Wharton v. Schwartzer (In re Wharton)

Case Type:
Case Status:
BAP No. NV-16-1218-JuFY (9th Circuit, Feb 13,2017) Published
The BAP for the 9th Cir. affirmed the ruling of the bankruptcy court (D. Nev.) order granting chapter 7 trustee's motion for turnover of a vehicle, notwithstanding debtors' claim of exemption. The BAP agreed that a creditor's unperfected security interest attached to vehicle and complied with Nevada Article 9 requirements and 522(g)(1) requirements for voluntary impairment of exemption, but was avoidable by the trustee for being unperfected. Avoidability of security interest, and threat of avoidance, was adequate to meet "recovers" component of 522(g), and defeat debtors' exemption claim.
Procedural context:
Bankruptcy court (D. Nev.) granted chapter 7 trustee's motion for turnover of debtors' vehicle. Debtors' appealed to BAP for 9th Circuit.
Chapter 7 debtors (Whartons) scheduled a 1965 Corvette as a nonexempt asset, and scheduled debtor's brother as holding a nonpurchase money security interest in the vehicle. Brother's security interest was unperfected. Debtors negotiated to purchase the vehicle from chapter 7 trustee, but were unable to agree to terms. Trustee moved for turnover of vehicle, which appraised at $23,000. Debtors amended schedules to claim exemption in vehicle, and trustee objected. Brother filed proof of claim for $45,000, asserting $40,000 was secured by vehicle. Brother held promissory note and cancelled check of loan to debtor, but failed to perfect security interest by holding title and noting security interest on title.
Jury, Fairs, Yun

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