KING, Circuit Judge:[fn1] [fn1] Judges Garwood, Higginbotham, and Jones are recused and did not participate in this decision.

A creditor appeals the district court's affirmance of the bankruptcy court's orders that fixed the amount of the creditor's secured claim and confirmed the debtors' amended Chapter 13 plan. The debtors' plan treated the creditor's secured claim under the "cram down" provision found in Section(s) 1325(a)(5)(B) of the Bankruptcy Code: the debtors would retain the collateral securing the creditor's lien — a tractor truck — and pay the creditor the amount of its secured claim, such amount being equal to the value of the truck. Following an evidentiary hearing, the bankruptcy court determined that the value of the truck for purposes of cram down was the amount that the creditor could realize if it repossessed and sold the truck according to the security agreement; the court then found that this amount was the truck's wholesale price. The creditor urges on appeal that, as a matter of law, the truck's value for cram down purposes is equal to its "replacement cost," or, what it would cost the debtors to purchase an identical vehicle; the creditor suggests that, on this record, the truck's replacement cost is its retail price. We do not agree that the Bankruptcy Code compels this result as a matter of law. Accordingly, we affirm the courts below.

I. FACTUAL AND PROCEDURAL BACKGROUND

On March 30, 1989, Elray Rash purchased a Kenworth tractor truck from Janoe Truck Sales Service, Inc., d/b/a Janoe Kenworth Trucks. The cash price of the truck was $73,700. Rash made a down payment of $16,011 by trading in the truck he then owned and agreed to pay the remaining balance and finance charges in sixty monthly installments of $1,610.41. To secure payment of the unpaid balance, Janoe retained a lien on the truck. Janoe assigned this lien and its other rights under the sales agreement to Associates Commercial Corporation ("ACC"). Since the date of purchase, Rash has continued to own and operate the truck as part of his freight hauling business, which is the primary source of income for his family.

In March 1992, Rash and his wife Jean E. Rash (collectively, the "Rashes") filed a joint petition and a plan under Chapter 13 of the United States Bankruptcy Code. The petition stated that the amount of ACC's secured claim — i.e., the value of the truck — was $28,500. The plan provided that the Rashes would keep the truck and that ACC's secured claim would be treated under the "cram down" option found in 1325(a)(5)(B) of the Bankruptcy Code, 11 U.S.C. §(s) 1325(a)(5)(B). Pursuant to this option, ACC would retain its lien and receive payments over the life of the plan, the present value of which equaled the amount of its secured claim: $607.79 per month for fifty-eight months, for a principal total of $28,500 and interest at nine percent. If ACC claimed more than this amount, the plan treated the excess as an unsecured claim to be paid pro rata with the other unsecured claims after all priority and secured debts had been paid.

ACC then filed a proof of claim and a motion for relief from the automatic stay. In its proof of claim, ACC alleged that it had a fully secured claim in the amount of $41,171.01. In response, the Rashes filed an objection to ACC's claim, asserting that the value of the truck was $28,500. Accordingly, the Rashes maintained that only $28,500 of ACC's claim was secured and that the balance was unsecured; however, the Rashes did not dispute the total amount of the claim.

On June 16, 1992, the bankruptcy court held a hearing on, inter alia, the Rashes' objection to ACC's claim and ACC's motion for relief from the automatic stay. The court heard the Rashes' objection and ACC's motion together because the disposition of each required the court to determine the value of the truck. ACC's expert witness on the valuation issue was Dirk Copple, a twenty-four-year-old collections manager for ACC. Copple opined that the truck's "current market value" — a term that he defined as the fair value paid by an average individual who walked off the street into a dealership — was $41,000. Copple admitted that he had never seen the Rashes' truck; rather, he based his opinion on his own experience, his conversations with a couple of dealerships, software used by ACC to "book out" equipment, and the industry blue book. Regarding his experience, Copple testified that he had never bought or sold trucks in the open market and that ACC was not a truck dealer, but that he had conducted between fifteen and twenty-five foreclosure sales of trucks in his two years at ACC. Assuming a figure of fifteen sales, Copple testified that ACC had purchased the trucks at twelve of the sales. ACC offered no evidence as to what it did with these trucks after purchasing them. With respect to the other three sales, Copple testified that the purchasers paid at least ninety-two percent of the trucks' retail price; however, Copple also admitted that bidders other than ACC typically offered only seventy-five percent of the retail price.

The Rashes' expert witness was Steven Thibodeaux, a thirty-two-year-old salesperson for Smart's Truck and Trailer, a local dealership that sells new and used trucks. Thibodeaux testified that he had worked at Smart's for ten years and had bought and sold all types of trucks during that period. Thibodeaux opined that the truck's value was $31,875. In support of this opinion, Thibodeaux testified that he had (1) conducted a complete inspection of the Rashes' truck, (2) calculated the truck's retail price to be $42,500 by reference to the industry blue book, and (3) deducted twenty-five percent from the retail price to arrive at a wholesale price of $31,875. Thibodeaux stated that, as a dealer, he would not pay more than this amount if the Rashes or ACC tried to sell the truck to Smart's. Later, Thibodeaux elaborated that he could not make a profit if he paid the retail price of the truck because of the additional costs incurred by a dealer, including reconditioning the truck for resale and paying a salesperson's commission.

On January 11, 1993, the bankruptcy court entered an order denying ACC's motion for relief from the automatic stay and fixing the amount of ACC's secured claim at the truck's wholesale price of $31,875. In an accompanying opinion, the court reasoned that it had to calculate the value of the truck from the "creditor's perspective" because Section(s) 506(a) of the Bankruptcy Code sets the amount of a secured claim at "the value of [the] creditor's interest in the estate's interest in the property." In re Rash, 149 B.R. 430, 433 (Bankr. E.D. Tex. 1993) (quoting 11 U.S.C. §(s) 506(a)) (emphasis added). Accordingly, the court determined that the value of the truck was equal to the amount that ACC could realize if it exercised its right under the security agreement to repossess and sell the truck. Id. Based on the evidence presented at the hearing, the court found that this amount was the truck's wholesale price. Id. at 434. The court noted that this value was not affected by the fact that the Rashes were keeping the truck "because from the creditor's perspective, his net result, in the event of future repossession or foreclosure, will be the same." Id. at 433.

In response to the January 11 order, the Rashes amended their plan to increase the amount of ACC's secured claim from $28,500 to $31,875. The bankruptcy court then entered another order confirming this amended plan. ACC appealed both orders. The district court consolidated the appeals and affirmed the decisions of the bankruptcy court. A panel of this court reversed, holding that the appropriate measure of the truck's value was its replacement cost to the Rashes, which the panel determined to be the truck's retail price. Associates Commercial Corp. v. Rash (In re Rash), 31 F.3d 325, 329 (5th Cir. 1994), modified, 62 F.3d 685 (5th Cir. 1995). We granted rehearing en banc to determine whether the bankruptcy court erred, as a matter of law, in failing to value the Rashes' truck at its replacement cost. 68 F.3d 113 (5th Cir. 1995).

II. STANDARD OF REVIEW

Although the bankruptcy appellate process makes this court the second level of review, we perform the identical task as the district court. Heartland Fed. Sav. Loan Ass'n v. Briscoe Enters., Ltd., II (In re Briscoe Enters., Ltd., II), 994 F.2d 1160, 1163 (5th Cir.), cert. denied, 114 S.Ct. 550 (1993). We review findings of fact by the bankruptcy court under the clearly erroneous standard and decide issues of law de novo. Henderson v. Belknap (In re Henderson), 18 F.3d 1305, 1307 (5th Cir.), cert. denied, 115 S.Ct. 573 (1994); Haber Oil Co. v. Swinehart (In re Haber Oil Co.), 12 F.3d 426, 434 (5th Cir. 1994). We are aided here by excellent opinions from the bankruptcy court and the district court.

