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Repossessions: 14.2.8.3 Inflated Residual Values

Another way an early termination formula can produce unreasonable results is when the disclosed residual value is inflated, and then the formula compares this inflated residual value with a low realized value.

Repossessions: 14.2.8.4 Manufacturer “Supported” Residual Values

A special issue arises when a manufacturer “supports” an inflated residual value. In this case, inflating the residual value without manipulating rent payments allows the dealer to offer lower lease payments. When rent payments are not manipulated, the total payments can be lower because they need cover less depreciation between the initial capitalized cost and the (inflated) residual value. The manufacturer protects the dealer with a cash subsidy, as the vehicle at lease termination will be worth less than the inflated residual value.

Repossessions: 14.2.8.5.3 Sale price, if used, should be reasonable

The lessor owns the vehicle and can sell the vehicle as it chooses, either at wholesale or retail value.192 But the question is how it uses this price in computing an early termination charge. At a minimum, the assumptions underlying the realized value should be used to establish the residual value as well. The lessor should be comparing apples with apples as much as possible.

Repossessions: 14.2.8.6 Approaches to Avoiding a Sale to Determine Realized Value

One way to protect against inadequate realized values is for the consumer to request, in writing, that the car be appraised by an independent appraiser, and to suggest the name of such an appraiser. Regulation M requires that the consumer be told of the right to such an appraisal.201 The appraisal is performed at the lessee’s expense, by an independent appraiser agreed to by the lessor and lessee. The appraisal is final and binding on the parties.202

Repossessions: 14.2.8.9 When Formula Fails to Provide Credit for Realized Value

A lessee’s early termination liability formula is clearly unreasonable when the formula charges the consumer for the vehicle’s residual value or the adjusted lease balance, but fails to provide a credit for the vehicle’s realized value.205 This result applies even when the lessor has a practice of crediting the consumer for that value—if the formula does not contain a credit for the realized value, then the formula is unreasonable, which is both a substantive CLA violation and a CLA disclosure violation.

Repossessions: 14.2.9.1 Capitalized Cost Manipulation

Just as lease payments can remain constant even with different residual values (by manipulating the rent charge),207 two leases with identical payments and residual values can have different adjusted capitalized costs. The lease with the higher adjusted capitalized cost will have higher expected depreciation, but can offset this by lowering the rent charge.

Consumer Bankruptcy Law and Practice: 7.3.7.8 The Summary of Schedules and Statistical Summary

Accompanying the schedules is a form summarizing debts, property, income, and expenses. A summary of certain statistical information, also included in the form, is used by the courts solely to gather statistics mandated by law. The form is self-explanatory. After the summary is filled out, it is usually inserted at the front of the schedules for filing, or elsewhere if required by local practice.179 It requires the debtor to compute the total of amounts listed for certain types of debts that are often nondischargeable.

Consumer Bankruptcy Law and Practice: 7.3.10 Filing Debtor Payment Advices

The 2005 amendments added section 521(a)(1)(B)(iv) to the Code, which requires, unless the court orders otherwise, that the debtor file copies of all payment advices or other evidence of payment received from employers within sixty days before the petition was filed.214 Bankruptcy Rule 1007(b)(1)(E) and (c) requires that the payment advices be filed within fourteen days after filing the petition (although the court can extend the time) and that all but the last four digits of the debtor’s Social Security number should be redacted from these d

Consumer Bankruptcy Law and Practice: 7.3.12.1 Generally

The most important document filed in a chapter 13 case is usually the debtor’s proposed plan. This plan, which only the debtor can propose, sets out how the debtor wishes to reorganize their financial situation. Its purpose, then, is to make clear how the debtor desires payments and distributions to be made in the case. The plan may be modified as of right before confirmation and also, with the court’s permission, after confirmation in certain circumstances.242

Consumer Bankruptcy Law and Practice: 7.3.12.2 Form of Plan

The form of the plan is prescribed by the Federal Rules of Bankruptcy Procedure. Rule 3015(c) requires that the national form plan, Official Form 113, be used unless the judicial district where the case is filed has adopted a local form plan as provided in Rule 3015.1.243 If a local form plan has been adopted, the local rules may, and almost always will, require that it be used.

Consumer Bankruptcy Law and Practice: 7.3.13.2 Disclosure of Fees

In every case, under Federal Rule of Bankruptcy Procedure 2016(b), a disclosure of fees paid or promised to the debtor’s attorneys must be filed. The form must also state whether the attorney is sharing fees with any other entity.299 The purpose of this form is to allow the court and the United States trustee, who also must receive a copy, to monitor fees to make sure they are reasonable.

Consumer Bankruptcy Law and Practice: 7.3.13.5 Motion for Extension of Time to File Required Documents

If the schedules, statements, plan, or other documents required to be filed within fourteen days of the petition cannot be filed on time, a motion for additional time must be filed or the case may be dismissed.309 A simple form for this purpose can easily be prepared for repeated use.310 Such an application should show cause for the extension and be served on the trustee, if any, and the United States trustee.311 Most courts routinely grant a two t