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In re Campbell, 2009 Bankr. LEXIS 833, Ch. 11 Case No. 08-51832-JDW (Bankr. M.D. Ga. March 25, 2009). Debtor owned a 50% interest in an LLC. The LLC was indebted to the Bank for more than $5.1 million, secured by the LLC’s assets and Debtor’s assets, and Debtor personally guaranteed the debt. The loan was in default. The parties agreed that the total value of the Bank’s collateral, including LLC and Debtor’s assets, was more than the total debt. However, the value of the Debtor’s property that served as collateral was worth less than the total debt.
The Bank sought relief from the automatic stay to repossess the Debtor’s Rolls Royce automobile, which was worth approximately $220-225,000. Debtor objected to the motion on the grounds that he had equity in the vehicle if the Court considered the total value of the Bank’s collateral, including LLC property.
The Court granted the Bank’s motion and lifted the stay.
The statute provides for stay relief if the debtor has no equity "in such property." 11 U.S.C. § 362(d)(2)(A). The phrase "such property" apparently refers property protected by the automatic stay, id. § 362(d), which includes property of the estate and property of the debtor but not property of non-debtors. See id. § 362(a). However, bankruptcy courts are divided on the proper interpretation of the statute. Compare In re Colonial Center, Inc., 156 B.R. 452, 461 (Bankr. E.D. Pa. 1993) ("The measurement of equity in section 362(d) … should depend upon the circumstances and the purpose behind the valuation of property.") with In re New Era Co., 125 B.R. 725, 729 (S.D.N.Y. 1991) ("[S]ection 362(d)(2) only demands an analysis of the debtor’s equity in property[.]").
The Court need not analyze the merits of the two positions at this time. There is no question Debtors must relinquish the Rolls Royce. Its value will either benefit the Bank or the unsecured creditors. Therefore, it is appropriate to allow stay relief for the limited purpose of selling the Rolls Royce. The proceeds of the sale shall be held by the Bank as property of the estate, which the Bank may not disburse until further order of the Court. Such further order will depend on a change in circumstances, such as liquidation of other collateral and the conclusion of additional litigation that affects the Bank’s security. The Court will consider entering such further order upon application of any party in interest at such time as a change of circumstances should occur.