how the courts [should] make specific evaluation decisions under that standard."21
Therefore, the answer to the "question of how future courts will determine... value while serving the interests of predictability and uniformity... is" that it will be done with
"great difficulty and very little uniformity...."22
One commentator concludes that post-Rash decisions on value are just as conflicting as they were before Rash.23 After Rash, courts have used four different methods to
decide "replacement value": (i) N.A.D.A. Retail Value, (ii) Not Retail, (iii) Midpoint between wholesale and retail, with adjustments, and (iv) Actual Sales Prices.24 The
courts, when adopting a method, have justified their holdings by relying upon footnotes two and six in Rash.
The "N.A.D.A. Retail Value" method is exemplified by In re Russell. The Russell court rejected the debtor's attempt to dispute the N.A.D.A. retail value by submitting as evidence a single newspaper advertisement placed by a used car dealer for a similar automobile. The court held that the proper way to decide "replacement value" was to start with the retail value that is listed in the N.A.D.A. (holding that this value does not include any extra value for items not retained by the debtor) and then make adjustments from there as "agreed to by the debtor, the secured creditor and the Chapter 13 trustee."25
The "not retail" method is illustrated by In re Roberts. Under this method, the court will reject evidence the debtor had submitted that entails a written appraisal
without testimony by the appraiser. The court said, however, that it will accept the average of the N.A.D.A. blue book values (i.e. average between trade-in and retail values) as a guidepost, but those values are not conclusive (unlike Russell where retail value controls). The parties should bring in witnesses who can actually talk about the condition of the car.26
The "[m]idpoint between wholesale and retail, with adjustments" method was used by In re Franklin and In re Younger. In Franklin, the court held that the replacement value was properly set as the average between the vehicle's retail and wholesale bluebook values, with adjustments upward or downward as called for by special circumstances. The court adjusted downward for the vehicle's condition and cost of needed repairs. It also adjusted upward for the value of remaining extended warranty coverage purchased by the debtor.27
In Younger, the court also held that the starting point is the average of the wholesale and retail values listed in the N.A.D.A. guidebook, with adjustments for equipment, mileage
and vehicle condition. The court would, however, accept other comparable reliable sources or appropriate compilations. In reference to other "reliable sources" and
"compilations," the court said it would follow Rule 803(17) of the Federal Rules of Evidence in that "[t]he following are not excluded by the hearsay rule, even though the
declarant is available as a witness: ... (17) Market reports, commercial publications...." Younger also stated that the retail value in the N.A.D.A. should be adjusted downward in some amount to account for "inventory storage" and "reconditioning," two items that Rash specifically stated should not be included.28
Finally, the last post-Rash method, "Actual Sales Prices," is depicted in In re McElroy and In re Jenkins. McElroy held that valuation would be
"based on prices paid in the market that is accessible to the debtors, which includes, without limitation, sales by dealers to the public, auctions open to the public, and sales
between private parties. That ‘market' is broader than the ‘retail' market."29 The court went on to say that from these prices items such as "reconditioning, warranties, and the
cost of other services or additions provided by the seller" should be deducted. The court defined "fair market value" as "the cash price that a willing buyer would pay
a willing seller in an arms-length transaction, free from compulsion or duress." The court then held that the fair market value should be based on a simple cash sale, a "sale
for cash (no financing provided or required as part of the transaction), without a trade-in, and without the buyer purchasing any additional products, such as disability, life or
mechanical insurance, in conjunction with the sale."30
Jenkins is another good example of the "Actual Sales Prices" method. In addition to what McElroy said, Jenkins held that it would not consider a "risk
premium" imposed on the price by the dealer because the dealer had arranged for financing.31
Applying Post-Rash Methods
Of the various methods employed to determine the true "replacement value," this author believes that each holds a bit of the truth and
that several methods should be used.
In determining "replacement value" of any type of collateral that has a published book of market values, the process should start with these guidebooks to determine "book
value." For example, for vehicles, a debtor or creditor would first determine the "book value" per N.A.D.A. Based upon the internal, external, and mechanical conditions of
the vehicle, the creditor/debtor should first decide if it is worth the high ("N.A.D.A. Retail"), middle ("The Midpoint between wholesale and retail, with
adjustments"), or low ("Not Retail") book value. The creditor/debtor's value judgment will of course be subjective (i.e. wear, tear, and scratches) as well as objective (i.e. cost to repair damage or mechanical break down). Next, allowed N.A.D.A. additions (i.e.
low mileage and accessory items such as custom wheels) and subtractions (i.e. high mileage and manual transmission) should be made to come up with an adjusted N.A.D.A. "book value."
