Decision in the Shawn P. Cooke Case Deviates from Precedent of the Nolan Decision
CHICAGO, IL -- A recent decision in a Chapter 13 bankruptcy case represents a deviation in the Northern District of Illinois, which traditionally followed the Nolan decision, restricting post-confirmation surrender of vehicles in Chapter 13 cases.
The case involves Shawn P. Cooke, who filed a motion to modify his confirmed Chapter 13 bankruptcy plan, specifically proposing to surrender his vehicle and reclassify the associated secured claim as unsecured.
The Chapter 13 Trustee objected to this motion based on the precedent set in the case of Nolan, arguing that a plan cannot be modified to change a secured creditor's treatment from payment to surrender of collateral without the creditor's consent.
Initially, Cooke filed for Chapter 13 bankruptcy and listed the vehicle, valuing it at $9,520.00. He proposed a plan treating Car Finance Capital's claim, secured by the vehicle, at the same amount. However, Car Finance Capital filed a claim slightly higher than Cooke's plan proposed. Cooke then amended his plan to match Finance's claim amount but maintained the vehicle's value.
Subsequently, the vehicle was reported stolen, leading Cooke to file a motion to modify his plan. He proposed to surrender the vehicle, reducing its secured claim to zero and treating the remainder as unsecured. The Trustee objected, citing the Nolan case, which suggests such a modification is not permissible under Chapter 13.
The court, however, granted Cooke's motion to modify. It found that the proposed modification is permissible under Section 1329 of the Bankruptcy Code, which allows for such modifications post-confirmation. The court argued against the reasoning in Nolan and similar cases, stating that the Bankruptcy Code permits modification of a confirmed plan by surrendering collateral. The court also noted that proper notice was given and Car Finance Capital did not object to the modification.
Ultimately, the court decided that modifying a confirmed plan to change a secured creditor’s treatment from payment of the claim to surrender of collateral is permissible under Chapter 13 bankruptcy law. This decision represents a deviation in the Northern District of Illinois, which traditionally followed the Nolan decision, restricting post-confirmation surrender of vehicles in Chapter 13 cases.
This decision set a new precedent in bankruptcy court that can potentially help benefit countless people who seek to modify motions in their cases.