Summary:
In In re Dawson, the bankruptcy court faced a familiar but fact-intensive confirmation dispute over the value of a 1998 Fleetwood 76’x14’ manufactured home serving as the debtor's primary residence. Debtor Classie Dawson purchased the home in 2016 and sought to "cram down" the secured claim of 21st Mortgage Corporation—who holds a lien noted only on the certificate of title but did not file a UCC-1—to the asserted value of $4,890.
21st Mortgage objected, contending that the replacement value of the mobile home far exceeded the debtor’s figure. After a hearing involving both debtor testimony and expert appraisal, Judge Callaway ultimately sided with neither party fully, instead crafting a final valuation figure of $11,485.30, requiring Dawson to file an amended Chapter 13 plan or face dismissal.
Key Issues:
- Replacement Value Standard Applies: As required by 11 U.S.C. § 506(a)(2), the court reiterated that “replacement value” governs cramdown valuations in Chapter 13 cases, not resale or liquidation value. This means the value a retail merchant would charge, considering the item’s age and condition.
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Scope of 21st Mortgage’s Lien: The court distinguished between affixed “accessions” and unattached personal property. While 21st Mortgage had a perfected lien on the manufactured home via certificate of title, it failed to perfect its interest in any unattached items—like an outdoor porch, AC unit, or refrigerator—by not filing a UCC-1. Thus, those items were excluded from the collateral’s value.
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Appraisal Disputed, Rebutted, and Revised: The court accepted testimony and an appraisal from 21st Mortgage’s expert, Robert Keck, but found numerous errors and overstatements. Debtor’s photographs and testimony rebutted the appraisal’s assumptions about the home’s condition. Notably, Judge Callaway identified improper double-counting, credits for missing or damaged items, and unsupported add-ons like a “wind zone” adjustment.
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Final Valuation: After adjusting downward for unpermitted collateral, flawed credits, and additional needed repairs (even estimating $750 worth of repairs not specified in the appraisal), the court arrived at a value of $11,485.30 as of the petition date.
Commentary:
This decision offers a thorough and practical template for litigating mobile home cramdown valuations in Chapter 13. It also serves as a cautionary tale to both debtor and creditor counsel.
On the debtor’s side, relying solely on ad valorem tax values and “gut” replacement guesses won’t cut it. Judge Callaway rightly emphasized the debtor bears the burden of proving a plan-confirmation-appropriate value under § 1325(a)(5)(B). Yet, the court was notably patient with Ms. Dawson’s lay testimony, using her photos and homegrown estimates to challenge an overzealous appraisal.
For creditors like 21st Mortgage, the opinion underscores the importance of precision in appraisals and perfection in lien documentation. Attempting to include non-affixed items in collateral value—without filing a UCC-1—was a losing strategy here. Moreover, the inclusion of speculative or duplicative value enhancements in the appraisal (e.g., double-counting a tow bar or assuming repairs weren’t needed) only served to undermine credibility.
The court's methodology—relying in part on its own experience with mobile home valuations—highlights a pragmatic, fact-intensive approach often necessary in Chapter 13 confirmation proceedings. The resulting valuation, more than double the debtor’s original estimate but significantly below the creditor’s, demonstrates how judicial scrutiny can land on a middle ground that demands more realism from both sides.
Practice Tip #1: Counsel should not treat manufactured home valuations as “boilerplate” issues. Both factual rigor (photos, receipts, inspection reports) and legal accuracy (on lien perfection and accession law) are essential to either defend or attack a proposed cramdown. As Dawson shows, unchallenged appraisals are not always accepted, and well-documented rebuttal testimony can be surprisingly persuasive.
Practice Tip #2: Rather than merely allowing an expert for the mobile home lender to testify, it is important to make sure that any basis for a valuation is tested and documented. This can include:
Improper Disclosures: In light of the 4th Circuit decision in Alig v. Quicken Loans verifying that the mobile home lender did not improperly disclose valuation amounts to the appraiser. Providing such estimates is "explicitly forbidden- and viewed as unethical" parties should not only refrain from providing those estimates, which would include details in the bankruptcy petition, but also, since appraisers are sophisticated professionals, amounts owed on liens, etc., as those could point the appraiser in the desired direction. Appraisers should be questioned about what information was provided in advance, since that can not only indicate a predetermined bias, but undermine the ethics and competence of the appraiser.
Discovery: As a valuation hearing is a contested matter, debtors' attorneys should strongly consider submitting discovery requests to mobile home lenders in particular, to ensure that the "replacement value" accurately reflects the "commercially reasonable" amounts for which that lender sells repossessed vehicles. Contact me and I can provide a set of interrogatories, requests of production of document and for admissions, that have previously proved successful in encouraging mobile home lenders, often very protective of releasing information about their business practices to the public, in finding reasonable accommodations in these valuation battles.
To read a copy of the transcript, please see:
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