In re Mellors

Jason and Darlene Mellors (debtors) filed for Chapter 13 bankruptcy. Their Chapter 13 plan was confirmed in December 2006. Prior to the bankruptcy, the Mellorses purchased a used vehicle. This was the Mellorses’ only vehicle, and Jason used it to commute to work. Coastal Credit (Coastal) (creditor) held a security interest in the vehicle. Under the Chapter 13 plan, Coastal’s claim was treated as secured to the extent of the value of the car, with the remaining portion of the claim treated as unsecured. Coastal’s secured claim would be repaid monthly over the life of the plan. In February 2007, the Mellorses learned that the frame of their vehicle was cracked and would have to be repaired before the vehicle could be driven. Although the vehicle had been inspected previously, the defect had not been detected. The Mellorses could not afford the repair. The Mellorses also could not afford to continue paying for the inoperable vehicle and financing a replacement vehicle at the same time. In March, the Mellorses filed an amended Chapter 13 plan. The amended plan provided for (1) the surrender of the vehicle to Coastal in satisfaction of Coastal’s secured claim and (2) Coastal’s sharing pro rata for its unsecured claim any distributions that any other unsecured creditors might receive. Coastal objected to confirmation of the amended Chapter 13 plan.