We are very much in the early innings on issues involving 910 claims under the hanging paragraph of 11 U.S.C. §1325(a)(9). Until the relief of appellate decisions enters the game, there may not be a lot of uniformity of this bankruptcy law.

Applicability of the Till Interest Rate Analysis

One issue, however, seems resolved at the starting pitch. Lacking the labyrinthine statutory construction problems encrusting most of the hanging paragraph, courts are consistently holding that the standards of Till v. SCS Credit Corp., 541 U.S. 465, 124 S. Ct. 1951, 158 L. Ed. 2d 787 (2004), apply to 910 claims in order to provide a creditor with the present value of its claim. In re McCormick, 2006 WL 3499226 (Bankr. E.D. Wis.); see In re Vagi, 351 B.R. 881 (Bankr. N.D. Ohio 2006); In re Robinson, 338 B.R. 70 (Bankr. W.D. Mo. 2006); In re Finnegan (Bankr. M.D. Pa.), No. 1-06-00198 (Opinion Nov. 30, 2006, France, J.). It’s the remaining issues that are being hit all over the ballpark.

“Acquired for the Personal Use of Debtor”

The anti-cramdown protection of the hanging paragraph applies only if the vehicle is “acquired for the personal use of debtor.” It was immediately noted that “personal” use cannot possibly mean the same thing as the formulary “personal, family, household use” used elsewhere in the Bankruptcy Code and consumer protection laws. Courts are struggling with the definition of “personal” use and finding, as did Alice in Wonderland,¹ that the word must unavoidably, and at some linguistic cost, mean more than its seemingly simple definition.

Early on it was easily determined that the secured claim in a vehicle purchased by a debtor for nondebtor’s use could be subjected to a cramdown in value. In re Jackson, 338 B.R. 923 (Bankr. M.D. Ga. 2006); In re Lewis, 347 B.R. 769 (Bankr. D. Kan. 2006). In the case of In re Davis, 226 W.L. 3613319 (Bankr. M.D. Ala.) (Slip Opinion), the debtor and her nondebtor husband purchased a vehicle used “exclusively” by the nondebtor husband. Cramdown was permitted. Accord, In re Finnegan, supra (nondebtor husband’s commercial use). So, now we know that “personal use” means “not for the exclusive use by a nondebtor.”

Some courts are yet pushing back the outfield walls, making it harder for a creditor to hit that anti-cramdown homerun the hanging paragraph was purportedly to provide. What happens when only one debtor spouse purchases the vehicle used by the other debtor spouse? In the Northern District of Ohio, cramdown was prohibited as the court read the statute to require that the vehicle be “acquired for the personal use of one of the debtors” [Emphasis added], Vagi, supra at 885, thereby avoiding an issue of whether “personal use” must mean “exclusive” use by the debtor.² Thus, we have “personal use” mean, “not for the exclusive use by a nondebtor or for the personal use by any debtor.”

The Vagi court rejected the argument that the hanging paragraph should be read as “acquired for the personal use of the acquiring debtor.” Not so the court in In re Press, 2006 W.L. 2734335 (Bankr. S.D. Fla.), 19 Fla. L. Weekly Fed. B 383 2006. This court allowed cramdown on a debt incurred by only the debtor-husband, which was secured by a vehicle purportedly acquired for the “personal” use of the debtor-wife, specifically rejecting the application of the above-cited Rules of Construction. Instead, the Press court found that the acquiring debtor’s intention at the time of the purchase controlled the issue so that even the acquirer-husband’s subsequent extensive use of the vehicle was of no consequence or evidentiary value. The court failed to offer a basis for how it determined the “original intention” of the parties.³ Not that “original intent” analysis is a legally questionable theory given the requirement that the vehicle must have been “acquired” by the debtor. However, it is wholly unclear what the court found convincing. The clearly established fact that this was the family’s sole vehicle, surprisingly, had little weight with the court. Although it did not specifically say so, this court is reading the hanging paragraph as “acquired for the exclusive use of the acquiring debtor.” Modifying “debtor” with “acquiring” and use with “exclusive” will eviscerate the anti-cramdown provision for any reasonably savvy debtor with a spouse or other household user of the vehicle. The court should have provided indicia of the levels of credibility and proof, under the conditions of an enticing retrospective cramdown, that are needed to establish the original intent of the acquiring debtor.

The Finnegan court, supra, found that the debtor had purchased a vehicle for her nondebtor husband’s commercial use and allowed a cramdown. What if the vehicle had been purchased for the exclusive business by a sole-proprietor debtor? The above analysis, based on who uses the vehicle, implies that “personal” can include the commercial use by the sole-proprietor debtor. Or, does the debtor get two chances to defeat “personal” use by establishing that it was either acquired for use by someone else, or that it was acquired for a commercial, albeit exclusive, use by the debtor.

No matter what, “personal” use cannot be determined without adding some modifier giving it some meaning beyond the simply stated word in the statute. Humpty Dumpty is not the only one paying a dearer price for words with more than one meaning.

Surrender in Full Satisfaction of Debt

Rather than simply state that a vehicle purchased within 910 days of the petition for relief must be paid for in full, the hanging paragraph instead states that Bankruptcy Code §506 [relating to determination of secured status] does not apply to a 910 claim. Presumably this was designed to preclude the debtor from bifurcating the claim into secured and an unsecured portions, thereby cramming down the secured claim. This immediately led to the well-established legal theory of “what’s good for the goose…” so that if the debtor could not bifurcate the claim, neither could the creditor. Consequently, surrender of the collateral would be in full and complete satisfaction of the entire obligation and there would be no unsecured-deficiency claim. In re Ezell, 338 B.R. 330 (Bankr. E.D. Tenn. 2006); In re Maggett, 2006 W.L. 347 8991 (Bankr. D. Neb. 2006); In re Turkowitch, 2006 W.L. 3346156 (Bankr. E.D. Wis.); In re Gentry, 2006 WL 3392947 (Bankr. E.D. Tenn.)

