Bankr. E.D.N.C.: In re Lamb- Burden of Establishing Cram-Down Value lies with the Debtor

Summary:

The bankruptcy court  denied the confirmation of the debtors' Chapter 13 plan after objections from NewRez LLC (Shellpoint). The Lambs proposed to reduce Shellpoint’s claim on their mobile home to $6,000, treating the rest as unsecured, based on the property’s alleged value. Shellpoint objected, arguing the value was too low, and provided a J.D. Power Report indicating a higher value.

At the hearing, Larry Lamb testified about the home’s deteriorated condition, including roof leaks, broken HVAC, and water damage. However, he did not provide a clear basis for his $6,000 valuation, and no expert valuation was presented by either party. The court found Lamb’s valuation unsupported by sufficient objective evidence, such as a comparable market price or industry-standard value like NADA to "discern any basis for that figure."

The court ruled that the burden of proof for valuing the property in a cram-down scenario rests on the debtor. Since the Lambs did not sufficiently prove the $6,000 value by a preponderance of the evidence, the court sustained Shellpoint’s objection and denied confirmation without prejudice, allowing the Lambs an opportunity to present stronger evidence of the mobile home’s value.

Commentary:

This case should not be understood to hold that a debtor's valuation of property is not sufficient,  but merely that the debtor must be able to provide a basis for the court to discern how the debtor reached that value.  A valuable counter-example, also from the E.D.N.C.,  is  In re Ward,  where the debtor explicitly testified that  based on her "independent knowledge of sales and events affecting home values in her neighborhood", the tax value was accurate.  Perhaps had Mr.  Lamb here testified  that,  based on his independent knowledge,  having lived in a mobile home for at least 25 years (almost certainly longer than anyone else in the courtroom for that hearing),  and knowing the costs of repairs, the $6,000 value was accurate and perhaps even generous to Shellpoint.

In response,  the debtor,  who still has the right to propose a new plan,  should perhaps send discovery to Shellpoint requiring it to produce evidence of how much it has actually sold used mobile homes in the last 10 years compared to the J.D. Power NADA values for each of those mobile homes.   Compilation and production  of that data would certainly assist the court in discerning the validity of J.D. Power value,  but Shellpoint might reconsider the return on investment in complying with such discovery, particularly in a dispute that at worst would result in a $25,000 cram-down and loss.

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