III. DISCUSSION

A. Statutory Framework

Section 1325(a) of the Bankruptcy Code, 11 U.S.C. §(s) 1325(a), sets forth six prerequisites to confirmation of a Chapter 13 plan. The requirement at issue in this case, Section(s) 1325(a)(5), concerns the plan's treatment of allowed secured claims. That provision states in relevant part: [T]he court shall confirm a plan if — . . . .

(5) with respect to each allowed secured claim provided for by the plan —

(A) the holder of such claim has accepted the plan;

(B)(i) the plan provides that the holder of such claim retain the lien securing such claim; and

(ii) the value, as of the effective date of the plan, of property to be distributed under the plan on account of such claim is not less than the allowed amount of such claim; or

(C) the debtor surrenders the property securing such claim to such holder . . . .

11 U.S.C. §(s) 1325(a)(5). Thus, a debtor seeking confirmation of his plan has three options with respect to each allowed secured claim included in the plan. If the creditor holding the allowed secured claim accepts the plan, nothing more is required. Alternatively, the debtor may invoke the so-called "cram down" power of subsection (B) to confirm the plan over the creditor's objection. Under this option, the creditor retains his lien and the debtor agrees to distribute to the creditor, over the life of the plan, property whose present value is not less than the amount of the creditor's allowed secured claim. Finally, the debtor may surrender the property securing the claim — i.e., the collateral — to the creditor.

If the creditor does not accept the plan and the debtor does not want to surrender the collateral, then the debtor must invoke the cram down power. Because this option requires a distribution to the creditor of property whose present value is no less than the amount of the creditor's allowed secured claim, it is necessary to determine the amount of the allowed secured claim before confirming the plan. Section 506(a) of the Bankruptcy Code, 11 U.S.C. §(s) 506(a), prescribes the method for making this determination. That section states in relevant part:

An allowed claim of a creditor secured by a lien on property in which the estate has an interest . . . is a secured claim to the extent of the value of such creditor's interest in the estate's interest in such property . . . and is an unsecured claim to the extent that the value of such creditor's interest . . . is less than the amount of such allowed claim. Such value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor's interest.

11 U.S.C. §(s) 506(a). Thus, the amount of the allowed secured claim is equal to "the value of such creditor's interest in the estate's interest in such property."

B. ACC's Arguments

According to ACC, Section(s) 506(a) mandates that the value of the creditor's interest in the estate's interest in the collateral for cram down purposes is equal to its so-called "replacement cost," or in this case, the amount that the Rashes would have to pay to purchase an identical truck of the same vintage and condition from a retail truck dealer. ACC advances several arguments in support of this position. Its principal contention is that this interpretation of 506(a) is truer to the plain language of the statute and the economic realities of the parties' situation than the reading offered by the bankruptcy court. ACC also argues that the legislative history of 506(a) reinforces this interpretation. Finally, ACC suggests that we should adopt its interpretation of Section(s) 506(a) to avoid a circuit split. We address each of these arguments in turn.

C. Textual and Structural Analysis

1. The Significance of State Law in Analyzing the Text of the Bankruptcy Code

Before we address ACC's plain language argument, we note that if 506(a) requires a replacement cost valuation, it changes the extent to which ACC is secured from what obtained under state law prior to the bankruptcy filing. Texas law offers a secured party two remedies against a debtor in default: (1) it may dispose of the collateral in a "commercially reasonable" manner and apply the proceeds to satisfaction of the debt, Tex. Bus. Com. Code Ann. Section(s) 9.504(a), (c); or (2) it may retain the collateral in total satisfaction of the debt, Tex. Bus. Com. Code Ann. Section(s) 9.505. Tanenbaum v. Economics Lab., Inc., 628 S.W.2d 769, 771-72 (Tex. 1982). Should the creditor elect the first remedy under Section(s) 9.504(a) and find that the proceeds are less than the amount of the debt, it has an unsecured claim under Section(s) 9.504(b) for the balance and may sue for the deficiency. Id. at 771. Accordingly, before the Rashes filed for bankruptcy, ACC was secured under Section(s) 9.504(a) and Section(s) 9.505 to the extent of what it could realize by resort to these two remedies, and, if it elected to proceed under Section(s) 9.504(a), it was unsecured under 9.505(b) for the balance of its claim. Under ACC's reading of Section(s) 506(a), it is now secured to the extent of what it would cost the Rashes to replace the truck. To be sure, the Bankruptcy Code modifies ACC's collection rights as a secured creditor under state law — unless lifted, the automatic stay precludes any recourse to state law remedies in a Chapter 13 case until the debtor is discharged, which usually occurs when the debtor has completed all payments under the plan. 11 U.S.C. §(s) 362(a), (c)(2); 1328(a). The question remains, however, whether the Code also modifies the extent to which the Rashes' debt to ACC is secured. Generally, such a departure from state law requires "clear textual guidance." BFP v. Resolution Trust Corp., 114 S.Ct. 1757, 1764 (1994) (declining to read Section(s) 548 of the Bankruptcy Code as requiring a foreclosure sale to yield a minimum price beyond what state foreclosure law requires "absent clearer textual guidance than the phrase `reasonably equivalent value'"); see also Midlantic Nat'l Bank. v. New Jersey Dep't of Envtl. Protection, 474 U.S. 494, 501 (1986) (noting that congressional intent to create an exemption from nonbankruptcy law must be "clearly expressed"); Butner v. United States, 440 U.S. 48, 55 (1979) (recognizing that property interests, including security interests, are created and defined by state law, and should not be analyzed differently in a bankruptcy proceeding unless mandated by "congressional command" or an "identifiable federal interest"). Butner and its progeny simply reflect the cautious regard for state law that federal courts ordinarily exhibit (and should exhibit) in cases where state and federal law intersect. These cases necessarily will inform our analysis of ACC's plain language argument: not only must ACC's reading of Section(s) 506(a) comport with the statutory language, but the statutory language must clearly compel any departure from state law produced by that reading.

2. Section 506(a): The First Sentence

Our analysis begins with the first sentence of Section(s) 506(a). It states that an allowed claim is a secured claim to the extent of "the value of such creditor's interest in the estate's interest in such property." ACC argues that this sentence only describes what a court has to value — the collateral — because the Supreme Court has read the quoted language to mean "the value of the collateral." United Sav. Ass'n v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 365, 372 (1988). Therefore, ACC asserts, the first sentence says nothing about how a court is to value the collateral.

We do not accept ACC's invitation to give uncritical treatment to the words "the value of such creditor's interest in the estate's interest in such property" simply because they have been judicially distilled to the phrase "the value of the collateral." Although we do not disagree with this interpretation, we are not free to ignore the precise words of the statute. If Congress intended the first sentence of Section(s) 506(a) to indicate only that a claim was secured to the extent of the value of the collateral, it could have drafted it with more economy. Therefore, we look to see what additional meaning the first sentence harbors.

The first sentence clearly envisions a layered analysis. The bankruptcy court must first ascertain the estate's interest in the property securing the creditor's lien. The court must then determine the creditor's interest in the estate's interest found in the first step. Finally, the court values the creditor's interest found in the second step to arrive at the amount of the creditor's allowed secured claim.

Beginning with the first step, we note that the focus is on the interest of the "estate" in the property, rather than that of the "debtor." The reason for this designation is that the commencement of a bankruptcy case creates an estate and, with some exceptions, the debtor's legal and equitable interests in property at that time become interests of the estate. 11 U.S.C. Section(s) 541. The distinction is also necessary because the debtor may in some instances retain all or a portion of a property interest by exempting it from the property of the estate. 11 U.S.C. §(s) 522; see, e.g., First of America Bank v. Gaylor (In re Gaylor), 123 B.R. 236, 240 (Bankr. E.D. Mich. 1991) (debtor may retain interest in property to the extent of his equity in the property or the statutory exemption ceiling, whichever is less; estate has interest in remainder).

