Expert: Terry Leeders - 11/16/2010

Question
One of our borrowers filed Chap 13.  He has 2 car loans with our bank.  Today we received a "Notice of Time to Respond to Debtors Amended Schedule C - Property Claimed as Excempt.  It involves one of the 2 cars.  The value of claimed exemption is $1,725.00.  The Current Value of Property without Deducting Exemption" is $11,725.  The balance owed on the car is $10,175.  We are not sure what this amendment means to us as the bank.  If we don't file any response, what is our exposure?  We are thinking that based on the dollar amount in question, it would not be cost effective to file the paperwork, nor do we know what the value of doing so will be.  Can you please help me understand?  FYI, the cars are in Georgia

Thanks so much.  

Pat
Share Plus Federal Bank

Answer
The exemption is between the trustee and the debtor, if there is equity in the car after subtracting the loan balance and the exemption, the trustee can liquidate the vehicle, pay off the loan, pay the exemption amount then use the rest to distribute to creditors in a chapter 7 case.  Since this is chatper 13, the chapter 13 plan will provide for payment of the note with you, based on the plan and your filed claim.  If you have issue with the plan, then you need to object. The exemption would only go to determine what percentage would be paid on unsecured claims, since the plan must pay back enough of the debt to protect any unexempted assets. So there isn't really much to worry about with the exemption, as a secured creditor.  you still retain your lien.