Judge Nugent

12-12650 Little (Doc. # 54)

In Re Little, 12-12650 (Bankr. D. Kan. Sep. 25, 2013) Doc. # 54

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SIGNED this 24th day of September, 2013.




Case No. 12-12650
Chapter 13



Section 506(a)(2) of the bankruptcy code provides that when a secured claim is
allowed in a chapter 7 or 13 case, the value of the security is the property’s
replacement value on the date of the petition “without deduction for costs of sale or
marketing.” If the debtor acquired the property for personal or household use, the
replacement value is determined at the time value is determined and the property’s


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age and condition can be considered.1 This case involves a manufactured home that is
debtor’s place of residence, and her claim that the home is worth far less than what
21st Mortgage Corporation, her purchase money lender, claims. If she’s correct, her
chapter 13 plan is feasible and can be confirmed. If the home is worth substantially
more as the lender claims, it cannot.


Ms. Little’s home is a 1996 Fleetwood model. She purchased it used in 2007 and
testified that it looked good then, but that it had been damaged in transit to the
community where it is presently set. The debtor assigned what appears to be a
somewhat arbitrary value of $8,000 to the home, but offered no actual appraisal
evidence. Ms. Little notes, and her photographs support, that the home has sustained
interior water damage that she attributes to problems with the roof. She also says that
there are plumbing issues and that the home needs to be leveled. She testified that
replacing the roof would cost between $3,000 and $4,000 while leveling the home would
cost $2,000 to $3,000. She noted on cross examination that she had done some repairs
to the roof that were paid for by insurance. She subsequently had the ceilings repaired
as well, but new stains appeared. She believes there has been further roof damage, and
until the repair work is completed, the home is worth only $8,000.

21st Mortgage presented an appraiser, Dan Pate, who testified that the home,

1 11 U.S.C. § 506(a)(2).


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net of necessary repairs, was worth $23,400.2 He arrived at this amount by applying
the N.A.S. manual guidebook3 to the base model of the mobile home ($18,900),
considering the size, age, make and model of the home and giving a location and
condition adjustment. Mr. Pate then added about $6,200 to the base value to recognize
the value of “options” the home came with. These options include “house-type” roofing,
storm windows, full baths, certain appliances and fixtures, heating and air
conditioning units, window treatments, and skirting. The value of all of these “options”
is reduced for the age of the home. He deducted needed repair costs of $315 from the
home value as follows: $200 which represents his estimate of the cost of roof repairs
(replacing the roof cap); $45 for other necessary exterior repairs; and $70, the cost of
removing the water stains from the ceiling using the product “Kilz.” Mr. Pate also
made a deduction to the base value for missing running gear components.

Mr. Pate’s testimony was reliable and credible, though the photographs both he
and Mrs. Little offered suggest that the interior water stain damage might cost more
than $70 to repair. While he agreed that a new roof might cost between $3,000 and
$3,500, he stated that replacing the ridge cap at significantly lower expense might be
all that was necessary. He stated that he used the NADA cost guide to value the

2 Ex. A.

3 Pate stated that the National Appraisal System (N.A.S.) is a product ofNADA and a recognized value guide in the industry.


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Analysis 4

Section 506(a)(2) governs both the timing and the method of evaluating personal
property owned by an individual debtor.5 The statute provides that a chapter 7 or 13
individual debtor’s property is to be valued at “replacement value” as of the date of the
petition without deduction for sale or marketing costs. But, the replacement value of
property that is acquired for personal, family or household purposes is what a retail
merchant would charge considering the age and condition of the property at the time
it is valued.6 Ms. Little undoubtedly acquired her home for personal use, so we must
value her property as of the hearing date, June 18, 2013, and consider its age and
condition in the process.

In In re Kollmorgen, I noted that other courts determine a mobile home’s value
using the NADA retail guide.7 That guide is “ based on the general specifications of the
subject home and ‘is considered a Depreciated Replacement Cost in Retail Dollars. By

4 This is a core proceeding under 28 U.S.C. § 157(b)(2)(L) over which theCourt has jurisdiction pursuant to 28 U.S.C. §§ 157(a), (b)(1) and 1334(b). David
Lund appeared as attorney for the debtor Ms. Little. Tyson C. Langhofer appearedas attorney for 21st Mortgage. Karin N. Amyx appeared as attorney for the chapter13 trustee, Laurie B. Williams.

5 Under Kansas law, a manufactured home is deemed to be personal propertyunless its certificate of title has been eliminated in accordance with the statutory
process. See KAN. STAT. ANN. §§ 58-4204(a) (2012 Supp.) and 58-4214(2005).

6 See In re Cook, 415 B.R. 529, 533-34 (Bankr. D. Kan. 2009) (section 506(a)(2)
valuation of motor vehicle is as of the date of valuation hearing).

7 In re Kollmorgen, Case No. 11-10904, 2012 WL 195200 at *3 (Bankr. D.
Kan. Jan. 20, 2012) (cases cited in footnote 19).


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definition the Depreciated Replacement Cost is the cost to replace and [sic] item less
accrued depreciation.... Unlike cars, the NADA value as to mobile homes tells what the
[mobile home] will actually sell for.’ ”8 In Kollmorgen, I also noted that the value guide
is the starting point for mobile homes and that the adjustments are based on
replacement costs to “adjust the retail value to address the specific components and
condition of the subject manufactured home as § 506(a)(2) requires for personal use

As in Kollmorgen, the debtor did not challenge the amounts of the adjustment
costs; instead she claims the mobile home requires more repair. But she offered
nothing in evidence to support a different finding as to the cost of the interior stain
repairs and we are left with only her testimony that replacing the roof rather than the
ridge cap is necessary. Courts place weight on value evidence that is supported by
testimony of the actual appraiser.10 The debtor provided no such evidence. Because the
evidence to support her proposed value of $8,000 is outweighed by the credible expert
evidence offered by 21st Mortgage, I conclude that it is more likely than not that the
value of the home is $23,400 as the lender asserts. 21st Mortgage’s objection to
confirmation is sustained.11

8 Id. at *3, citing and quoting In re Coleman, 373 B.R. 907, 913 (Bankr. W.D.
Mo. 2007).

9 Id. at *4.

10 In re Tucker, 2013 WL 3230615 at *6 (Bankr. M.D. Ga. June 25, 2013).

11 Dkt. 24 and 12.


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In light of that conclusion, the debtor’s plan is not feasible at its current
proposed payment level of $275 per month. The Trustee’s counsel stated at the hearing
that the payment would need to be increased to $597 per month if the home were
valued at $23,400. Confirmation is therefore denied, but the debtor is granted 28 days
to offer an amended plan.

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