The estate's "interest" in the property is a broad concept that incorporates multiple attributes. See Black's Law Dictionary 812 (6th ed. 1990) (defining "interest" as "[t]he most general term that can be employed to denote a right, claim, title, or legal share in something"). One attribute is the estate's share in the property vis-a-vis others. For example, the debtor may have been the sole owner of the property or he may have been a co-owner. Another attribute is the nature of the property interest held by the estate. In this regard, the debtor's interest may have been in fee or merely possessory, present or future, vested or contingent. Consequently, the court's ultimate valuation decision must account for the fact that the estate's interest in the property may be something less than sole fee ownership. 3 Collier on Bankruptcy Para(s) 506.04, at 506-17 (Lawrence P. King et al. eds., 15th ed. 1996) [hereinafter Collier].

Having ascertained the estate's interest in the property, the bankruptcy court must then determine the creditor's interest in the estate's interest. The use of the parallel phrases "estate's interest" and "creditor's interest" is instructive — as with the estate's interest, the court must consider the various attributes comprising the creditor's "interest." Again, the creditor's share in the estate's interest is significant. The creditor's lien may only be a partial lien or it may be junior to other liens also secured by the estate's interest in the property. Likewise, the nature of the creditor's interest is another important attribute. Whereas the nature of the estate's interest contemplates several variables, the nature of the creditor's interest is by definition a security interest. Although its precise contours are fixed by agreement between the creditor and the debtor and state law, a security interest may generally be defined as "[a] form of interest in property which provides that the property may be sold on default in order to satisfy the obligation for which the security interest is given." Black's Law Dictionary 1357 (6th ed. 1990). As with the estate's interest, the court's ultimate valuation must take into account the various attributes of the creditor's interest.

Finally, the first sentence directs that the bankruptcy court value the creditor's interest in the estate's interest in the property. The foregoing analysis of these interests suggests a logical starting point for the valuation: what the creditor could realize if it sold the estate's interest in the property according to the security agreement, taking into account the rights of other creditors with liens secured by the estate's interest. Focusing on the creditor's potential recovery makes sense because the first sentence of Section(s) 506(a) refers to "the value of such creditor's interest." The words "in the estate's interest in the property" only designate the object in which the creditor has an interest. To be sure, these words do limit the value of the creditor's interest — the creditor's interest in something cannot be greater than the thing itself — but they do not call for a separate valuation of the estate's interest. Otherwise, the first sentence would read "the value of such creditor's interest in the value of the estate's interest in such property." Ultimately, it is the creditor's interest that is being valued under Section(s) 506(a), and such valuation must account for the fact that the creditor's interest is in the nature of a security interest, giving the creditor the right to repossess and sell the collateral and nothing more. Therefore, the valuation should start with what the creditor could realize by exercising that right. See, e.g., General Motors Acceptance Corp. v. Mitchell (In re Mitchell), 954 F.2d 557, 560 (9th Cir.), cert. denied, 506 U.S. 908 (1992); Valley Nat'l Bank v. Malody (In re Malody), 102 B.R. 745, 750 (Bankr. 9th Cir. 1989); Overholt v. Farm Credit Servs. (In re Overholt), 125 B.R. 202, 215 (S.D. Ohio 1990); Grubbs v. National Bank, 114 B.R. 450, 452-53 (D.S.C. 1990); Memphis Bank Trust Co. v. Walker, 14 B.R. 264, 265 (W.D. Tenn. 1981); In re Byington, No. 96-10370, 1996 WL 341933, at *7 (Bankr. D. Kan. June 20, 1996); In re 203 North LaSalle St. Ltd. Partnership, 190 B.R. 567, 578 (Bankr. N.D. Ill. 1995), aff'd, 195 B.R. 692 (N.D. Ill. 1996); In re Penick, 170 B.R. 914, 918-19 (Bankr. W.D. Mich. 1994); Ford Motor Credit Co. v. Phillips (In re Phillips), 142 B.R. 15, 17 (Bankr. D.N.H. 1992); In re Owens, 120 B.R. 487, 490 (Bankr. E.D. Ark. 1990); Johnson v. General Motors Acceptance Corp., 115 B.R. 515, 516 (Bankr. D.S.C. 1988); In re Claeys, 81 B.R. 985, 992 (Bankr. D.N.D. 1987); In re Cook, 38 B.R. 870, 875 (Bankr. D. Utah 1984); In re Klein, 10 B.R. 657, 660 (Bankr. E.D.N.Y. 1981); Chrysler Credit Corp. v. Van Nort (In re Van Nort), 9 B.R. 218, 221 (Bankr. E.D. Mich. 1981); In re Adams, 2 B.R. 313, 313 (Bankr. M.D. Fla. 1980).

Our analysis does not conflict with the Supreme Court's reading of the phrase "the value of such creditor's interest in the estate's interest in such property" to mean "the value of the collateral." Indeed, we also interpret the quoted statutory language to mean "the value of the collateral," but more precisely, "the value of the collateral to the creditor." See In re Raylin Dev. Co., 110 B.R. 259, 261 (Bankr. W.D. Tex. 1989) ("[V]aluation must be approached in large part from the point of view of what the collateral would be worth in the hands of the creditor under the circumstances of the case."); In re Boring, 91 B.R. 791, 795 (Bankr. S.D. Ohio 1988) ("[I]t is the creditor's interest in property which should be valued under Section(s) 506, not the value, per se, of the property itself."); see also James F. Queenan, Jr., Standards for Valuation of Security Interests in Chapter 11, 92 Com. L.J. 18, 30 (1987). Given this analysis, it is clear that the plain language of the first sentence of Section(s) 506(a) does not require a replacement cost valuation, as urged by ACC. Moreover, this language does not compel the departure from state law that a replacement cost valuation would produce. To the contrary, the first sentence calls for a valuation that preserves the extent to which a creditor is secured under state law by establishing that a creditor's claim is a secured claim to the extent of the value of its security interest.

3. Section 506(a): The Second Sentence

We now look to the second sentence of Section(s) 506(a) to see if it qualifies the first sentence so as to mandate the replacement cost valuation proposed by ACC. Again, the second sentence states that:

Such value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor's interest.

11 U.S.C. §(s) 506(a). "Such value" naturally refers to "the value of such creditor's interest in the estate's interest in such property," which we read to mean the value of the collateral to the creditor. The second sentence directs that the bankruptcy court determine this value "in light of" two factors: "the purpose of the valuation" and "the proposed disposition or use of such property." We consider each of these factors in turn.

a. "The Purpose of the Valuation"

The meaning of "the purpose of the valuation" is not obvious from the words themselves or from the remaining text of Section(s) 506(a). Of course, that subsection does indicate that the purpose of valuing the collateral is to determine the amount of the secured and unsecured portions of the creditor's allowed claim, but that is true in every case. The meaning of these words becomes clear, however, when one considers that several different provisions of the Bankruptcy Code call for calculations of the extent to which an allowed claim is secured. For example, such a calculation is necessary to determine a debtor's eligibility for Chapter 13 protection under Section(s) 109(e), to assess adequate protection for a creditor requesting stay relief under Section(s) 362(d) or being subjected to a senior or equal lien under Section(s) 364(d), to establish what the debtor must pay the creditor to redeem property under Section(s) 722, or to ascertain the amount to be distributed to the holder of a secured claim in a reorganization plan under Chapter 11, 12, or 13. Thus, there are many "purposes" for which the bankruptcy court may need to conduct a valuation under Section(s) 506(a). The directive to consider the particular purpose at hand indicates that a valuation for one purpose will not necessarily control for another. Resolution Trust Corp. v. Murray (In re Midway Partners), 995 F.2d 490, 494 (4th Cir.), cert. denied, 114 S.Ct. 599 (1993); Fairchild v. Lebanon Prod. Credit Ass'n (In re Fairchild), 31 B.R. 789, 795 (Bankr. S.D. Ohio 1983); see also Queenan, supra, at 38 ("[I]t seems likely that the reference in Section 506(a) to purpose and disposition or use was intended merely to make it clear that a valuation in one setting would not be binding upon a valuation in another."). One reason that a prior valuation should not be binding is that the value of the collateral may change during the bankruptcy case, thereby requiring new valuations at each proceeding. See In re Midway Partners, 995 F.2d at 494; Schreiber v. United States (In re Schreiber), 163 B.R. 327, 332 (Bankr. N.D. Ill. 1994); see also 3 Collier Para(s) 506.04, at 506-25. Another reason could be that each section calling for a valuation presents "unique considerations" that the court may find to affect value. See In re Hoskins, 183 B.R. 166, 169 (Bankr. S.D. Ind. 1995); see also United States v. Arnold and Baker Farms (In re Arnold and Baker Farms), 177 B.R. 648, 656 (Bankr. 9th Cir. 1994) ("[A] bankruptcy court may approach a valuation in the context of a relief from the stay hearing under Section(s) 362 differently than it would in the context of a `cram down' under 1129(b)."), aff'd, 85 F.3d 1415 (9th Cir. 1996).

