![]() In arguing in favor of what may, up to now, be called the general rule, Brown & Co. Therefore, we hold that the district court's ruling was not in error, and we affirm.Īs the majority indicates, the split in authorities tends generally to follow a perceived tension between the first and second sentences of section 506(a). Each of these factors supports the view that the district court properly refused to deduct hypothetical costs of sale from the value of Balbus' property. 506(a) is the value of the collateral, not the value of the collateral minus the hypothetical costs of sale. Finally, the dicta in Timbers indicates that the proper interpretation of valuation in Sec. Balbus intends to continue living in his house, so the proposed disposition of the property also counsels that hypothetical costs should not be deducted. 109(e) have been exceeded, counsels that hypothetical costs should not be deducted. In this case, the purpose of valuation, to determine whether the dollar limits of 11 U.S.C. 506(a) requires that we determine the value of a creditor's interest "in light of the purpose of the valuation and of the proposed disposition or use of such property." We find that we cannot ignore the direction of that sentence and thus cannot follow those courts which have chosen to focus on the first sentence of Sec. 506(a), virtually ignoring the debtor's proposed disposition of the collateral and the requirements of the second sentence of Sec. Those courts which hold that hypothetical costs should be deducted generally do so by focusing on the first sentence of Sec. Courts which have focused on the intended use of the property have generally held that when a debtor retains the property, hypothetical costs should not be deducted. Here, the proposed use or disposition of the real property is that Balbus plans to continue to live in his house and not sell it. Indeed, the Senate Report underscores that requirement. 506(a) directs us to look at the "proposed disposition or use of" the property at issue. In addition to looking at the purpose of the valuation, the second sentence of Sec. ![]() Therefore, the purpose of valuation supports the view that hypothetical costs should not be deducted from the value of the property. 109(e) requirements, and this weighs in favor of consistent interpretation of the dollar limitations of Sec. The purpose of the valuation in this case is to determine whether Balbus met the Sec. That purpose was to "permit the small sole proprietor, for whom a chapter 11 reorganization is too cumbersome a procedure, to proceed under chapter 13." H.R.Rep. 109(e) on which Congress compromised runs contrary to the purpose of setting specific dollar limitations. This ability to manipulate the limits of Sec. 109(e) could be manipulated according to the amount of hypothetical costs determined to be reasonable. 506(a), then these limitations set out in Sec. If hypothetical costs were deducted under Sec. Congress compromised on dollar limitations between the Senate version and the House version. ![]() 109(e) were reached as a result of a compromise between the Senate bill which had higher limits and the House bill which had lower limits. 506(a) means "the value of the collateral." The phrase "value of such creditor's interest" in Sec. The Court wrote:In subsection (a) of the creditor's "interest in property" obviously means his security interest without taking account of his right to immediate possession of the collateral on default. One of those other contexts was the use of the phrase in Sec. The Court looked at the "interest in property" phrase used in other contexts in the Bankruptcy Code for assistance. In order to make this determination, the Court had to interpret "interest in property" as found in Sec. 362(d)(1) because of the delay in foreclosing on their collateral caused by the automatic bankruptcy stay. ![]() Timbers required the Court to determine whether unsecured creditors are entitled to interest on their money under 11 U.S.C. Timbers of Inwood Forest Associates, Ltd., 484 U.S. In this case, the district court determined that the hypothetical costs should not be deducted, basing its ruling in large part upon dicta in the recent Supreme Court decision in United Savings Ass'n v.
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