The Bankruptcy Court for the Eastern District of Michigan rules otherwise – namely that the surrender of a 910 vehicle does in fact leave the creditor with an unsecured-deficiency claim. In re Hoffman, 2006 W.L. 3813775 (Bankr. E.D. Mich.); In re Particka, 266 W.L. 3350198 (Bankr. E.D. Mich.); accord, In re Duke, 345 B.R. 806 (Bankr. W.D. Ky. 2006); In re Zehrung, 351 B. R. 675, 2006 W.L. 30599808 (W.D. Wis. 2006).⁴ These courts hold that with respect to the 910 claim, §506 does not apply to §1325(a)(5) of the Bankruptcy Code. Section 506 applies only to determine the value of collateral if in fact the debtor was to retain it. On the other hand, surrender of the collateral changes the parties’ interest and consequently the impact of §506, which, by its terms, applies only to “an allowed claim of a creditor secured by a lien on property in which the estate has an interest.” Once the vehicle is surrendered, the estate no longer has an interest in it upon confirmation under §1325(a)(5)(C). Thus, if the estate has no interest in the property, there is no reason to use the valuation process of §506 at all. Accordingly, with recourse to state law that allows for deficiency claims, the deficiency remains allowable as an unsecured claim.

Negative Equity

The most recent hot-button issue arises from the fact that a fair number of motor vehicles are purchased by having the debtor trade in a presently owned vehicle and having any debt remaining on that vehicle rolled into the financing for the purchase of the new vehicle. Thus, does the creditor run afoul of the hanging paragraph requirement that the 910 claim be one in which the creditor has a “purchase-money security interest securing the debt?” In re Peaslee, 2006 W.L. 3759476 (Bankr. W.D.N.Y.), is not good news for creditors. When Ms. Peaslee purchased her Pontiac, she traded in a Chevrolet Blazer that had negative equity of $5,980. That amount, along with the usual taxes, etc., was rolled into the financing for the Grand Am [cash price $17,070] for a financed amount of $23,180.

Insofar as the Bankruptcy Code does not define “purchase-money security interest,” the Peaslee Court referenced §9103 of the New York Revised Uniform Commercial Code, which, in all likelihood after the 2000 national UCC revisions, applies to most states with no change in language. The court found that the financing of the negative equity is not what is contemplated by UCC §9103(a)(2) wherein a purchase-money obligation is said to include all of the “value given to enable the debtor to acquire rights in” the collateral. The court on its own decided that financing of negative equity is not necessary to enable the purchase of the vehicle. The court construed a purchase-money obligation under UCC §9103 to mean only “all or part of the price” of the collateral – ignoring the disjunctive phrase “or for value given” – to enable the debtor to acquire rights in that collateral. The new-car lender, having refinanced the negative equity of the old vehicle, did the earlier lender and the selling dealer a favor, but it did not have a purchase-money security interest in the vehicle.

The Peaslee court went beyond simply stating that the claim could be subjected to cramdown but also, on the basis of UCC §9103(g) and (h), exercised discretion not simply to bifurcate the secured claim into a purchase money security interest and an unsecured portion but rather to “transform” the entire transaction into a non-purchase-money security interest. The court felt “it would be impossible to determine the actual amount of negative equity and the purchase-money obligation.”⁵ It held that the hanging paragraph requires that a motor vehicle financer have a claim secured by a purchase money security interest in which “all,” meaning the “entirety,” of the debt fit within its PMSI definition.⁶ Accordingly, this lender was held to have a crammed-down secured claim of an amount equal to the value of the vehicle. Yet another case surely to be further litigated.

It’s not what a man doesn’t know that makes him a fool, it’s what he does know that ain't so.
-Josh Billings

It is now widely known that the Bankruptcy Abuse and Consumer Protection Act of 2005 (BAPCPA) changed the waiting times for certain debtors who, having previously obtained a discharge, wish to seek another.¹ It is perhaps less widely known that BAPCPA limits or denies a stay to certain repeat filers following dismissals during the previous year. It is not unusual for a lawyer to be asked how long a person who previously filed bankruptcy must wait to file again. A common answer to this question seems to be something like, “You now have to wait eight years.” That answer is often wrong and can mislead and discourage debtors in need of bankruptcy relief from seeking a remedy for which they qualify.

Laypersons unfamiliar with the language of the law cannot articulate their questions in precise legal terms. Lawyers must therefore attempt to discern what inquisitive clients really need to know. Usually, a debtor does not need to know whether he can file a case, although even the simple act of filing may at times be unavailable.² He probably needs to know whether he can obtain a stay, and, in most cases, a discharge of dischargeable³ debts.

Analysis of these questions must begin with a determination of whether the previous case was dismissed or concluded with a discharge. If the debtor’s previous case ended by dismissal, the issue is whether or when the debtor can obtain and maintain another stay. If, on the other hand, the previous case concluded with a discharge, the issue is when the debtor may be able to obtain another discharge.
 
Stays

In general, any person who files a petition is automatically entitled to a stay under 11 U.S.C. §362(a). The stay does not apply to a number of legal and creditor actions. These are set out in subsection (b) of the same section. There are dozens of exceptions to the automatic stay, but exceptions of general interest would, I think, include criminal proceedings,⁴ matters related to paternity, support, child custody, visitation, dissolution of marriage (except division of property that is property of the estate ⁵) and matters related to domestic violence.⁶

The purpose of the stay was stated In re Whitaker, 341 B.R. 336 (Bankr. S.D. Ga., 2006), Dalis, J., as follows:

Traditionally, the automatic stay has served to "prevent dismemberment of the [bankruptcy] estate and insure its orderly distribution." SEC v. First Financial Group, 645 F.2d 429, 439 (5th Cir.1981), citing S. Rep. No. 95-989, 95th Cong., 2d Sess. 50 (1978); H.R.Rep. No. 95-595, 95th Cong., 2d Sess. 341 (1977), U.S.Code Cong. & Admin.News 1978, pp. 5787, 5836, 5963, 6297, 6298. In that capacity, the automatic stay serves the interests of both the debtor and the creditors of the bankruptcy estate. For the debtor, it provides a "breathing spell" by "stopping all collection efforts, all harassment, and all foreclosure actions." S. Rep. No 95-989, 95th Cong.2d Sess. 54-55 (1978); H.R. Rep. No 95-595, 95th Cong., 1st Sess. 340 (1977), U.S.Code Cong. & Admin.News 1978, pp. 5787, 5840, 5841, 5963, 6296, 6297. However, the stay also serves the interest of creditors, insofar as it "eliminate[s] the impetus for a race of diligence by fast-acting creditors." SEC v. First Financial Group, at 439. The stay ensures that assets are distributed according to the order of priorities established by Congress. Id. at 341.

BAPCPA added provisions designed to deny a stay to persistent filers of bad-faith petitions, specifically, filings intended not to reorganize or obtain a discharge, but merely to temporarily frustrate creditors by repeatedly invoking the automatic stay, and then dismissing the case or suffering a dismissal by the court, only to file again once a creditor resumes collection efforts. By such filings, the debtor seeks merely to delay legitimate collection procedures, notably inevitable foreclosures.