The purpose of the valuation in this case is to determine the amount of the distribution that ACC must receive under the Rashes' plan in order to meet 1325(a)(5)'s confirmation requirement under the cram down option. There has been no prior valuation for another purpose. We still look to Section(s) 1325(a)(5), however, to see whether it interjects any unique considerations that would inform a Section(s) 506(a) valuation. In re Hoskins, 183 B.R. at 170 (noting that the Section(s) 506 rights of a creditor subject to Chapter 13 cram down "cannot be ascertained without reference to Section(s) 1325"); cf. Nobelman v. American Sav. Bank, 508 U.S. 324 (1993) (holding that valuation of a residence under Section(s) 506(a) must account for "interplay" between that subsection and Section(s) 1322(b)(2), which protects the rights of the holder of a security interest in the debtor's principal residence).

As previously noted, a Chapter 13 debtor has two options if the holder of a secured claim does not accept the plan: (1) he may provide in the plan for a distribution to the creditor, the present value of which is at least equal to the amount of the secured claim; or (2) he may surrender the property securing the claim to the creditor. 11 U.S.C. §(s) 1325(a)(5)(B), (C). Structurally, it appears that these two alternatives are set forth as equivalent methods of protecting the creditor's security interest where it does not accept the debtor's treatment of that interest under the plan. Accordingly, one would expect that these alternatives would yield the same result. If the debtor chose to surrender the collateral to the creditor, the creditor would be protected to the extent of what it could realize by disposing of the collateral in a commercially reasonable disposition. Likewise, if the debtor chose to retain the collateral and pay the creditor the amount of its secured claim, the creditor would receive the same protection if the amount to be paid were equal to what the creditor could realize by repossession and sale. As two commentators put it:

Section 1325(a)(5)(B) is meant to ensure that a secured creditor will receive the equivalent of recourse to the collateral which was the inducement for extending the loan to the debtor. In other words, section 1325(a)(5)(B) protects the creditor's expectations of recovery against the debtor in the event of default. As long as only the debtor and creditor are involved, these expectations are protected by guaranteeing the creditor the amount he would receive upon repossession and sale of the collateral.

S. Andrew Bowman William M. Thompson, Secured Claims Under Section 1325(a)(5)(B): Collateral Valuation, Present Value, and Adequate Protection, 15 Ind. L. Rev. 569, 577 (1982), quoted with approval in Grubbs v. National Bank, 114 B.R. 450, 452 (D.S.C. 1990), and In re Cook, 38 B.R. 870, 876 (Bankr. D. Utah 1984); see also General Motors Acceptance Corp. v. Jones, 999 F.2d 63, 66-67 (3rd Cir. 1993) (" 1325(a)(5)(B)(ii) . . . seeks to put the secured creditor in an economic position equivalent to the one it would have occupied had it received the allowed secured amount immediately, thus terminating the relationship between the creditor and the debtor.").

A replacement cost valuation under Section(s) 506(a) contravenes the apparent symmetry of the protection offered by Section(s) 1325(a)(5)(B) and (C). Valuing the creditor's secured claim at the replacement cost to the debtor will generally give the creditor more protection under subsection (B) than it would have under subsection (C); that is, the amount that the debtor would have to pay to replace the collateral will generally be greater than the amount that the creditor could realize if the debtor surrendered the collateral and the creditor sold it. Nothing in the language or structure of Section(s) 1325(a)(5) seems to compel this additional protection under subsection (B). If anything, the structure of Section(s) 1325(a)(5) would seem to call for a valuation tied to the creditor's potential recovery upon a commercially reasonable sale of the collateral. 5 Collier Para(s) 1325.06, at 1325-54 n. 130 ("Since the purpose of the valuation [under Section(s) 1325(a)(5)(B)] is to protect the value that the secured creditor would receive if it repossessed the collateral and disposed of it, in which case the creditor would have to incur the costs of resale, it is appropriate to use the wholesale value of the property for this purpose, rather than the retail resale value.").

b. "The Proposed Disposition or Use of Such Property"

The second sentence of Section(s) 506(a) also commands that the valuation be made "in light of . . . the proposed disposition or use" of the collateral. ACC reads this language to compel a replacement cost valuation via the following logic: (1) because the "proposed disposition or use" is use by the debtor rather than disposition by the debtor or creditor, the value of the property is its worth to the debtor; and (2) the worth of the property to the debtor while he is using it is what it would cost the debtor to replace the property. ACC argues that the bankruptcy court defied this statutory mandate by ignoring the proposed use of the truck by the Rashes and by instead valuing the truck according to what ACC would realize in a hypothetical disposition of the truck. In so doing, ACC contends, the court failed to give effect to the "proposed disposition or use" language and thereby contravened the canon of statutory construction that "a statute must, if possible, be construed in such fashion that every word has some operative effect." United States v. Nordic Village, Inc., 503 U.S. 30, 36 (1992). By contrast, ACC points out that its reading of Section(s) 506(a) gives effect to the second sentence in that subsection.

We cannot conclude that Section(s) 506(a)'s directive that valuations be made "in light of . . . the proposed disposition or use of such property" offers the "clear textual guidance" needed to justify the departure from state law effected by a replacement cost valuation. Contrary to ACC's assertion, this language does not patently lead to the conclusion that, where the debtor proposes to retain and use the collateral, the value of the collateral is equal to what it would cost the debtor to replace it. ACC must bridge the gap between the statutory language and this conclusion with its own peculiar line of logic.

Moreover, this logic is corrupted by an obvious non sequitur. It simply does not follow that, because the collateral is being retained and used by the debtor, its value is necessarily measured by its worth to the debtor. When the collateral is in the hands of the debtor in a Chapter 13 cram down, it is worth something to both the debtor and the creditor. The collateral has worth to the debtor because he has an ownership or a possessory interest; the collateral also has worth to the creditor because it has a security interest. Thus, if the "proposed disposition or use" language in Section(s) 506(a) merely tells us to value the collateral in light of the fact that the debtor has retained possession, that says nothing about whether its worth to the debtor or its worth to the creditor is the appropriate measure of its value.

Similarly misguided is ACC's claim that its explication of 506(a) is superior to that of the bankruptcy court because it focuses on the actual proposed use of the collateral by the debtor rather than a hypothetical disposition by the creditor. "[T]he entire process of claim valuation is `purely hypothetical,' since it ascribes value to property without an actual sale." In re 203 North LaSalle St. Ltd. Partnership, 190 B.R. 567, 579 n. 2 (Bankr. N.D. Ill. 1995), aff'd, 195 B.R. 692 (N.D. Ill. 1996). Indeed, by ACC's own reasoning, the collateral's worth to the debtor is measured by reference to a hypothetical transaction — what it would cost the debtor to purchase a replacement for the collateral. Likewise, the worth to the creditor is what the creditor could realize if it repossessed and sold the collateral according to the security agreement. Therefore, ACC's interpretation of Section(s) 506(a) is equally susceptible to the "criticism" that it hypothesizes a transaction to determine value.

