POST BAPCPA:
(See also Vehicles)
In re
Brown, 346 B.R. 868 (Bkrtcy.N.D.Fla. 2006) LEWIS M. KILLIAN
JR., Bankruptcy Judge CREDITOR HOLDING PMSI NOT ENTITLED TO
DEFICIENCY CLAIM IN CHAPTER 13 WHERE DEBTOR SURRENDERS
VEHICLE IN FULL SATISFACTION OF DEBT § 1325(a)5) (hanging
paragraph), § 506, 502
Debtor proposed to surrender a motor vehicle subject to a
PMSI and purchased for personal use within 910 days of
filing the petition, in full satisfaction of the
undersecured debt. Creditor objected.
The court first held that despite language in § 1325(a)
(hanging paragraph) that Code § 506 does not apply to a PMSI
debt, the debt is still a secured debt. The court ruled that
"just because § 506 does not apply does not mean that there
is no secured claim. Section 506(a) simply provides for the
bifurcation of claims into secured and unsecured portions in
accordance with the value of the collateral; it does not
form the basis for a secured debt." The court essentially
held that § 502 is the section that determines the secured
status of a claim.
The court then observed that "Secured creditors, like every
other party to a bankruptcy case, have to take both the good
and the bad," held that . . . the Hanging Paragraph
following § 1325(a)(9) allows the Debtor to surrender his
vehicle, which is the subject of a 910 claim, in full
satisfaction of the debt owed to Wells Fargo."
In re Sparks, 346 B.R. 767 (Bkrtcy.S.D.Ohio 2006) J. VINCENT
AUG, JR. Bankruptcy Judge CREDITOR HOLDING PMSI NOT
ENTITLED TO DEFICIENCY CLAIM IN CHAPTER 13 WHERE DEBTOR
SURRENDERS VEHICLE IN FULL SATISFACTION OF DEBT §
1325(a)(5)
The court held that where a vehicle is subject to a PMSI and
was purchased for the debtor's personal use within 910 days
of filing the petition the Code prohibits a "cram-down" but
does not prohibit the debtor from surrendering the vehicle
in full satisfaction of the debt, with no unsecured portion
remaining to be treated in the plan. In other words, the
anti-cramdown provision acts restricts both the creditor and
the debtor from treating the claim as a cram-down or
strip-down for a partially secured claim.
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