Next, that "book value" should be compared with "Actual Sales Prices," i.e., those "prices paid in the market[s] that [are] accessible to the debtors, which
includes, without limitation, sales by dealers to the public, auctions open to the public, and sales between private parties," and if appropriate wholesale markets.32
Finally, expert appraisers should be used to testify to the condition and value of the collateral. The court should consider all the facts that are relevant to the determination of the
value and not rely on a dogmatic rule. If both the debtor and creditor were to take on this approach, they should be closer in their evaluation of the collateral and could settle
valuation issues more often than not.
Bankruptcy Reform Act of 2001
Congress has continued to consider changes to the Bankruptcy Code for a way that, in their opinion, would fairly resolve the valuation issues. In
March of 2001, both the House and the Senate passed versions of the Bankruptcy Reform Act of 2001 ("Act").33 The proposed changes are identical when it comes to valuation of
security collateral. The Act, if passed, would state that "Secured claims shall be determined under ¤ 506(a) based on the replacement value of the collateral as of the filing without deduction for costs of sale or marketing."34
[Emphasis added]. Thus, the Act would codify the Rash holding but remove the Court's emphasis in footnote six that "replacement value" does not include the value of items such
as "warranties, inventory storage, and reconditioning."
Each version also contains an amendment to ¤ 1325(a)35 that would prohibit a debtor from cramming down a claim that was incurred within three36 years of the filing date and is secured by a
purchase-money security interest in a motor vehicle acquired for personal use by a Chapter 13 debtor. All other claims that are secured by a purchase-money security interest in any other
thing of value cannot be crammed down if the debt was incurred within one year preceding bankruptcy.37 This is meant to cut down the amount of litigation surrounding "replacement
value" and to protect secured creditors from (perceived) abuses at the hands of debtors.
Whether this Act will be passed is unknown. If it is, these changes will have a substantial effect on valuation battles between debtors and creditors. But for now, the courts will continue
to define value based on the replacement value standard. When the issues and arguments are refined, and the Circuits are split again, the Supreme Court may finish resolving the problem it
started to fix in Rash.
Footnotes
1 The debtor's plan under Code ¤ 1322(b)(2) may "modify the rights of holders of ... unsecured claims...." Under the "Best Interest" test of ¤ 1325(a)(3) and (4), the
two requirements of the debtor when paying unsecured claims are: 1) The plan must be "proposed in good faith and not by any means forbidden by law"; and 2) "The value, as
of the effective date of the plan, of property to be distributed under the plan on account of each allowed unsecured claim is not less than the amount that would be paid on such claim if
the estate of the debtor were liquidated under chapter 7...." Thus, for example, assuming the debtor has met the "good faith" requirement, she may "cram down" the
unsecured debt to 30 cents on the dollar if the liquidation analysis shows that the unsecured class would receive something less than the 30% of their debt back. However, several courts
have held that the debtor must pay more to the unsecured class than just the amount they would receive under Chapter 7 liquidation, for example 6% more than the liquidation percentage.
E.g. In re Santa Maria, 128 B.R. 32, 36 (Bankr. N.D. N.Y. 1991) and In re Rivera, 116 B.R. 17, 18 (Bankr. D. Puerto Rico 1990).
2 Norton Bankruptcy Law and Practice ¤ 122:8, 122-69, (2d ed. 1997).
3 In 1994, Congress amended Code ¤ 348 to state that any "valuations of property and of allowed secured claims
in the chapter 13 case shall apply in the converted case [i.e. Chapter 7] with allowed secured claims reduced to the extent that they have been paid in accordance with the chapter 13
plan." Code ¤ 348(f)(1)(B). Therefore, a debtor may redeem the collateral upon conversion to Chapter 7 for the fair market value determined under the Chapter 13 minus all payments
made on the creditor's secured claim. So, in essence, the debtor may redeem the collateral for $0.00 if the entire claim had been paid under the plan. This analysis has been carried
forward to Chapter 13 cases where the majority of the courts hold that once the creditor's secured claim has been paid, the plan can provide for releasing the creditor's lien. See e.g., 8
Collier on Bankruptcy, ¦ 1325.06[3], 1325-28-30 (15th ed. 1997).
4 "Some courts have held that an oversecured creditor is entitled to claim accrued post-petition interest at the
contract rate [which is generally higher], but only through the effective date of the plan." Norton Bankruptcy Law and Practice, ¤ 123:12, 123-55 (2d ed. 1997). Cf. 8 Collier on
Bankruptcy, ¦ 506.04[2][b][i], 506-109 (15th ed. 1997). The vast majority of the courts have held that post-petition interest should be computed using the contract rate of interest.
After the effective date of the plan, the creditor is only allowed interest at the "confirmation rate." NORTON, ¤ 123:12, 123-56. The appropriate "confirmation rate"
has been the source of much debate. Some courts have held that the rate is controlled by something other than the contract. See Key Bank N.A. v. Milham, 141 F.3d 420, 424 (2nd Cir. 1998).