Accordingly, BAPCPA provides that if two or more bankruptcy cases filed by the debtor were dismissed within the previous year, there is no stay automatically available to the debtor.⁷ The court can, however, impose a stay, on motion filed within 30 days of filing and a showing of good faith.⁸ If only one case was dismissed within the previous year, the debtor is entitled to an automatic stay lasting only 30 days. The court can continue this temporary stay on motion of the debtor and demonstration of good faith; however, the notice and hearing must be completed within 30 days following the filing to qualify under this subsection.⁹ Ironically, a one-time repeat filer who misses the deadline apparently can dismiss and re-file and still have a chance to get a stay imposed as a multiple filer. See In re Toro-Arcila, 334 B.R. 224, 228 (Bankr. S.D. Texas, 2005), where this possibility is mentioned. At least one court has extended the temporary stay of a debtor who filed too late to allow for completion of the notice and hearing within 30 days, relying upon §105 for authority to do so. In re Whitaker, 341 B.R. 336 Id.

A debtor’s chapter 7 case can be dismissed for abuse, where it has been determined that the debtor has sufficient resources to fund a repayment plan under another chapter.¹⁰ Since it would not be abusive for a debtor whose case was dismissed for that reason to immediately re-file under another chapter, the new law provides an exception for such a debtor, thereby permitting an unfettered automatic stay upon re-filing under the other chapter.¹¹ Also, the stay is not limited with respect to a co-filing spouse who has not had a case dismissed within the previous year and is filing jointly with a spouse who has. In re Parker, 336 B.R. 678 (Bankr. S.D.N.Y., 2006). The Hon. Eugene R. Wedoff, “The Automatic Stay and Serial Filings: How Courts have Interpreted §362(c)(3) and (4),” ABI Consumer Bankruptcy Committee Newsletter, June 2006, at 7 (Vol. 4, No. 4).

Several cases have held that §362(c)(3)(A) terminates the stay with respect to the debtor, but does not terminate the stay with respect to property of the estate (as distinguished from the property of the debtor¹² ). In re Jones, 339 B.R. 360 (Bankr. E.D. N.C., 2006). In re Moon, 339 B.R. 668 (Bankr. N.D. Ohio, 2006). In re Johnson, 335 B.R. 805 (Bankr. W.D. Tenn., 2006). In re Harris, 342 B.R. 274 (Bankr. N.D. Ohio, 2006). But see In re Jupiter, 344 B.R. 754 (Bankr. D. S.C., 2006) holding that the stay terminates with respect to property of the estate, as well. Id. at 759-762.

Multiple Discharges

Eligibility for a multiple discharge depends upon (a) which kind of procedure was done before, (b) if the previous case was under chapter 12 or 13, how much was paid, and (c) which kind of new case will be filed. BAPCPA now contains four different waiting periods for eligibility for a discharge, and in some circumstances no waiting period at all. The specified waiting periods are 2-, 4-, 6- and 8-years.

The following code provisions govern multiple discharges:

            For chapter 7 cases, section 727(a)(8) of the Code provides:

1.  The court shall grant the debtor a discharge, unless –

       . . .

1. 1. the debtor has been granted a discharge under this section, under section 1141 of this title, or under section 14, 371, or 476 of the Bankruptcy Act, in a case commenced within 8 years before the date of the filing of the petition;
   2. the debtor has been granted a discharge under section 1228 or 1328 of this title, or under section 660 or 661 of the Bankruptcy Act, in a case commenced within six years before the date of the filing of the petition, unless payments under the plan in such case totaled at least—
      1. One hundred percent of the allowed unsecured claims in such case; or
      2. (i) Seventy percent of such claims; and

    (ii) the plan was proposed by the debtor in good faith, and was the debtor’s best effort.
                        . . .

For chapter 13, cases, §1328(f) of the Code provides:
            . . .
            (f) Notwithstanding subsections (a) and (b), the court shall not grant a discharge of all debts provided for in the plan or disallowed under section 502, if the debtor has received a discharge –

1. in a case filed under chapter 7, 11 or 12 of this title during the 4-year period preceding the date of the order for relief under this chapter, or
2. in a case filed under chapter 13 of this title during the 2-year period preceding the date of such order.

Therefore, if the debtor obtained a discharge in the previous case, and if the debtor is now filing a case under chapter 7 or 13, there may (or may not) be a required time gap between filing the previous case and eligibility to obtain another discharge in the new case. There is no waiting period for a new case filed under any chapter other than 7 or 13. If the debtor did not obtain a discharge in the earlier case, these waiting periods do not apply. Following is a summary of these BAPCPA-discharge waiting periods, organized according to which chapter is currently under consideration.

A debtor filing under chapter 7 cannot be granted a discharge, if the debtor received a discharge in a chapter 7 or 11 case filed within 8 years of the filing of the new case.¹³ Nor can the debtor be granted a discharge in a chapter 7 case, if the debtor received a discharge in a prior chapter 12 or 13 case filed within 6 years of the filing of the new case, unless in the previous chapter 12 or 13 case, the debtor paid into the plan an amount equal to100 percent of allowed unsecured claims, or 70 percent of allowed unsecured claims, and the plan was proposed in good faith, and the plan constituted the debtor’s best effort.¹⁴

The debtor filing under chapter 13 cannot get a discharge, if the debtor received a discharge in a chapter 7, 11 or 12 case filed within 4 years of the filing of the new case. Nor can the debtor receive a discharge in a chapter 13 case, if it is filed within 2 years of the filing of a previous chapter 13 case.¹⁵

To simplify this jumble of numbers, these waiting periods are summarized in the following table:

* Unless debtor’s previous plan paid 100 percent or 70 percent with good faith and best effort requirements met; then no waiting period is required for eligibility for discharge.

Chapter 20

The foregoing does not mean a debtor cannot file and obtain a stay during one of the gaps; only that if he does, he cannot obtain a discharge. Ineligibility to obtain a discharge does not ipso facto preclude confirmation of a chapter 13 plan, In re Bateman, 341 B.R. 540 (Bankr. D. Md., 2006), and availability of a discharge may not, in some cases, be crucial. Although a debtor may be unable to obtain a discharge, he may still benefit from an automatic stay and an affordable payment plan. Consider, for example, a debtor who has nondischargeable debts, such as educational loans, along with medical bills and credit card debts. Assume further that the debtor has a regular income,¹⁶ but not enough to disqualify him for chapter 7 relief under 11 U.S.C. §707(b).