We note further that the collateral's replacement cost represents the value of the estate's interest in the collateral. Thus, a replacement cost valuation, which measures an ownership or possessory interest, directly conflicts with the first sentence's instruction to value the creditor's interest in the estate's interest in the property, which is a security interest. We would expect Congress to use more explicit language in the second sentence than "in light of . . . the proposed disposition or use of such property" to carve out such an antithetical exception to the first sentence. Indeed, it would be strange to cast a replacement cost requirement as an exception. A rule mandating a replacement cost valuation whenever the debtor proposes to retain the collateral would embrace many of the possible scenarios under which a valuation takes place. Again, we would expect Congress to establish such a far-reaching rule with more explicit language. Accordingly, we do not believe that Section(s) 506(a)'s reference to the proposed disposition or use of the collateral clearly demands a replacement cost valuation when the debtor retains and uses the collateral.

We also do not agree that requiring a replacement cost valuation when the debtor retains the collateral is necessary to give effect to the second sentence of Section(s) 506(a). Apparently, ACC reads the words "[s]uch value shall be determined in light of . . . the proposed disposition or use of such property" to mean that such disposition or use will be determinative of value in every case. The use of the word "shall" certainly indicates that the bankruptcy court will have to look at the proposed disposition or use of the collateral in making its valuation. The phrase "in light of," however, suggests that the court need only consider the proposed disposition or use, see The American Heritage Dictionary 729 (2d Coll. ed. 1982) (defining the idiom "in (the) light of" as "[i]n consideration of"); it does not dictate that such disposition or use will necessarily affect the result. We would expect Congress to use more forceful language if the proposed disposition or use of the collateral were to have a positive or negative effect on value in every case. Indeed, given the myriad purposes for which a court must conduct valuations under Section(s) 506(a), it is not surprising that the collateral's disposition or use would have a determinative impact for some purposes and not for others.

This interpretation finds support in the fact that the words "[s]uch value" in the second sentence refer to "the value of such creditor's interest in the estate's interest in such property" in the first sentence. Accordingly, only those dispositions or uses of the collateral that affect the creditor's security interest should be determinative of value. As Judge Queenan commented:

The debtor's use of the collateral may be of assistance in delineating the market for the collateral by indicating a use which may be of interest to potential buyers at a foreclosure sale. The statute could also refer to a use which affects value rather than the standard of value. The debtor's use of the collateral may be particularly beneficial, or particularly detrimental, to its value. For example, the collateral may consist of equipment which is being used by the debtor twenty-four hours per day, so that its use is causing rapid deterioration.

Queenan, supra, at 37. Similarly, one bankruptcy court explained:

The emphasis to be placed upon the concept of "use" or "disposition" of property should not be placed in the context of collateral retention by a debtor via a reorganization plan, but rather ought to focus on a use or disposition of collateral that is either destructive or unanticipated in the sense that it would increase the risk of loss to the creditor's interest in the collateral. Illustrative of such use in a Chapter 12 treatment context might be a post-confirmation proposal to use a combine for custom work where previously it had been used seasonally to harvest the debtor's own crop. Thus, the second sentence of section 506(a) should not have any effect upon how the value of a creditor's interest in collateral is arrived at, at least in the context of collateral retention unless the manner of that retention is so unusual or extreme as to constitute a use that is destructive of the collateral itself in a way unanticipated.

In re Claeys, 81 B.R. 985, 992 (Bankr. D.N.D. 1987).

Perhaps the most common example of a situation in which disposition or use will be determinative is when a creditor moves for relief from the automatic stay under Section(s) 362(d)(1) on the ground that its interest in the collateral is not being adequately protected. Such a motion calls for the bankruptcy court to compare the value of the creditor's interest at the commencement of the case with its likely value at the date the stay terminates in order to determine whether that value is declining, thereby entitling the creditor to adequate protection in the manner provided by Section(s) 361 of the Bankruptcy Code. In this context, the debtor's proposed disposition or use of the collateral will frequently have a determinative effect on the value of the collateral at the later date and, consequently, on the outcome of the motion. The Supreme Court recognized the impact of declining collateral value during the pendency of the stay in its opinion in Timbers:

It is common ground that the "interest in property" referred to by Section(s) 362(d)(1) includes the right of a secured creditor to have the security applied in payment of the debt upon completion of the reorganization; and that that interest is not adequately protected if the security is depreciating during the term of the stay. Thus, it is agreed that if the apartment project in this case had been declining in value petitioner would have been entitled, under Section(s) 362(d)(1), to cash payments or additional security in the amount of the decline, as Section(s) 361 describes.

Timbers, 484 U.S. at 370. Other courts have also acknowledged the relationship between the proposed disposition or use of the collateral and adequate protection. See, e.g., Bank Hapoalim B.M. v. E.L.I., Ltd., 42 B.R. 376, 379 (N.D. Ill. 1984) (finding that creditor's interest in collateral would be adequately protected where collateral's value, as evidenced by the contract price for a proposed sale of the collateral, exceeded creditor's claim); In re Mueller, 123 B.R. 613, 615-16 (Bankr. D. Neb. 1990) (holding that creditor's interest in collateral would not be adequately protected because evidence showed that debtor's heavy use of collateral would affect its value); In re Wolsky, 46 B.R. 262, 265 (Bankr. D.N.D. 1984) (requiring adequate protection payments to compensate creditor for $25,000 loss in value occasioned by debtor's future use of collateral); First Fed. Sav. Loan Assoc. v. Shriver (In re Shriver), 33 B.R. 176, 178 (Bankr. N.D. Ohio 1983) (valuing collateral for purposes of motion for relief from stay by considering use of collateral as home, dairy farm, and feeder cattle farm).

By contrast, where the debtor retains the collateral and uses it for its usual, intended purpose, such retention and use should not ordinarily affect a valuation under Section(s) 506(a) for the purpose of Chapter 13 cram down. In this case, the bankruptcy court found that the Rashes' proposed use of the truck — hauling freight — was its intended purpose and that the truck was not susceptible to multiple uses that would affect its value. 149 B.R. at 433. The court also found that the truck was insured and maintained. Id. at 434. Accordingly, the court concluded that the Rashes' retention and use of the truck did not affect its value to ACC. Id. at 433. Based on the evidence presented to the court, this finding is not clearly erroneous.

In sum, we reject ACC's contention that the plain language of 506(a) calls for a replacement cost valuation where the debtor proposes to retain and use the collateral. Certainly, the language of that subsection does not provide the clear textual guidance necessary to command the departure from state law effected by such a valuation. If anything, Section(s) 506(a) reaffirms the extent to which a creditor is secured under state law by suggesting a valuation that starts with what the creditor could realize by repossession and sale of the collateral. This reading gives full effect to Section(s) 506(a)'s second sentence by directing the court to consider in every case two factors that may affect the value of the creditor's security interest — the purpose of the valuation and the proposed disposition or use of the collateral.

D. Economic Analysis

1. Effect of the Debtor's Retaining the Collateral on the Value of the Creditor's Interest

ACC also argues that a replacement cost valuation more accurately reflects the economic relationship between the creditor and the debtor when the debtor proposes to retain and use the collateral as part of his Chapter 13 plan. First, ACC contends that, by retaining the collateral, the debtor is acknowledging that its value is greater than its liquidation price. See In re Penz, 102 B.R. 826, 828 (Bankr. E.D. Okla. 1989). If the debtor could not retain the collateral, he would have to purchase a replacement. Thus, ACC asserts that replacement cost is the appropriate measure of value. According to ACC's logic, the creditor's secured claim should reflect this higher value because that value would not otherwise exist if the creditor were allowed to exercise its right to repossess the collateral. See id. ("[C]reditor's secured claim is entitled to be valued to the extent of its contribution to the entire estate . . . ."); see also In re Crockett, 3 B.R. 365, 367 (Bankr. N.D. Ill. 1980) ("The value of [the creditor's] secured claim is enhanced by the continued use of the collateral in effectuating the debtor's performance under the plan, which value must be reflected in distributions under the plan.").

