Home -> Law Blog Directory -> State Law Blogs -> Showmeblawgs

State Law

: Showmeblawgs

By stan_sipple

Chapter 13 debtors who surrender "910 day" automobile collateral still may not strip down the car lender's deficiency claim under the "hanging paragraph" of Section 1325(a)(9) that Congress added in the 2005 Bankruptcy Reform Act.
071726P.pdf 02/05/2008 Capital One Auto Finance v. Nathan OsbornU.S. Court of Appeals Case No: 07-1726 U.S. Bankruptcy Court for the Western District of Missouri - Kansas City [PUBLISHED] [Benton, Author, with Wollman, Circuit Judge and Doty,
District Judge]
071315P.pdf 02/05/2008 AmeriCredit Financial v. Larry Moore
U.S. Court of Appeals Case No: 07-1315 U.S. Bankruptcy Court for the Western District of Arkansas [PUBLISHED] [Benton, Author, with Wollman, Circuit Judge, and Doty, District Judge]

The Eighth Circuit Court of Appeals, siding with a minority of appeals and bankruptcy courts to hold that even if Chapter 13 debtors surrender or allow the repossession of their personal use automobiles purchased within 910 days of their bankruptcy filing, "910 day" Creditors still may file an unsecured claim for any deficiency balance because Missouri law allowed a deficiency judgment to a car lender following repossession.
"The contract here gave Capital One the right to repossess the vehicle, sell it, and
apply the proceeds (minus reasonable sales expenses) to the debt owed. The contract further allows Capital One to ?sue [the debtors] for additional amounts if the proceeds of the sale do not pay all of the amounts [the debtors] owe us.? In Missouri, an unsecured deficiency judgement is allowed when the creditor complies with Missouri law governing disposition of collateral after default. See Reno Fin., Ltd. v. Valleroy, 229 S.W. 3d 622, 624 (Mo. Ct. App. 2007); Mo. Rev. Stat. § 400.9-615. As nothing in § 502 or § 1325 denies a creditor an unsecured deficiency claim, Capital One is entitled to one. See Travelers Cas. & Sur. Co. of Am. v. Pac. Gas & Elec. Co., 127 S.Ct. 1199, 1206 (2007) (?[W]e generally presume that claims enforceable under applicable state law will be allowed in bankruptcy unless they are expressly disallowed.?); In re Wright, 492 F.3d 829, 832-33(7th Circuit 2007). The Osborns argue that Capital One?s state law right to a deficiency judgment may be eliminated because 11 U.S.C. § 1322(b)(2) allows a Chapter 13 plan to
?modify the rights of holders of secured claims.? See 11 U.S.C. § 1322(b)(2).
Section 1322(b)(2) does allow bankruptcy courts to modify ?the number, timing, or
amount of the installment payments from those set forth in the debtor?s original
contract.? See Till v. SCS Credit Corp., 541 U.S. 465, 468-69 (2004) 541 U.S. at 475. However, because no bankruptcy provision bars a creditor?s state-law right to a deficiency claim, it is unnecessary to consider whether § 1322(b)(2) would allow a court to eliminate that claim.
Because state law gives Capital One a right to an unsecured deficiency judgment, on the record here, it entitled to an unsecured deficiency claim in the amount of $9,916.50

Full post as published by Showmeblawgs on February 07, 2008 (boomark / email).