This hypothetical debtor might first obtain a discharge of his medical bills and credit card debts under chapter 7, and then immediately file for protection from his student loan creditors under chapter 13, and thus obtain the benefit of an automatic stay. The debtor could then concentrate his available resources on paying down his nondischargeable debts through a chapter 13 payment plan, which could run up to five years.¹⁷ And, if the first plan did not pay off the debts, perhaps an additional plan (a chapter 33) would suffice.

Conclusion

A client inquiring about filing bankruptcy may need a stay, a discharge or both. An individual who filed a chapter 7 case less than eight but more than four years ago may simply need protection from creditors and an affordable payment plan – both of which may be available under chapter 13. Occasionally, a repeat-filing debtor will need to file under chapter 11 or 12. It is therefore incumbent upon counsel advising a client concerning how long he or she must wait to file bankruptcy again to determine and advise the client as to the availability of a stay, as well as eligibility for a discharge. A correct and useful response requires analysis of what was done previously as well as available options and their efficacy to deal with the debtor’s individual circumstances and needs rather than, “You now have to wait ei

Disparate Effects of a Single Word
In order to gain confirmation of a chapter 13 plan if it faces objection by the trustee or the holder of an unsecured claim, a debtor must pay in full each allowed unsecured claim, 11 U.S.C. §1325(b)(1)(A), or devote to the plan all projected disposable income to be received during the applicable commitment period, 11 U.S.C. §1325(b)(1)(B). Thus confirmation rests, if allowed unsecured claims are not completely satisfied, on a qualifying amount of money paid over a qualifying span of time.

While it has become quite de rigueur to criticize the unartful drafting of some of the amendments to the Bankruptcy Code wrought by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), the requirement for a debtor to pay into her plan her projected disposable income remains unchanged. What has been added, however, is a definition of “disposable income.” 11 U.S.C. §1325(b)(2). Some courts have found this semantic difference consequential, even determinative. Others, by various devices, have not. The issue is whether projected disposable income is distinguishable from disposable income for the purposes of compliance with 11 U.S.C. §1325(b).

The Code explicitly defines “disposable income” as current monthly income, itself further defined in the Code (see 11 U.S.C. §101(10A)), less reasonable expenditures for a debtor’s support, a debtor’s dependent’s support, a debtor’s domestic support obligation, qualifying charitable contributions up to a specified limit and for the continued viability of a debtor’s business. 11 U.S.C. §1325(b)(2). If a debtor’s current monthly income exceeds the median family income of her state, the reasonableness of the expenditure amounts is determined by tests set forth in 11 U.S.C. §707(b)(2). 11 U.S.C. §1325(b)(3).

According to some, different statutory treatment is accorded a debtor’s projected disposable income. (See 11 U.S.C. §1325(b)(1)(B)). By the addition of the participial adjective “projected,” as well as the particularization of income “to be received,” the Code appears to require a determination of a debtor’s anticipated income. For confirmation of a plan in the face of objection thereto, this anticipated income must be applied to paying unsecured creditors. 11 U.S.C. §1325(b)(1).

“It’s But Little Good You’ll Do Watering Last Year’s Crops.”¹

The U.S. Bankruptcy Court for the Northern District of Texas conducted its textual and contextual analysis of the germane statutory language and concluded that projected disposable income “necessarily refers to income that the debtor reasonably expects to receive during the term of her plan.” In re Hardacre, 338 B.R. 718, 723 (Bankr. N.D. Texas 2006). Many others on similar or additional bases agree. See, e.g., In re Dew, No. 06-40154, 2006 Bankr. LEXIS 1126, at **10-11 (Bankr. N.D. Ala. May 31, 2006) (“For any particular debtor, disposable income in §1325(b)(2) is not necessarily the same as projected disposable income in §1325(b)(1)(B)…To hold otherwise would assign no meaning to the term ‘projected,’ which would be contrary to rules of statutory construction”); accord, In re DeMonica, No. 06-00094, 2006 Bankr. LEXIS 1466, at *10 (Bankr. N.D. Ill. July 31, 2006) (concurring with the Hardacre court’s interpretation of projected disposable income); In re Kibbe, 342 B.R. 411, 414 (Bankr. D. N.H. 2006), appeal docketed, No. 06-19 (B.A.P. 1st Cir. May. 12, 2006) (agreeing with the semantic analysis offered by In re Hardacre and opining that Congress intended, by the inclusion of the word “projected,” a forward-looking examination of a debtor’s anticipated income, thus avoiding potentially anomalous results attendant with a debtor’s dramatic change of financial circumstances in the six months immediately pre-petition).

To the semantic analysis of Hardacre are added the accordant legislative intent, juridical and public policy analyses of In re Jass, 340 B.R. 411, **10-16 (Bankr. D. Utah 2006). The Jass court, harmoniously with the textual and contextual approaches employed by the Hardacre court, found additional support for its statutory interpretation in its analysis of Congress’ intent for a differentiation between “projected disposable income” and “disposable income” in its showing that such differentiation furthers the public policy goals of bankruptcy, and by showing that it avoids the surplusage construction attendant with equating the two.

In accord are In re Clemons, No. 05-85163, 2006 Bankr. LEXIS 1366, (Bankr. N.D. Ga. June 1, 2006) (showing, by a “holistic” statutory interpretation, and by harmonious legislative intent and the policy goals served thereby, that 11 U.S.C. §1325(b) permits a bankruptcy court to adjust the debtor’s current monthly income so as to approximate his anticipated income so that his plan requires him to pay what he can, but not more than is possible); In re Grady, 343 B.R. 747 (Bankr. N.D. Ga. 2006) (opining that determination of projected disposable income necessarily requires a consideration of a debtor’s future and historical finances on the basis of the plain meaning of the statute, contextual analysis and the policy goals of the Code); In re Risher, No. 05-61822, 2006 Bankr. LEXIS 1364, at **8-10 (Bankr. W.D. Ky. July 12, 2006) (in requiring debtors to pay into their plans their income tax refunds, the court opined that projected disposable income is based on anticipated income over the term of the plan); In re Pak, 343 B.R. 239, 2006 Bankr. LEXIS 907, at **17-18 (Bankr. N.D. Calif. May 18, 2006) (opining that, for the purposes of confirmation of a chapter 13 plan, a determination of projected disposable income must include a debtor’s actual and anticipated future income); In re Fuller, No. 06-30313, 2006 Bankr. LEXIS 1615, at **26-27 (Bankr. S.D. Ill. June 21, 2006) (agreeing with others’ conclusion that “projected disposable income,” 11 U.S.C. §1325(b)(1)(B), is distinguished by legislative intent from “disposable income,” 11 U.S.C. §1325(b)(2)); In re McGuire, 342 B.R. 608, 614 (W.D. Mo. 2006) (opining that projected disposable income predates BAPCPA and, by analogizing to the Eighth Circuit’s pre-BAPCPA characterization of a chapter 12 debtor’s projected disposable income, that it changes from year to year, based on actual income and expenses); In re Fuger, No. 06-20801, 2006 Bankr. LEXIS, at *12 (Bankr. D. Utah June 29, 2006) (opining that the term “projected disposable income” requires that a plan’s payments be based on disposable income as projected into the future).