We find two problems with this logic. First, replacement cost does not reflect the value of the collateral alone. When hypothetically purchasing a replacement for the collateral from a retail dealer, the debtor would be buying the replacement property and the services provided by a dealer, such as inventory storage, reconditioning, marketing, and warranties of quality. The replacement cost represents the value of the replacement property and the value of these services. The creditor, however, has a security interest only in the property that would be replaced, and not in the hypothetical dealer's services. As Judge Easterbrook explained:

In the retailing business the difference between the wholesale price and the retail price is the "value added" of the business. It is the amount contributed by storing, inspecting, displaying, hawking, collecting for, delivering, and handling warranty claims on the goods. This difference covers the employees' wages, rent and utilities of the premises, interest on the cost of goods, bad debts, repairs, the value of entrepreneurial talent, and so on. The increment of price is attributable to this investment of time and other resources. The [creditor] does not have a security interest in these labors. It has an interest only in [the collateral]. The value of its interest depends on what the [creditor] could do, outside of bankruptcy, to realize on its security. . . . What it could do is seize and sell the inventory.

Samson v. Alton Banking Trust Co. (In re Ebbler Furniture and Appliances, Inc.), 804 F.2d 87, 92 (7th Cir. 1986) (Easterbrook, J., concurring) (emphasis added), quoted with approval in Smith v. Associates Commercial Corp. (In re Clark Pipe and Supply Co., Inc.), 893 F.2d 693, 698 (5th Cir. 1990). Similarly, two commentators noted:

We believe that a value that approximates wholesale price should be the relevant measure of [the creditor's] claim for purposes of the Chapter 13 cramdown. . . . [T]he inflated retail price includes value-adding activities by the retailer. Because [the creditor] is not a retailer of automobiles, it is unable to take advantage of these value-adding activities. There should be no reason why a secured creditor . . . should profit from the value-adding activities of others. Because the value of an automobile sold in the market at the wholesale level comes almost directly from the manufacturing activities of the dealer, the wholesale price of the automobile likely comes closest to representing the automobile's true worth.

Robert M. Lawless Stephen P. Ferris, Economics and the Rhetoric of Valuation, 5 J. Bankr. L. Prac. 3, 18 (1995). Accordingly, the replacement cost of the collateral to the debtor is not an appropriate measure of the creditor's allowed secured claim because it includes the value of services in which the creditor does not have a security interest.

Second, ACC's replacement cost argument appears to be motivated by a desire to compensate creditors for the fact that cram down allows debtors to retain collateral and prevents creditors from foreclosing according to their security agreements. Any such compensation, however, would amount to a bonus to creditors. To the extent that cram down prevents the creditor from foreclosing, the creditor is already protected because it will receive payments whose present value equals the value of its security interest in the estate's interest in the property. 11 U.S.C. §(s) 506(a), 1325(a)(5)(B). In this case, ACC will receive payments from the Rashes under the plan equal to the amount of its allowed secured claim, together with interest until the claim is paid at the rate of nine percent per annum. As one court indicated:

Congress has provided protection for the creditor, in the form of the requirement that the amount to be paid to the creditor over time have a current value of not less than would be received in an immediate liquidation. . . . Those courts which have sought to provide creditors with substantial additional protection, in the form of providing valuation of the collateral at retail . . . are in effect engaging in judicial legislation and imposing their view of appropriate bankruptcy policy upon litigants within their jurisdiction.

In re Myers, 178 B.R. 518, 523 (Bankr. W.D. Okla. 1995). Judge Lundin has made a similar observation:

To allow sellers and financiers to recover the retail or replacement cost of personal property in Chapter 13 cases is to twice compensate for the risk of nonpayment. Lienholders in Chapter 13 cases are already guaranteed "present value" at confirmation under Section(s) 1325(a)(5)(B)(ii).

2 Lundin Section(s) 5.48, at 5-134. Further, to the extent that the creditor should be compensated beyond what it could realize upon foreclosure, it can easily provide this protection itself. "Lenders and sellers build the risk of default and the risk of bankruptcy into the interest rates they charge, the prices at which they sell, and the transaction costs that they charge." Id. Creditors can also protect themselves by requiring a larger down payment or shortening the term of the loan. ACC offers no compelling economic reason why a creditor subject to a Chapter 13 cram down should receive even more compensation in the form of valuing its secured claim at the replacement cost of the collateral.

Moreover, the Supreme Court has arguably rejected the notion that a creditor should receive additional compensation for its inability to foreclose due to cram down. In United Sav. Ass'n v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 365 (1988), the Court addressed whether an undersecured creditor was entitled to compensation under Section(s) 362(d)(1) due to the delay caused by the automatic stay in foreclosing on the collateral. The Court held that such compensation was not due because the "interest in property" entitled to adequate protection under 362(d)(1) did not include the right to immediate foreclosure. Id. at 371. In reaching this conclusion, the Court drew an analogy between the "interest in property" protected by Section(s) 362(d)(1) and the "creditor's interest in the estate's interest in such property" mentioned in 506(a). With respect to the latter phrase, the Court stated:

[T]he creditor's "interest in property" obviously means his security interest without taking account of his right to immediate possession of the collateral on default. If the latter were included, the "value of such creditor's interest" would increase, and the proportions of the claim that are secured and unsecured would alter, as the stay continues — since the value of the entitlement to use the collateral from the date of bankruptcy would rise with the passage of time. No one suggests this was intended.

Id. at 372 (emphasis added). Accordingly, one would not expect the Court to agree that a valuation under Section(s) 506(a) for purposes of cram down should provide the creditor with additional compensation in respect of his inability to foreclose. See General Motors Acceptance Corp. v. Mitchell (In re Mitchell), 954 F.2d 557, 560-61 (9th Cir.), cert. denied, 506 U.S. 908 (1992).

2. The Potential for a Windfall

ACC further contends that a foreclosure price valuation where the debtor retains the collateral gives the debtor an opportunity to reap a windfall. Specifically, ACC fears that a debtor could use the cram down provision to bifurcate an undersecured creditor's claim into an unsecured portion and a secured portion valued at the collateral's wholesale price, and later resell the collateral for a higher price, pocketing the difference. See Winthrop Old Farm Nurseries v. New Bedford Inst. for Sav. (In re Winthrop Old Farm Nurseries), 50 F.3d 72, 76 (1st Cir. 1995).

The short answer to this concern is that there is no evidence on this record that the Rashes could sell their truck for a higher price than ACC could obtain at a commercially reasonable sale. Cf. In re 203 North LaSalle St. Ltd. Partnership, 190 B.R. 567, 579 n. 2 (Bankr. N.D. Ill. 1995) ("A debtor, no less than its secured creditor, would incur disposition costs to obtain this value, and so there is no `quick profit' available to the debtor."), aff'd, 195 B.R. 692 (N.D. Ill. 1996). Indeed, it stretches credulity to suggest that ACC, with all of the financial resources, personnel, and foreclosure sales experience at its disposal, could not sell the truck for a price at least equal to what the Rashes could receive for it.

If anything, a replacement cost valuation will produce a windfall to the creditor in the form of a "cram down premium." Under state law, the creditor is secured to the extent of what it could realize by repossessing and selling the collateral. A replacement cost valuation in the bankruptcy context increases the extent of the creditor's security by awarding it the value of services performed by a dealer, even where the creditor is not a dealer and could not realize such value under any other circumstances. See Lawless Ferris, supra, at 18. Thus, a replacement cost valuation contravenes the well-established canon that a party should not receive "a windfall merely by reason of the happenstance of bankruptcy." Butner v. United States, 440 U.S. 48, 55 (1979); Lewis v. Manufacturers Nat'l Bank, 364 U.S. 603, 609 (1961).

