In re Cersey and In re Ledford, (03-72005 and 04-70311)
Creditor, Farmers Furniture, objected to the confirmation hearing in the Cersey and Ledford cases because the Debtors’ plans did not include all of the collateral securing the notes executed between the Debtors and Farmers Furniture. The Debtors claimed that the purchase money security interest ("PMSI") in the collateral was lost under the Transformation Rule when subsequent contracts with cross-security clauses were executed. However, the case law regarding this issue holds that if the contract contain a method for allocation, the PMSI will be enforceable. Because the contracts at issue contained an adequate allocation method, the PMSIs are enforceable.
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Date:
Monday, November 15, 2004