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Sixth Circuit addresses whether a provision of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 eliminates a deficiency claim when, in a Chapter 13 plan, the debtors propose to surrender a car purchased within 910 days before bankruptcy

Sixth Circuit addresses whether a provision of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 eliminates a deficiency claim when, in a Chapter 13 plan, the debtors propose to surrender a car purchased within 910 days before filing for bankruptcy: Today, the members of a three-judge Sixth Circuit panel issued a ruling that announces three separate views on how this question should be resolved.

The lead opinion, which uses the judicial "we" although speaking for only its author, begins:

This consumer bankruptcy, Chapter 13 case arises because the debtor bought a car under a typical financing arrangement in which the lender retained a lien or mortgage on the car as security for payment of the outstanding loan that enabled the debtor to buy the car. The debtor proposed to surrender the car to the finance company as part of the Chapter 13 plan. The value of the car was less than the outstanding debt. Due to a glitch or gap in a recent revision of the Bankruptcy Code intended to benefit creditors, the law is now silent on what happens to the remaining indebtedness in the surrender-of-the-car situation. The bankruptcy court below held that the congressional mistake in drafting the revision means that the remaining indebtedness is completely wiped out. We believe the gap should be filled and the Congressional mistake corrected. The law previously governing this situation should be restored until Congress can correct its mistake and fill in the gap.

Previously, the Seventh Circuit (opinion here) and the Eighth Circuit (opinion here; my coverage here) have weighed in on this interesting question of statutory construction.

Full post as published by How Appealing on March 04, 2008 (boomark / email).