Moreover, this windfall would come at the expense of holders of unsecured claims. Valuing the secured portion of a creditor's claim at the collateral's replacement cost benefits that creditor because it receives a correspondingly greater portion of the debtor's monthly disposable income. The holders of unsecured claims are correspondingly harmed because there is less disposable income available for them. Indeed, in a situation where a commercial lender to a consumer makes a loan that is undersecured from the outset, see supra note 22, the effect of ACC's proposed rule would be to shift some of the debtor's disposable income from one group of unsecured creditors to a creditor who itself made what was in part an unsecured loan. We do not believe that the Bankruptcy Code compels such an odd result. In fact, this is exactly the sort of windfall that bankruptcy is not supposed to produce.

E. Legislative History Analysis

ACC also makes the argument that the legislative history of Section(s) 506(a) supports a replacement cost valuation. In this regard, ACC points only to the following excerpt from the Senate Report:

Subsection (a) of this section separates an undersecured creditor's claim into two parts: He has a secured claim to the extent of the value of his collateral; and he has an unsecured claim for the balance of his claim. The subsection also provides for the valuation of claims which involve setoffs under section 553. While courts will have to determine value on a case-by-case basis, the subsection makes it clear that valuation is to be determined in light of the purpose of the valuation and the proposed disposition or use of the subject property.

S. Rep. No. 989, 95th Cong., 2d Sess. 68 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5854 (emphasis added). Of course, this passage merely repeats the words of the statute itself. As we have explained at length, this language does not compel a replacement cost valuation.

On the other hand, there is legislative history that strongly suggests that replacement cost is not the appropriate measure of a creditor's secured claim. Most notably, the House Report states:

The second important change [from current law] is in the treatment of secured creditors. Most often in a consumer case, a secured creditor has a security interest in property that is virtually worthless to anyone but the debtor. The creditor obtains a security interest in all of the debtor's furniture, clothes, cooking utensils, and other personal effects. These items have little or no resale value. They do, however, have a high replacement cost. The mere threat of repossession operates as pressure on the debtor to pay the secured creditor more than he would receive were he actually to repossess and sell the goods.

Current chapter XIII does little to recognize the differences between the true value of the goods and their value as leverage. Proposed chapter 13 instead views the secured creditor [-] debtor relationship as a financial relationship, and not one where extraneous, non-financial pressures should enter. The bill requires the court to value the secured creditor's interest. To the extent of the value of the security interest, he is treated as having a secured claim . . . .

H.R. Rep. No. 595, 95th Cong., 1st Sess. 124 (1977), reprinted in 1978 U.S.C.C.A.N. 5787, 6085. Thus, Chapter 13 distinguishes the "true value" of collateral from the value it has as leverage due to the cost of replacing it. Further, it sets the amount of a secured claim equal to the "value of the security interest" so that the debtor is not required "to pay the secured creditor more than he would receive were he actually to repossess and sell the goods." Not only does this history refute the notion that Section(s) 506(a) requires a replacement cost valuation when the debtor retains the collateral, but it also conforms to our earlier conclusion that such valuations should start with what the creditor could realize if it repossessed and sold the collateral. See In re Cook, 38 B.R. 870, 874 (Bankr. D. Utah 1984) ("A rule requiring valuations under Section 1325(a)(5)(B) to measure the replacement cost of collateral to debtors would defeat the design of Congress by giving secured creditors leverage they were not meant to have."); see also Grubbs v. Houston First Am. Sav. Ass'n, 730 F.2d 236, 239 n. 3 (5th Cir. 1984) (en banc) (stating that current Chapter 13 sought to cure deficiencies of the predecessor Bankruptcy Act in part by "permitting modification of the claims of secured creditors to reduce the creditor's security interest to the actual value of the goods secured," and citing the quoted legislative history concerning `leverage.'").

Similar support is found in the legislative history of the redemption provision found in Section(s) 722. This section allows the debtor to redeem certain tangible personal property by paying the creditor the amount of its allowed secured claim. 11 U.S.C. Section(s) 722; see supra note 11. The amount of the secured claim is, of course, determined pursuant to Section(s) 506(a). According to ACC's logic, Section(s) 506(a) compels a replacement cost valuation in this context because the debtor is retaining the collateral when he redeems it. The legislative history of Section(s) 722 suggests otherwise:

Under [Section(s) 722], the debtor may redeem from a secured creditor property that would be exempt in the absence of the security interest, or property that the trustee abandons, if the debtor pays the secured creditor the allowed amount of the creditor's secured claim. This right amounts to a right of first refusal on a foreclosure sale of the property involved. It allows the debtor to retain his necessary property and avoid high replacement costs, and does not prevent the creditor from obtaining what he is entitled to under the terms of his contract.

H.R. Rep. No. 595, 95th Cong., 1st Sess. 127 (1977), reprinted in 1978 U.S.C.C.A.N. 5787, 6088 (emphasis added). If Section(s) 506(a) fixes the creditor's secured claim at the collateral's replacement cost because the debtor is retaining the collateral, the debtor will not be "avoid[ing] high replacement costs" when he pays the creditor the amount of that claim. On the other hand, if the court determines the amount of the secured claim by reference to what the creditor could realize by foreclosing on the collateral pursuant to the security agreement, the creditor will "obtain what he is entitled to under the terms of his contract." Further, the legislative history clearly reflects Congress's intent to encourage debtors to use Chapter 13 and make payments to their unsecured creditors, rather than to opt for a Chapter 7 liquidation. The House Report notes that the premises of the Bankruptcy Code "with respect to consumer bankruptcy are that use of the bankruptcy law should be a last resort; [and] that if it is used, debtors should attempt repayment under chapter 13 . . . ." Id. at 118. Later, the House Report elaborates on the benefits to debtors and creditors offered by Chapter 13 reorganization vis-a-vis Chapter 7 liquidation:

The benefit to the debtor of developing a plan of repayment under chapter 13, rather than opting for liquidation under chapter 7, is that it permits the debtor to protect his assets. In a liquidation case, the debtor must surrender his nonexempt assets for liquidation and sale by the trustee. Under chapter 13, the debtor may retain his property by agreeing to repay his creditors. Chapter 13 also protects a debtor's credit standing far better than a straight bankruptcy, because he is viewed by the credit industry as a better risk. In addition, it satisfies many debtors' desire to avoid the stigma attached to straight bankruptcy and to retain the pride attendant on being able to meet one's obligations. The benefit to creditors is self-evident: their losses will be significantly less than if their debtors opt for straight bankruptcy.

Id. The House Report also comments that the bill contains a provision to apprise debtors of the availability of Chapter 13 relief to "encourage and facilitate greater use of chapter 13 repayment plans by overburdened debtors." Id. at 121.

A replacement cost valuation contravenes this intent by artificially increasing the secured portion of the creditor's claim. As the secured portion of the creditor's claim approaches the total amount of that claim, it will make little difference to the debtor whether he bifurcates the claim in bankruptcy or simply reaffirms the debt outside of bankruptcy. Given this indifference, the debtor will likely reaffirm the debt and avoid paying the unsecured claims by opting for Chapter 7. As one bankruptcy court observed:

To always require retail value would ignore the [interests of unsecured creditors]. In many cases, this would be tantamount to reaffirming the original obligation. That scenario in which secured creditors are paid the full debt on their collateral and unsecured creditors are paid nothing is commonly played out in Chapter 7s. The imposition of an artificially high retail value would bring this preferred treatment into the Chapter 13 confirmation process.

In re Hoskins, 183 B.R. 166, 170 (Bankr. S.D. Ind. 1995). Therefore, we cannot conclude that the Bankruptcy Code demands a valuation standard so contrary to congressional intent to encourage resort to Chapter 13.