“Whatever Is, Is.”²

Predictably, others eschew any independent operation of the term “projected” as used to modify “disposable income.” Fairly exemplary is In re Alexander, No. 06-00324-JRL, 2006 Bankr. LEXIS 1272, at **16-17 (Bankr. E.D.N.C. June 30, 2006), which opined that the Code “plainly sets forth a new definition and method for calculating disposable income,” to which projected disposable income is “linked” (although the court avoided “equated”), and that determination of disposable income is a mathematical calculation mandated by 11 U.S.C. §1325(b)(2). Resultantly, “debtors with no disposable income under the new law have no projected disposable income.” Nevertheless, this court speculated that legislative intent may not have been well served by such a protocol: “Perhaps Congress, in an effort to make higher income debtors pay more to their unsecured creditors, unwittingly reached the opposite result.” Id. Another court accorded, applying an expense-centric analysis. In re Guzman, No. 05-45978-svk, 2006 Bankr. LEXIS 1406, at **4-5 (Bankr. E.D. Wis. July 19, 2006) (overruling a trustee’s objection to confirmation of an above-median-income debtor’s chapter 13 plan that showed no disposable income on Form B22C, which showed a calculation of monthly income strictly on the basis of the average of the six months pre-petition).

“Where Minds Differ and Opinions Swerve There Is Scant a Friend in That Company.” ³

Fortunately eschewing the drastic outcome observed by Elizabeth Regina, it appears that most courts distinguish projected disposable income from disposable income while still acknowledging the close relationship between the two. However, majority is not unanimity. This issue, like so many others birthed by BAPCPA, will be resolved over time by authoritative review or statutory amendment.

View Online.

Occasionally, a debtor may place a provision in a chapter 13 plan that is contrary to the Bankruptcy Code and the plan is confirmed without objection. It has been a long-held belief that a creditor’s failure to object to the confirmation of a chapter 13 plan waives any objection to the plan once the plan is confirmed. This position is supported by the legal concept of res judicata (i.e., the binding effect of a court order), and the following language in §1327:

A(a) The provision of a confirmed plan bind the debtor and each creditor, whether or not the claim of such creditor is provided for by the plan, and whether or not such creditor has objected to, has accepted, or has rejected the plan.

In order to obtain confirmation, however, the Code states that a chapter 13 plan must comply with the provision of chapter 13 and with the other applicable provisions of title 11 [§1325(a)(1)]. Moreover, the plan must be proposed in good faith and not by any means forbidden by law. [§1325(a)(3)]. Thus, provisions placed in chapter 13 plans that are contrary to specific provisions of the Code should doom confirmation of a chapter 13 plan.

With the changes recently made by Congress to chapter 13 in BAPCPA, courts now are dealing with the issue of whether the absence of an objection by a creditor can be deemed “implied acceptance” of a plan containing a provision that appears to be contrary to provisions of BAPCPA. This issue came to light in two recent cases where a debtor’s chapter 13 plan provided to bifurcate a secured claim under §506 for a vehicle financed within 910 days of filing.

The so-called “hanging paragraph” found after §1325(a)(9) added by BAPCPA limits the ability of an individual debtor to cram down a 910-day vehicle loan. In In re Montoya, 341 B.R. 41 (Bankr. D. Utah 2006), the debtor’s plan proposed to cram down a 910-day vehicle loan. The secured creditor did not file an objection. The chapter 13 trustee and the debtor contended that the secured creditor’s failure to object to confirmation of a chapter 13 plan containing a cramdown of a 910-day claim constituted acceptance of the plan. The court in Montoya rejected this argument, stating that “a plan should not be used as a sword to change the explicit provisions of the Code to what the parties wish Congress had drafted.” The court referenced the case law, which considers the absence of a creditor’s objection to a chapter 13 plan to be implied consent, but found these cases missed the point:

The concept of implied acceptance of an otherwise compliant plan, or even voting on similar provisions in chapter 11, however, is quite different from proposing a plan intentionally inconsistent with the Code and then waiting for the trap to spring on a somnolent creditor. Creditors are entitled to rely on the few unambiguous provisions of the BAPCPA for their treatment. They should not be required to scour every chapter 13 plan to insure that provisions of the BAPCPA specifically inapplicable to them will not be inserted in a proposed plan in the debtor’s hope that the improper secured creditor treatment will become res judicata.

The court in Montoya supported its denial of confirmation by pointing to §1325(a)(1), which provides that “the court shall confirm a plan if the plan complies with the provisions of this chapter and with the other applicable provisions of this title.” the judge in Montoya found that a bankruptcy judge “has an affirmative duty to review and ensure that the plan complies with the Code even if creditors fail to object to confirmation. This offending provision presents no less a bar to confirmation than failing to pay priority claims in full, proposing a plan in bad faith or proposing a plan that is not feasible.” The court concluded that trying to insert an impermissible provision into a chapter 13 plan (such as the proposed cramdown of a 910-day vehicle claim) “is not an option.” The court noted that its opinion did not preclude a debtor and secured creditor from agreeing to a cramdown for a 910-day vehicle claim. The court also stated in a footnote that it was not addressing the issue of whether a secured creditor’s filing of a bifurcated proof of claim constituted “expressed acceptance or some sort of waiver of the provisions of the hanging paragraph.”

The analysis in the Montoya case was followed by a bankruptcy court in Kentucky. In In re Montgomery, 341 B.R. 843 (Bankr. E.D. Ky. 2006), the secured creditor actually filed an objection to a debtor’s chapter 13 plan proposing a cramdown of a 910-day vehicle loan, but the objection was not timely filed. The court nevertheless denied confirmation of the plan and adopted the holding in Montoya.

