In re Manley

Carlos and Vanessa Manley (debtors) purchased a mobile home in 2011 with a loan from Vanderbilt Mortgage and Finance, Inc. (Vanderbilt) (creditor). Vanderbilt placed a lien on the certificate of title for the mobile home. The loan was for over $62,000, and with the indebtedness at about $57,000, the Manleys defaulted on the loan and filed for Chapter 13 bankruptcy in 2015. In their Chapter 13 plan, the Manleys valued the mobile home at $20,000. Vanderbilt objected, arguing that the mobile home was worth much more. Vanderbilt was allowed to have the home appraised, and their appraiser valued it at $43,300, due to good overall condition and some improvements to the home that increased the value. This matter was before the bankruptcy court on the bankruptcy plan’s motion to value secured property. The Manleys, by attempting to set the value of the mobile home at $20,000, were attempting to limit the value of Vanderbilt’s secured claim in their property, meaning that it would be a bifurcated claim, where only $20,000 would be secured and the remainder of their obligation (about $37,000) would be unsecured debt. This is often termed a cramdown procedure. The determination of collateral value is based upon the replacement value of the property as of the date of filing of the petition. The relevant bankruptcy code specifically defines this as the price a retail seller would charge for property of the same type, accounting for age and condition at the time of valuation. Vanderbilt’s appraiser based his appraisal value on the National Appraisal System, an appraisal system for manufactured homes, and he indicated that the value he listed, $43,300, was “what a normal consumer would pay for this home in this condition.”