12345678910111213141516171819202122232425262728ARUN GUPTA, ESQ. Nevada Bar No.: 11387GUPTA LAW FIRM, LLC800 N. Rainbow, #208Las Vegas, Nevada 89107(702) 493 1059Fax (702) 543 3937attorney@theguptalawfirm.comAttorney for Debtor
IN THE UNITED STATES BANKRUPTCY COURTDistrict of NevadaIn Re
:Fayyaz M. RajaKathleen A. Raja
Debtor
sCase No. 10-28885-LBR Chapter 11Hearing Date:
08/03/2011Hearing Time: 1:30 pm
Motion To Value Collateral
,
"Strip Off", and Modify Rights of Real Time Resolutions, Inc.Agent for Bank of America (fka Countrywide)
Now comes Fayyaz and Kathleen Raja (hereinafter referred to as “Debtors”), by andthrough its attorney, Arun Gupta, Esq., and moves this Court pursuant to 11 U.S.C. §506(a), andBankruptcy Rules 3012 and 9014 and state:1.Debtors converted from Chapter 13 to Chapter 11 bankruptcy on April 7th, 2011 (“PetitionDate”).2.On Petition Date, debtor(s) owned 6 rental income producing properties (hereinafter referred to as “the Properties”). These are7104 Alta Dr, Las Vegas, NV 891457613 Aplin Ave, Las Vegas, NV 891457708 Alina Ave, Las Vegas, NV 89145721 Biltmore Dr, Las Vegas, NV 891016413 Capricorn Dr, Las Vegas, NV 89108
Case 10-28885-lbr Doc 107 Entered 07/01/11 18:45:34 Page 1 of 10
123456789101112131415161718192021222324252627288149 Spur Ct. Last Vegas, NV 891453.At the time of filing, all the Properties were subject to second mortgages held by RealTime Resolutions, Inc., Agent for Bank of America (fka Countrywide), (hereinafter “RTR”)4. The proofs of claims filed by RTR, and values of the properties are attached hereto asexhibits “A” and “B”.
LEGAL ARGUMENT
5. Section 506(a)(1) of the Bankruptcy Code provides that a Chapter 11 debtor may bifurcatea secured lender’s claim into an allowed secured claim and an allowed unsecured claim based upon the actual value of the property securing such lender’s lien.An allowed claim of a creditor secured by a lien on property inwhich the estate has an interest, or that is subject to set off under section 553 of this title, is a secured claim to the extent of the valueof such creditor’s interest in the estate’s interest in such property,or to the extent of the amount subject to set off, as the case may be,and is an unsecured claim to the extent that the value of suchcreditor’s interest or the amount so subject to set off is less than theamount of such allowed claim. Such value shall be determined inlight of the purpose of the valuation and of the proposeddisposition or use of such property, and in conjunction with anyhearing on such disposition or use or on a plan affecting suchcreditor’s interest. 11 U.S.C. § 506(a)(1).6. The Supreme Court has recognized that section 506 of the Bankruptcy Code defines theamount of the secured creditor's allowed secured claim and the conditions of his receiving post-petition interest. United Sav. Ass'n of Texas v. Timbers of Inwood Forest Associates,Ltd., 484 U.S. 365, 371 (1988). In United Sav. Ass'n of Texas, the Supreme Courtinterpreting Section 506(a) of the Bankruptcy Code found that:In subsection (a) of this provision the creditor’s “interest in property” obviously means his security interest without takingaccount of his right to immediate possession of the collateral ondefault. If the latter were included, the “value of such creditor'sinterest” would increase, and the proportions of the claim that aresecured and unsecured would alter, as the stay continues-since thevalue of the entitlement to use the collateral from the date of
Case 10-28885-lbr Doc 107 Entered 07/01/11 18:45:34 Page 2 of 10
12345678910111213141516171819202122232425262728 bankruptcy would rise with the passage of time. No one suggeststhis was intended. The phrase “value of such creditor’s interest” in §506(a) means “the value of the collateral.” See id. (emphasis added)(quoting H.R.Rep. No. 95-595, pp. 181, 356 (1977)).7. The Ninth Circuit agrees with this interpretation of section 506 of the Bankruptcy Code. Inre Maldonado, 46 B.R. 497, 499 (9th Cir. BAP 1984) (interpreting section 506(a), “a claimis a secured claim to the extent of the value of [the] creditor’s interests in the estate’sinterest in the property. The entire claim is not a secured claim. The claim is secured onlyto the extent of the value of the secured interest.”)8. In addition, this Bankruptcy Court has found that “an allowed secured claim is adetermination generally made under 11 U.S.C. § 506.” In re BBT, 11 B.R. 224, 229(Bankr. D. Nev. 1981). The Bankruptcy Court further stated that, with respect to a claimsecured by a lien on property of the estate, “to the extent that the value of the property isless than the amount of the total allowed claim, the claim is unsecured.” Id. (emphasisadded).9. Thus, pursuant to the law of this Circuit, the amount of the allowed secured claim cannotexceed the market value of the property and the remainder of the claim must be treated asan allowed unsecured claim for purposes of the plan. In re Sagewood Manor AssociatesLtd. Partnership, 223 B.R. 756, 773 (Bankr. D. Nev. 1998) (holding that the court mayconfirm a chapter 11 plan over the objection of a class of secured claims if the members of that class are to receive under the plan property of a value equal to the allowed amount of their secured claims, as determined under 11 U.S.C. § 506(a)).10. Moreover, the Ninth Circuit Court of Appeals has also found that a wholly unsecured lienholder's claim can be modified and reclassified as a general unsecured claim pursuant tosection 506(a) of the Bankruptcy Code. See In re Zimmer, 313 F.3d 1220 (9th Cir. 2002).Specifically, the Court held:Section 506(a) divides creditors' claims into 'secured claims' and'unsecured claims.' Although the conventional interpretation of 'secured' might include any claim in which the creditor has a
Case 10-28885-lbr Doc 107 Entered 07/01/11 18:45:34 Page 3 of 10
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Chapter 11 debtor strips wholley unsecured 2nd and bifurcates 1st mortgage to value of property
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