Dickinson, Mackaman, Tyler & Hagen, P.C.

No Free Car: Bankruptcy court protects bank's security interest in vehicle

iowa bankruptcy law John Lande Iowa Banking Law Dickinson Law Firm Des Moines, Iowa

Posted on 09/24/2013 at 01:07 PM by John Lande

In a short opinion on Monday, September 23, 2013, the United States Bankruptcy Appellate Panel for the Eighth Circuit (BAP) found in favor of a bank in a case where a debtor tried to claim an exemption for a vehicle pledged as collateral. The case, In re Mirella S. Goben, originated from a transaction between Corydon State Bank in Corydon, Iowa, and Mirella S. Goben. Prior to bankruptcy, the bank made personal loans to Ms. Goben secured by an interest in a 2000 Hyundai Tiburon (the vehicle). While the record in the case is less than clear, it appears that the loans were used to purchase the vehicle. The bank's lien was noted on the title of the vehicle. Ms. Goben then filed bankruptcy under Chapter 7, and attempted to claim an exemption for the vehicle. Under Iowa and federal bankruptcy law, a debtor can protect from collection one vehicle with a value less than $7,000. Ms. Goben valued the vehicle at $1,000. Ms. Goben was indebted to the bank for over $4,000. Nevertheless, Ms. Goben tried to argue that her interest in the vehicle was exempt from collection. The bankruptcy court, sitting in Des Moines, and the BAP disagreed. Both courts concluded that while the vehicle was within the value range allowed under Iowa and federal law, Ms. Goben did not have an “exempt interest” in the vehicle. The bank was undersecured, so Ms. Goben did not have any equity in the vehicle. Therefore, the vehicle would not be exempt from liquidation in the bankruptcy proceeding. This case should give some comfort to banks with purchase money security interests undersecured by personal property. However, one critical piece of both courts' reasoning was that the Corydon State Bank had perfected its lien on the vehicle. There may have been a different outcome if the bank had not been diligent about protecting its interest. This case should serve as a reminder that a bank that is diligent about protecting its collateral will generally have its interests protected by the courts.  

The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed.

- John Lande

 

Questions, Contact us today.

 


The material, whether written or oral (including videos) that is posted on the various blogs of Dickinson Law is not intended, nor should it be construed or relied upon, as legal advice. The opinions expressed in the various blog posting are those of the individual author, they may not reflect the opinions of the firm.  Your use of the Dickinson Law blog postings does NOT create an attorney-client relationship between you and Dickinson, Mackaman, Tyler & Hagen, P.C. or any of its attorneys.  If specific legal information is needed, please retain and consult with an attorney of your own selection.

Comments
There are no comments yet.
Add Comment

* Indicates a required field

© 2019 Dickinson Mackaman Tyler & Hagen, PC