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In Re: Alvin Labostrie and Sandra Labostrie v. L.A. Financial Credit Union

December 14, 2012


Appeal from the United States Bankruptcy Court for the Central District of California Hon. Richard M. Neiter, Bankruptcy Judge, Presiding Bankr. No. LA 12-11261-RN



Submitted Without Oral Argument on November 15, 2012*fn3

Filed - December 14, 2012

Before: PAPPAS, MARKELL, and BEESLEY,*fn4 Bankruptcy Judges.

Appellants, chapter 7*fn5 debtors Alvin and Sandra LaBostrie ("Debtors"), appeal the decision of the bankruptcy court determining the redemption value of their 2005 Ford Freestyle SE (the "Vehicle") pursuant to § 722 to be $7,500, and granting stay relief to their creditor, appellee L.A. Financial Credit Union ("Creditor"). We AFFIRM.


On January 13, 2012, Debtors filed a pro se petition for relief under chapter 7. In their schedule D filed with the petition, Debtors listed Creditor as a secured creditor for a "vehicle loan" in the amount of $13,000. They listed the value of the Vehicle securing Creditor's debt as $1,400. On February 6, 2012, Creditor filed a motion for relief from the automatic stay seeking leave of the bankruptcy court to enforce the security interest it claimed in the Vehicle. In the motion, Creditor, presumably relying on Debtors' schedules, also listed the value of the Vehicle at $1,400. A hearing on the motion was set for March 13, 2012.

On February 22, 2012, Debtors filed a motion to redeem the Vehicle pursuant to § 722. In the motion, Debtors alleged that the redemption value of the Vehicle was $1,265 based on an online Kelley Blue Book report, less the amount of Debtors' California state law exemption in the Vehicle of $2,500. Creditor opposed Debtors' motion arguing that, according to a different Kelley Blue Book online report, the value of the Vehicle was actually $11,056. Creditor also disputed Debtors' suggestion that their exemption in the Vehicle would reduce the amount they were required to pay to redeem the Vehicle. Debtors' motion was also set for hearing on March 13, 2012.

At the hearing on Debtors' motion for redemption and Creditor's motion for stay relief, the bankruptcy court questioned Mr. LaBostrie about the valuation of the Vehicle in Debtors' redemption motion of $1,265. Mr. LaBostrie explained that he used an online version of Kelley Blue Book which valued the Vehicle at $3,990 to $5,265. He then subtracted from that value Debtors' California automobile exemption of $2,500.*fn6 The court advised Mr. LaBostrie that he could not deduct an exemption from the value of collateral in which he held no equity. In response, Mr. LaBostrie stated that he would pay $3,990 to Creditor to redeem the Vehicle, which he characterized as a fair value. He then described the Vehicle, representing to the bankruptcy court that it had been driven over 155,000 miles and that it needed 1 repairs. The bankruptcy court advised Mr. LaBostrie that it was 2 required to determine the retail value of the Vehicle, and Debtors 3 would be required to pay that amount to Creditor in order to 4 redeem it. Mr. LaBostrie argued that, although the $3,990 5 represented the trade-in value in the report, in his view, it was 6 also the retail value of the Vehicle.

7 Creditor's counsel argued that, considering the age, 8 condition, and mileage for the Vehicle, as described by 9 Mr. LaBostrie, its value was $9,500. At that point, the court 10 asked the parties to confer outside the courtroom, suggesting that 11 they should reach a compromise for the value. If the parties were 12 unable to agree on a value after a conference, the court stated 13 that it would determine the value. The parties were unable to 14 agree on a value.

15 The court found the value of the Vehicle to be $7,500, 16 explaining that the trade-in value of $3,990, as argued by 17 Debtors, was not the correct valuation. Rather, the court 18 concluded, retail value was the appropriate valuation. The court 19 then noted that when the condition and mileage of the Vehicle as 20 described by Mr. LaBostrie was considered, an appropriate retail 21 value was $7,500. The court informed Debtors that they could 22 redeem the Vehicle for that amount within ten days, but if they 23 failed to do so, Creditor would be allowed to pursue its state law 24 rights in the Vehicle. The court granted Creditor's motion for 25 relief from the automatic stay, but allowed Debtors ten days to 26 redeem the Vehicle for the retail value of $7,500.

27 The bankruptcy court entered an order setting the redemption 28 value of the Vehicle at $7,500 on March 15, 2012. On the same 1 day, the court entered an order granting relief from the automatic 2 stay providing Debtors ten days to redeem the vehicle for $7,500 3 before the automatic stay order became effective. 4 Debtors filed a notice of appeal on March 22, 2012. 5 JURISDICTION 6 The bankruptcy court had jurisdiction ...

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