There is no doubt that some debtors and their counsel will place provisions into a chapter 13 plan that (either implicitly or explicitly) do not comply with the requirements of the Code (e.g., a provision ignoring In re Till and providing for an interest rate of 2 percent on a secured claim paid over time through a plan). Notwithstanding the position taken by courts in the above two cases, secured creditors must be vigilant. A thorough review of each chapter 13 plan by secured creditors is imperative.

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Courts have recently been wrestling with, and finding creative ways of interpreting, the un-numbered “hanging paragraph” at the end of 11 U.S.C. §1325(a) in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). This is the provision that makes 11 U.S.C. §506 inapplicable to a claim in which the creditor has a purchase-money security interest on the subject debt incurred within the 910-day period prior to the filing of the bankruptcy petition (popularly referred to as a 910 claim). One such case out of Tennessee is In re Ezell, __ B.R. ___, 2006 WL 598142 (Bankr. E.D. Tenn.) (R. Stair, Jr.). The Ezell court held that a creditor with a 910 claim must accept a chapter 13 debtor’s surrender of the motor vehicle collateral under §1325(a)(5)(C) as full satisfaction of the secured claim and is foreclosed from asserting any deficiency.

In Ezell, the creditor, JP Morgan Chase Bank (Chase), held a secured claim of approximately $25,000 on a Nissan Xterra, purchased by the debtor, Mrs. Ezell, for the Ezells’ personal use. The Xterra was to be surrendered in full satisfaction of the debt owed under the terms of the chapter 13 plan. Chase filed an objection to confirmation, arguing that because §506 was no longer applicable in determining value of a secured claim under the provisions of §1325(a)(5), its claim was fully secured for the entire value of the Xterra after surrender.  Thus, Chase argued, it should be entitled to have any deficiency that may exist after liquidating the Xterra be provided for under the Ezells’ chapter 13 plan.

Surrendering Collateral Pre- and Post-BAPCPA

The Ezell court arrived at its decision by analyzing the interplay between §1325(a)(5)(C) and §506(a) in pre-BAPCPA decisions where the debtor surrendered collateral. The court wanted to determine whether pre-BAPCPA §506(a) was utilized in debtor surrender cases under §1325(a)(5)(C), or only in cramdown cases under §1325(a)(5)(B). Pre-BAPCPA, when collateral was surrendered pursuant to §1325(a)(5)(C), the creditor’s allowed secured claim would be fixed at the liquidation value. The creditor was also allowed an unsecured claim for the deficiency balance. The court found, in each case, that §506(a) was applied, directly or indirectly, to the bifurcation of the secured creditor’s claim into secured and unsecured components when the collateral was surrendered. However, §506(a) was only called upon in these pre-BAPCPA cases when valuation of the secured claim was in question.

Post-BAPCPA, the court explained that recourse to the §506(a) bifurcation of a claim into secured and unsecured portions has been eliminated by the hanging-paragraph provision of §1325(a).¹ A 910 claim may not be reduced or bifurcated under §506(a), so the value of a creditor’s 910 claim is fixed at the amount at which the claim is filed, unless there are other reasons for reduction unrelated to value of the collateral, according to the Ezell court.
           
The court reasoned further that if a chapter 13 debtor decides to retain the collateral pursuant to §1325(a)(5)(B), and such debtor must treat the creditor’s entire claim as secured, then the same analysis should apply when the debtor opts to surrender the collateral under §1325(a)(5)(C). In other words, a creditor that is fully secured when the debtor opts to retain the collateral is also fully secured when the debtor opts to surrender the collateral and such surrender satisfies the allowed secured claim in full.

What Does It All Mean?

Ezell gives debtors a powerful option in the face of an obstinate creditor. A debtor in such a position could potentially surrender the car under the chapter 13 plan, satisfy that debt and have his or her plan confirmed over that creditor’s objection.

Secured creditors may be fully secured in their 910 claims, but they run the risk of being forced to take back their motor vehicle collateral and swallow any deficiency that may result from liquidation, along with the additional costs inherent in selling that surrendered collateral. Given that most motor vehicles depreciate the moment they are driven off the lot, there rarely will be a situation in which such creditors will not face a deficiency should a chapter 13 debtor opt to surrender and the creditor is forced to liquidate. This gives creditors with 910 claims the incentive to negotiate and, perhaps, accept treatment under a chapter 13 plan that is more akin to a traditional pre-BAPCPA cramdown. A chapter 13 debtor could keep the vehicle and offer to pay a negotiated value to the creditor that would be somewhere above liquidation value, but below the lien amount.  In return, the creditor receives more than it would if it was forced to liquidate, plus it saves the inherent costs associated with liquidation. Such a position is arguably beneficial to both the debtor and creditor and carries with it the blessing of the Ezell court.    

Recent events have made me wonder, what exactly can I do for a previously filed client (previous filer) who walks into the door and wants to file a new bankruptcy case? Now, under the new law, I must initially ask: When did you previously file, when was your discharge, or did you pay 100 Percent in your prior case? The importance of these questions has grown, as the new law constrains the right to obtain a discharge for the previous filer. And because the majority of my clients really only want one thing from my offices (the discharge), I must correctly analyze my capability of providing the previous filer with the product they seek to obtain.  
           
I charted out the many common factual situations to see if there is a simple formula. I concluded that the list was so large and the variables so diverse that no one pithy answer could provide the appropriate answer. Hence, I delved deeper into the question with as many hypotheticals as I could muster and concluded that a few obvious canons about the right to file exist in relation to those who previously filed bankruptcy:

1. If the client's bankruptcy was dismissed within the past 180 days, the odds are that you cannot be allowed back in bankruptcy, but there are exceptions.  So a trip to PACER to find the reason for the dismissal will be warranted, as your client's ability to distinguish an ordinary  dismissal from the exceptions recited in §109(g)¹ is not to be assumed, nor should it be.
2. If the client completed the other bankruptcy less than two years ago, you may be able to file a chapter 13, as the two-year calculation is derived from the filing date to the date they want to file with you.
3. If the client knows that the “two-year thing” is well over, then the issue is how many years ago was the client “in.” If less than eight years, think chapter 13; if more than eight, maybe chapter 7 – but then you have that “Form 22 thing” to do with them and they may be forced to go into chapter 13 anyway. Remember that the eight years is gauged from the date of original filing to the new filing – 11 U.S.C. §727(a)(8).
4. The rule of three is good even if there is the old problem – conversion. If the case was filed more than eight years ago, but converted within eight years, you may ponder whether the debtor filed another chapter 7 and whether the conversion date established a new “commencement” date as identified in 11 U.S.C. §727(a)(8). The answer is that the original commencement date is the only commencement date. In re Czikalia, 2000 Bankr. LEXIS 2063 (Bankr. Idaho 2000) citing 6 Collier on Bankruptcy §727.11[2] (15th Ed. Revised 1999), and Resendez v. Lindquist, 691 F.2d 397, 399 (8th Cir. 1982); Riske v. Lyons (In re Lyons), 162 B.R. 242, 243-44 (Bankr. E.D. Mo. 1993); In re Burrell, 148 B.R. 820, 822 (Bankr. E.D. Va. 1992) [Note: all of these cases were under the pre-BAPCPA 6-year rule of §727(a)(8).]

