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In re Baxley, 72 B.R. 195, 15 Bankr.Ct.Dec. 1059

Facts

James Randy Baxley, the debtor, objected to the Farmers Home Administration's (FmHA) election to have its claim treated as a secured claim under 11 U.S.C. § 1111(b)(2). The debtor contended that FmHA's interest was of 'inconsequential value' and therefore should not be allowed to elect for secured status. The court had previously established the values of the debtor's property, including a hog herd valued at $28,500, which was the focus of the dispute. The total claim of FmHA was approximately $362,000, leading to the question of whether its interest in the hog herd was significant enough to allow the election.

James Randy Baxley, the debtor, objected to the Farmers Home Administration's (FmHA) election to have its claim treated as a secured claim under 11 U.S.C. § 1111(b)(2).

Issue

1. What is the interest of FmHA in debtor's property? 2. Is that interest 'of inconsequential value'?

1. What is the interest of FmHA in debtor's property? 2. Is that interest 'of inconsequential value'?

Rule

A class of claims may not elect application of paragraph (2) of this subsection if the interest on account of such claims of the holders of such claims in such property is of inconsequential value.

A class of claims may not elect application of paragraph (2) of this subsection if the interest on account of such claims of the holders of such claims in such property is of inconsequential value.

Analysis

The court analyzed the value of FmHA's interest in the debtor's property, specifically the hog herd valued at $28,500, against the total claim of approximately $362,000. The court determined that FmHA's interest constituted about 8% of its total claim, which the debtor argued was inconsequential. However, the court found that the value of the hog herd was greater than the claims against it secured by senior liens, thus qualifying FmHA to elect to treat its claim as secured.

The court analyzed the value of FmHA's interest in the debtor's property, specifically the hog herd valued at $28,500, against the total claim of approximately $362,000.

Conclusion

The court overruled the debtor's objection to FmHA's election to have its claim treated as a secured claim to the extent allowed.

The court overruled the debtor's objection to FmHA's election to have its claim treated as a secured claim to the extent allowed.

Who won?

Farmers Home Administration (FmHA) prevailed because the court determined that its interest in the debtor's property was not of inconsequential value, allowing it to elect to treat its claim as secured.

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