On the other hand, other courts have held that the appropriate rate is the contract rate of interest. See In re Younger, 216 B.R. 649, 651, n.3 (Bankr. W.D. Okla. 1998). See also, In
re Terry Limited Partnership, 27 F.3d 241, 243 (7th Cir. 1994) (There is a rebuttable presumption that the contract rate is the proper rate).
5 See Associates Commercial Corp. v. Rash, 117 S.Ct. 1789, 1883 (1997).
6 Winthrop Old Farm Nurseries, Inc., v. New Bedford Institution for Savings, et al., 50 F.3d 72, 74-75 (1st Cir.
1995). Coker v. Sovran Equity Mortgage Corp, 973 F.2d 258, 260 (4th Cir. 992). Huntington National Bank v. Pees (In re McCurkin), 31 F.3d 401, 405 (6th Cir. 1994). Taffi v. United States,
96 F.3d 1190, 1192 (9th Cir. 1996).
7 Winthrop Old Farm Nurseries, Inc., 50 F.3d at 74 (1st Cir. 1995).
8 Id.
9 In re Hoskins, 102 F.3d 311, 316 (7th Cir. 1996).
10 In re Valenti, 105 F.3d 55, 62 (2nd Cir. 1997).
11 Associates Commercial Corp. v. Rash, 90 F.3d 1036, 1043 & 1060 (5th Cir. 1996).
12 Associates Commercial Corp. v. Rash, 117 S.Ct. 1879 (1997).
13 Id. at 1886.
14 "A debtor may own only a part interest in the property pledged as collateral, in which case
the court will be required to ascertain the Ôestate's interest'...." Rash, 117 S.Ct. at 1884. The court must also determine "what" interest the creditor has in the
collateral, especially where "a creditor may hold a junior or subordinate lien...." Id. at 1885.
15 117 S.Ct. at 1885.
16 The Supreme Court did not give any "weight
to the legislative history of ¤ 506(a)" within regards to the appropriate standard that should be used, "noting that it is unedifying, offering snippets that might support
either [foreclosure or replacement-value] standard of valuation." Rash, 117 S.Ct. at 1886 n 4.
17 Id. at 1884-1886.
18 Id. at 1887 n.6.
19 As of Nov. 3, 2001, Westlaw reported 154 articles citing the Supreme Court's Rash decision.
20 The Supreme Court said in Rash that they "agree with the Seventh Circuit that Ôa
simple rule of valuation is needed' to serve the interests of predictability and uniformity." Rash, 117 S.Ct. at 1886, citing In re Hoskins, 102 F.3d 311, 314 (7th Cir. 1996).
21 See, Supreme Court's Rash Decision Fails to Scratch the valuation itch, 53 Buslaw at 1379.
22 Laurie B. Williams, Rash: Neither Final nor Right, 1998 No. 9 NRTN-BLA 12 (Sept. 1998).
23 Rash: Neither Final nor Right, 1998 No. 9 NRTN-BLA 12.
24 Id.
25 In re Russell, 211 B.R. 12, 13 (Bankr. E.D. N.C. 1997).
26 In re Roberts, 210 B.R. 325 (Bankr. N.D. Iowa 1997).
27 In re Franklin, 213 B.R. 782 (Bankr. B.D. Fla. 1997).
28 In re Younger, 216 B.R. 649 (Bankr. W.D. Okl. 1998).
29 In re
McElroy, 210 B.R. 833, 835 (Bankr. D. Or. 1997). In footnote 1, the court said that if the debtors' trade, business, or situation were such that they had access to the wholesale market,
the valuation analysis would include values from there.
30 Id., at 835.
31 In re Jenkins, 215 B.R. 689, 691 (Bankr. N.D. Tex. 1997).
32 In re Franklin, 213 B.R. at 835.
33 The
House's version of the Bankruptcy Reform Act of 2001, was passed on March 1, 2001 by a vote of 306-109. The Senate approved its version of the bill, S. 420, on March 15, 2001, by a vote
of 83-15. "Bankruptcy Reform Legislation of 2001, Summary of the Bankruptcy Reform Act of 2001." 2001 WL 5333346 (Norton Bankr. Reform Act. Newsl.) (May 10, 2001). See 2001
Cong. U.S. H.R. 333, 107th Congress, 1st Session (March 1, 2001). Also see 2001 Cong. U.S. S. 420, 107th Congress, 1st Session (March 15, 2001).
34 2001 Cong. U.S. H.R. 333, ¤ 309 & 2001 Cong. U.S. S. 420, ¤ 309.
35 2001 Cong. U.S. H.R. 333, ¤ 306(b) & 2001 Cong. U.S. S. 420, ¤ 306(b).
36 Five years in House Bill. 2001 Cong. U.S. H.R. 333, ¤ 306.
37 2001 Cong. U.S. H.R. 333, ¤ 306 & 2001 Cong. U.S. S. 420, ¤ 306.
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