Below, I deliver a better-than-nothing-at-all chart to show the different choices afforded to previously-filed clients.

If the trustee or an unsecured creditor objects to the debtor’s plan, the court may not approve it unless it provides that all of the debtor’s projected disposable income for either a three-or five-year period, depending on the debtor’s income level, is applied to pay unsecured creditors. (11 U.S.C. §1325(b)(1)(B)). The Bankruptcy Code, as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), calculates disposable income by deducting permissible personal expenses from the debtor’s current monthly income (CMI). If a debtor’s CMI exceeds the median income (adjusted for family size) in his/her state, then the deductions for computing disposable income are those found in tables published by the Internal Revenue Service (IRS) for use by its agents in determining a taxpayer’s ability to pay a delinquent tax. For personal spending categories such as food, clothing and miscellaneous expenses, the IRS maintains national standard expense tables. For transportation and housing, the tables are adjusted for regional cost differences. Under BAPCPA, a debtor may also deduct certain other expenses such as payments for health care, schooling and care for elderly or ill relatives.  Finally, a debtor is permitted to deduct the amounts necessary to maintain payments on secured property from his or her income. These expense categories are formalized in official form B22C, which was developed by the Advisory Committee on the Bankruptcy Rules for use by a chapter 13 debtor.

Projected vs. Disposable Income

In In re Hardacre, the bankruptcy court first investigated the effect of the differences in the language of the statutory requirement that a plan, in order to gain confirmation, distribute all of a debtor’s “projected disposable income” (11 U.S.C. §1325(b)(1)), contrasted with the definitional language of “disposable income” in 11 U.S.C. §1325(b)(2). Under that subsection, disposable income begins with a calculation of a debtor’s CMI, which looks at a six-month average of pre-petition income. Finding the terms to have different meanings, the court construed projected disposable income to be based on a debtor’s income that is reasonably anticipated over the life of the plan. The court reasoned that, had Congress intended for “projected disposable income” to be the same as “disposable income” for purposes of plan confirmation, it would have used the same words for each. Second, the income referred to in §1325(b)(1) is income “to be received” during the term of the plan and thus is forward-, not backward-, looking. Finally, the debtor must commit all disposable income “as of the effective date of the plan,” a further indication that projected disposable income is not the same as disposable income, which is calculated at or near the time of filing. The court pointed to the harsh result of using CMI, strictly as defined in §101(10A), as a starting point in this context. For example, a debtor’s income may drop after filing, creating hardship for the debtor in making the plan payments. Conversely, there is an obvious opposite consequence of inequitable underpayment to creditors by a debtor whose income increases after filing. CMI is not superfluous, however, as it still defines what must be included in a debtor’s calculation of income and retains its application to means testing.
 
The Double Dips

Next, the bankruptcy court turned its attention to the debtor’s deductions. In this case, the court thwarted the debtor’s attempt to gain confirmation of her chapter 13 plan that would have provided no return to her unsecured creditors, as determined by her form B22C calculations. Specifically, by her construction of the statutory calculations for disposable income, she attempted to deduct her residential-mortgage-debt service and the cost of servicing the purchase-money security interest in her automobile in addition to the IRS’ Housing and Transportation Allowable Living Expense schema. Such “double dipping” effectively reduced the debtor’s disposable income by approximately $1,000 per month. Such monies would otherwise, if committed to her plan, have paid the unsecured creditors in full. Also, shortly before her confirmation hearing, the debtor claimed an “ownership expense” for a car that she owned, but that secured no debt.

The chapter 13 trustee objected to confirmation of the debtor’s plan, citing the “double dip” the debtor had taken on her housing and auto expenses as impermissible. The debtor opposed the trustee and argued that, by virtue of the plain language of BAPCPA, she was entitled to the “standard” housing and transportation allowance, as well as a full deduction for her debt payments.

IRS Standard Expenses – A Minimum Allowance

The bankruptcy court denied the double deductions. Instead, it interpreted the statute to allow the greater of deductions of the actual amounts for home mortgage and automobile loans secured by the property, or the IRS allowances. (This is also the formula contemplated by official form B22C, which the debtor did not follow strictly). The court arrived at this conclusion by observing that the IRS’ Collection Financial Standards and the Internal Revenue Manual allow, for its purposes, either standardized amounts (from its tables) or actual expenditures, but not both. In addition, the court interpreted the language of 11 U.S.C. §707(b)(2)(A)(ii)(I) (“Notwithstanding any other provision of this clause, the monthly expenses of the debtor shall not include any payments for debts.”) as an instruction to reduce the standard deductions by the debtor’s average (calculated per 11 U.S.C. §707(b)(2)(A)(iii)) actual debt service for home mortgage and automobile ownership. By finding no legislative intent to reduce a debtor’s deduction to less than zero, the court arrived at the conclusion that allowable deductions for home and automobile ownership debt service are the larger of actual payments or IRS standards amounts.  The court found its interpretation to be statutorily correct as well as demonstrably harmonious with legislative intent.

Expenses for Unencumbered Vehicle

The bankruptcy court further ruled that the debtor-owner of an unencumbered automobile might show an “operating expense” for the vehicle. In this case, the debtor also attempted to claim, an “ownership” expense for an unencumbered vehicle on the theory that she was entitled to the expense since she owned the car. The court disallowed this deduction because the IRS manual, which accompanies the list of standard deductions, explicitly limits the “ownership deduction” to the cost of lease or purchase of an automobile.

