July 26, 2018
Authored by: Mark Duedall
Weird things happen in bankruptcy court. All you high-falutin Chapter 11 jokers out there, cruise down to the bankruptcy motions calendar one day. You will see sovereign citizen arguments, the increasing problem of unprepared pro se claimants relying on bogus bankruptcy petition preparers, and occasionally, the subject of this post – Chapter 13 debtors seeking court authority to buy a sweet Camaro.
Debtors’ Counsel: Your Honor, it has 20 inch rims!
The Court: But is it an IROC?
In In re Jordan, the Bankruptcy Court for the Eastern District of North Carolina addressed a way righteous motion by Chapter 13 debtors to purchase a Camaro. Not just any Camaro, but the 2018 “hot wheels” edition. (Curiously, the Debtors were proposing to trade in a 2017 Camaro in conjunction with the 2018 Camaro purchase.)
The court was not impressed by this rad maneuver. First, the Debtors’ plan proposed to pay $70 – $175 per month for 60 months to unsecured creditors. This was a payout of 13 cents on the dollar, not a very fierce amount. Second, the Debtors’ income drifted at times, dependent on future overtime pay that was uncertain. Third, the Debtors’ current Camaro was already underwater by 6 large, and the new Camaro would increase that negative loan-to-value to like $10 g’s, brah. Fourth, the Debtors’ other car (albeit not a Camaro) was vintage 2006, requiring replacement soon. And the high monthly car payment of the proposed new Camaro would leave little margin for error in the Debtors’ future household budget.
The Court was unimpressed with the Debtors’ rationale for this otherwise bodacious purchase. The Debtors argued that the 2018 Camaro was akin to an heirloom, likely to rise in value. The Court was all like, negatory. (Of course, any internet search reveals this new Camaro was a “special edition,” worthy of judicial notice, but this total drag Bankruptcy Court wasn’t into it.) The Debtors also appealed to the Court’s patriotic spirit, arguing that their re-entry into consumer borrowing is beneficial to the U.S. economy as a whole. The Court disagreed here too, noting in a very un-American fashion that honoring past debts is more important than the marginal benefits to our economy of buying of a Camaro, no matter how rockin’ it is.
Moreover, Court noted the likely increased insurance and taxes the Debtors would have to pay for this new muscle car. These stern parental warnings of fiscal responsibility were reminiscent of the end-of-episode lectures of Mike Brady or Claire Huxtable. Where’s a Peggy and Al Bundy approach to spending when you really need one?
Finally, the Debtors noted the sentimental value of the proposed purchase, stating that one of them had grown up as an “army brat,” with few close childhood friends but wonderful memories of playing with “hot wheels” cars among siblings. The Court’s heartstrings were not sufficiently tugged by this trip down memory lane, calling this “the unnecessary purchase of an adult version of a childhood toy.”
At bottom, we grudgingly accept the Bankruptcy Court’s ruling, although watching debtors peel out with their bankruptcy discharge papers flying out the car’s window would have been great. But unfortunately, the Bankruptcy Code does not recognize “come on, please, it’s a sweet ride” as a winning argument.