In re: Penny, No. 10-55073 SLJ (Bankr. N.D. Calif., January 21, 2011).
In a Chapter 13 plan, debtor Sandy Lynn Penny proposed to "cram down" the loan on her car to the current value of the vehicle, which the court valued at $8,761. The balance of her loan at the time was $19,476, and the lender argued that the car was actually worth $16,850.
In a Bankruptcy case, a vehicle may be valued using the debtor's estimated value, the Kelley Blue Book value, and an appraisal of the vehicle. In this case, the debtor testified she believed it was worth around $7,000 because of a "check engine" light that was on and several other problems with the car, as well as a high mileage. According to Kelley Blue Book, the value of the vehicle was $13,500. An appraisal of the vehicle indicated a value of $10,132.
Because these three valuations led to widely varying numbers, the court decided that it was best to start with the Kelley Blue Book valuation, then adjust if to reflect the actual condition of the car and the fact that the Kelley Blue Book price was for retail, not what it would finally be sold for. The court adjusted the value downward for the work that needed to be done on the vehicle, and also for its high mileage and cosmetic issues.
Although the court attempts to be as scientific as possible, no valuation will be as accurate as the price the vehicle is ultimately sold for. The court finally valued the car at $8,761, and permitted the debtor to modify the balance of her loan so that she did not owe more than the vehicle was worth.