Hardacre is the first case to interpret a debtor’s use of official form B22C and clearly attempted to strike a balance between a debtor’s need to maintain adequate funds to pay ordinary living expenses and a creditor’s expectation that its claims will be paid to the greatest extent possible under the law.

In re Hardacre, No. 05-95518-DML-13, 2006 Bankr. LEXIS 275 (Bankr. N.D. Tex. March 6, 2006).

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A most frustrating baseball statistic is the “LOB,” runners left on base, representing missed opportunities to score runs. Creditors relying on BAPCPA’s anti-cramdown provision to make life simpler and richer by precluding cramdown of purchase-money interests will, from time to time, have to leave a few runners and claims stranded on base.  

This incredibly important change of prior law is found in an orphaned paragraph at the end of Bankruptcy Code §1325(a)(9), and is one of the most carelessly written provisions of BAPCPA:

For the purposes of paragraph (5), §506 shall not apply to a claim described in that paragraph if the creditor has a purchase-money security interest securing the debt that is the subject of the claim, the debt was incurred within the 910-day preceding the date of the filing of the petition and the collateral for that debt consists of a motor vehicle (as defined in §30102 of title 49) acquired for the personal use of the debtor, or if the collateral for that debt consists of any other thing of value, if the debt was incurred during the one-year period preceding that filing.

It identifies the subject collateral as having been purchased for “the personal use” of the debtor (as opposed to “personal, family or household use”), creating a very serious limitation on the anti-cramdown provision – which we will not address in this article.  See In re Jackson, --B.R.-- 2006 WL 563317 (Bankr. M.D. Ga. March 6, 2006) (cramdown allowed on car purchased for nondebtor wife). The provision is designed to protect purchase-money loans, what we’ll call “910 claims” of “910 creditors” because it applies primarily to motor vehicles purchased within 910 days of the petition for relief, although it also encompasses nonvehicle purchases within a year of the petition.

Affirmatively mandating payment in full of a 910 claim was much too simple. The author of the anti-cramdown provision wants to do the job with oblique sophistication by telling us that “§506 shall not apply” to a 910 claim and therefore, as only the initiated would understand, you could not revalue or cramdown the claim.

One court has taken the view that a 910 claim is not a secured claim at all. In re Carver, --B.R.-- 2006 WL 563321 (Bankr. S.D. Ga. March 6, 2006). Unable to utilize §506, this court finds itself without the means to determine if the 910 claim is, in fact, “secured.”  Rather, the 910 claim is a uniquely-treated unsecured claim – almost a special class of claim. Seeming to enjoy hoisting the anti-cramdown language, the court would allow the very type of cramdown the provision the law was intended to prevent. “In a chapter 13 plan, a 910 claim must receive the greater of the full amount of the claim without interest [because only a secured claim is entitled to interest], or the amount the creditor would receive if the claim were bifurcated and crammed down (i.e., secured portion paid with interest and unsecured portion paid pro rata).”  In re Carver, supra (footnotes omitted; bracketed comments added).

However, given the very clear legislative history and, more importantly, that the anti-cramdown paragraph specifically relates to treatment of “allowed secured claims”  [§1325(a)(5)], most other courts reject the Carver-type analysis and accept the 910 claim as secured either by virtue of that reference to §1325(a)(5) (See In re Johnson, 337 B.R. 269, 270 (Bankr. M.D.N.C. 2006)), or as a matter of state law. In re Sessions (Bankr. S.D. Ala. No. 05-17647, March 13, 2006). They instead focus on how to determine what needs to be paid to the secured creditor in the chapter 13 plan, given that the normal secured-claim determination procedures of §506 are unavailable.

For example, the Sessions court first found that the 910 claim cannot be bifurcated, then applied state law to determine the extent or value of the secured claim, finding that Alabama law protects a purchase-money lien until it is paid in full (as do most states). Accordingly, the 910 claim is secured to the full extent of the amount due. “Amount due” seems to be the payoff amount as of the petition date with interest to be paid thereon, probably in accordance with Till v. SCS Credit Corp., 541 U.S. 465, 124 S.Ct. 1951, 158 L.Ed.2d 787 (2004) (see In re Wright, --B.R.-- 2006 WL 547824 (Bankr. M.D. Ala. Feb. 28, 2006)), and not on the original contractual terms.  In re Robinson, --B.R.-- 2006 WL 349801 (W.D. Mo. Feb. 10, 2006). 

Since §1325(a)(5), to which this anti-cramdown provision applies, speaks of an “allowed secured claim,” the 910 creditor will file a secured proof of claim presumably for the payoff amount as of the date of the petition for relief. Can the debtor object to this secured claim under §506(a)(2)? The inability to apply §506 to 910 claims necessarily implies that the objection process of §502(a) cannot allow for an objection as to value of the collateral; any other grounds for objection would remain available. The debtor might say that, having made payments, he only owes $1, not the $2, on the proof of claim, but cannot argue that the claim is secured only to the extent of the $1 value of the collateral. See In re Ezell, --B.R.-- 2006 WL 598142 (Bankr. E.D. Tenn. March 13, 2006); In re Johnson, supra.

So is all again well for the creditor, back to slamming every pitch over the wall with a big anti-cramdown bat? Not so fast. The inattentive author of the Faulkner-like 105-word paragraph, given the purported goal, failed to consider the legal concept of “what’s good for the goose….” If the only mechanism in the Code to bifurcate claims (i.e., §506) is unavailable to the debtor, it is similarly unavailable to the creditor. Thus, unless one accepts the Carver analysis, the surrender of the collateral must be in exchange for the full value of the 910 claim. There is no “deficiency” claim allowed. See, In re Ezell, supra.

This “no deficiency” consequence may give the purchase-money lender minor pause before swinging for the fences every time, particularly with minimal value in the collateral. If a debtor wants to surrender the collateral, the proceeds from its disposition may be all the creditor gets. Still, if the debtor thinks that “eat steel, lender!” is something of a bargaining chip, as suggested by the Carver court, my bet is that more often the debtor blinks first, not wishing to gamble with his car. Frankly, the “personal use” dispute (See Jackson, supra), if appropriate, is the leverage of choice for the debtor. Moreover, if the jurisdiction allows “zero percent” chapter 13 plans, the deficiency issue is effectively moot, anyway.

By and large, and before consideration of the “personal use” language that creditors may find a tough pitch to hit, the orphan paragraph of §1325(a)(9) will work to preclude bifurcation and cramdown of 910 claims. Nonetheless, thoughtless drafting of the provision means that the creditors will leave some money left on base in the scoring position.

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