Finally, the legislative history of Section(s) 506(a) appears to reject any rigid valuation rule such as the one ACC suggests. The Senate Report cited by ACC states that "courts will have to determine value on a case-by-case basis . . . ." S. Rep. No. 989, 95th Cong., 2d Sess. 68 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5854. Similarly, the House Report notes:

"Value" does not necessarily contemplate forced sale or liquidation value of the collateral; nor does it always imply a full going concern value. Courts will have to determine value on a case-by-case basis, taking into account the facts of each case and the competing interests in the case.

H.R. Rep. No. 595, 95th Cong., 1st Sess. 356 (1977), reprinted in 1978 U.S.C.C.A.N. 5787, 6312 (emphasis added); see also Johnson v. General Motors Acceptance Corp. (In re Johnson), 165 B.R. 524, 529 (S.D. Ga. 1994) (quoting this history and noting "Section(s) 506(a)'s aversion to standardized procedure"). The legislative history of the adequate protection provisions, which operate in concert with Section(s) 506(a), also emphasizes the ad hoc nature of valuation:

The section does not specify how value is to be determined, nor does it specify when it is to be determined. These matters are left to case-by-case interpretation and development. In light of the restrictive approach of the section to the availability of means of providing adequate protection, this flexibility is important to permit the courts to adapt to varying circumstances and changing modes of financing.

Neither is it expected that the courts will construe the term value to mean, in every case, forced sale liquidation value or full going concern value. There is wide latitude between those two extremes although forced sale liquidation value will be a minimum.

In any particular case, especially a reorganization case, the determination of which entity should be entitled to the difference between the going concern value and the liquidation value must be based on equitable considerations arising from the facts of the case.

S. Rep. No. 989, 95th Cong., 2d Sess. 68 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5840 (emphasis added); see also In re Hoskins, 183 B.R. 166, 169 (Bankr. S.D. Ind. 1995) ("[E]ach case hinges upon equitable considerations arising from the facts of the case. No singular method of valuation may be touted as the appropriate standard.").

By contrast, ACC proposes a fixed rule establishing a valuation standard that applies to a broad class of cases: as a matter of law, replacement cost is the measure of value whenever the debtor retains the collateral. Such a rule is antithetical to the clear congressional intent that valuation should be a case-by-case, fact-specific inquiry. Indeed, one bankruptcy court cautioned against invoking the second sentence of Section(s) 506(a) to establish rules contrary to this intent:

This Court believes that the congressional intent behind the enactment of Section(s) 506 was to make it clear that the bankruptcy court should consider all factors available to it in arriving at valuations of interests in property. This Court believes that the singling out of one sentence and allowing that to control the entire process of valuation is subverting that congressional intent . . . which is to allow the bankruptcy court the flexibility to determine values on a case by case basis after due consideration of the facts of each case and the competing interests in that case.

In re Sherman, 157 B.R. 987, 991 (Bankr. E.D. Tex. 1993).

It is true that we also interpret Section(s) 506(a) as establishing a rule of sorts by always requiring the court to determine the value of the collateral to the creditor. See Part III.C.2. We have qualified this reading, however, by holding that what the creditor could realize at a foreclosure sale is only a starting point for the valuation. Consistent with the legislative history, a bankruptcy court may make additions to or deductions from this amount depending upon "equitable considerations arising from the facts of the case."

F. Uniformity Among Circuits

Finally, ACC urges us to adopt its interpretation of Section(s) 506(a) because it has been endorsed by all of the other circuits that have addressed the issue. See Taffi v. United States, 68 F.3d 306, 309 (9th Cir. 1995), reh'g en banc granted, 86 F.3d 147 (9th Cir. 1996); Metrobank v. Trimble (In re Trimble), 50 F.3d 530, 531-32 (8th Cir. 1995); Winthrop Old Farm Nurseries, Inc. v. New Bedford Inst. for Sav. (In re Winthrop Old Farm Nurseries), 50 F.3d 72, 75-76 (1st Cir. 1995); Huntington Nat'l Bank v. Pees (In re McClurkin), 31 F.3d 401, 405 (6th Cir. 1994); Lomas Mortgage USA v. Wiese, 980 F.2d 1279, 1286 (9th Cir. 1992), vacated on other grounds, 508 U.S. 958 (1993); Coker v. Sovran Equity Mortgage Corp. (In re Coker), 973 F.2d 258, 260 (4th Cir. 1992); Brown Co. Sec. Corp. v. Balbus (In re Balbus), 933 F.2d 246, 251-52 (4th Cir. 1991). But see General Motors Acceptance Corp. v. Mitchell (In re Mitchell), 954 F.2d 557, 560 (9th Cir.), cert. denied, 506 U.S. 908 (1992). In making this argument, ACC primarily stresses the importance of uniformity among the circuit courts of appeals.

First, we note that four of these cases — McClurkin, Lomas, Coker, and Balbus — concern only the issue of whether Section(s) 506(a) requires a court to deduct the creditor's (or debtor's) hypothetical foreclosure and disposition costs from the otherwise undisputed value of real property securing a loan. By contrast, the deductibility of ACC's foreclosure and disposition costs is not an issue in this case — there is no evidence related to these costs — and the value of the collateral is otherwise in dispute. As such, these four cases do not address the primary issue in this case, which is whether Section(s) 506(a) compels a replacement cost valuation when the debtor proposes to retain the collateral. Therefore, they do not directly endorse the interpretation urged by ACC. The other three cases — Taffi, Trimble, and Winthrop — all followed the panel opinion in this case, which was the first circuit court opinion to employ the "replacement cost" valuation standard and has since been vacated, 68 F.3d 113 (5th Cir. 1995).

Second, to the extent that the cases cited by ACC are in conflict with our interpretation of Section(s) 506(a), we simply disagree with them. In so doing, we do not ignore the need for uniformity among circuits. Indeed, in some circumstances, it may be more important to preserve that uniformity even though it requires us to adhere to an arguably incorrect result. In this case, however, the need to reach the correct result in this circuit is paramount. As the number of amicus briefs filed in this court reflects, the valuation of the secured portion of an undersecured creditor's claim in the context of a Chapter 13 cram down has substantial economic impact not only on the Rashes and their creditors, both secured and unsecured, but also on all Chapter 13 debtors and their creditors in this circuit. The interpretation of Section(s) 506(a) subscribed to by these other circuits materially alters the congressional design in providing the reorganization alternative by distorting the economic relationship between the holders of secured and unsecured claims and by creating a disincentive for debtors to elect the Chapter 13 remedy. We cannot join our sister circuits in an interpretation of Section(s) 506(a) that so disserves an important congressional objective.

IV. CONCLUSION

In sum, we hold that Section(s) 506(a) of the Bankruptcy Code does not compel a bankruptcy court to value collateral at its replacement cost to the debtor when the debtor proposes to retain the collateral as part of his reorganization plan. The language of the statute does not provide the clear textual guidance necessary to justify the departure from state law effected by a replacement cost valuation. Moreover, such a standard does not accurately reflect the economic relationship between a debtor and his creditor. Finally, there is no support in the legislative history for a replacement cost rule. Rather, the statutory language, economic considerations, and the legislative history indicate that a valuation of a secured creditor's interest under Section(s) 506(a) should start with what the creditor could realize if it repossessed and sold the collateral pursuant to its security agreement, taking into account the purpose of the valuation and the proposed disposition or use of the collateral. Bankruptcy courts may make adjustments to this amount depending upon considerations arising from the facts of the particular case.

In this case, the bankruptcy court valued the Rashes' truck at its wholesale price, reasoning that this price reflected what ACC could obtain if it repossessed and sold the truck. The court based this finding on credible expert testimony from the valuation hearing. In addition, the court did consider that the purpose of the valuation was to determine the distribution ACC was entitled to receive under the Rashes' plan pursuant to Section(s) 1325(a)(5)(B). The court also considered that the Rashes were using the truck for its intended purpose and that the truck was insured and maintained. Accordingly, we do not believe that the court erred in determining the truck's value.

For the foregoing reasons, the judgment of the district court affirming the judgment of the bankruptcy court is

AFFIRMED.