Volume 13, July, 2006

As a service to our clients, Dennis LeVine & Associates strives to keep you updated on breaking news and recent notable bankruptcy cases effecting creditors. We would like to share the following item of interest with you.

New cases hold that the debtor can surrender a car financed within 910 days of the bankruptcy in full satisfaction of the entire claim.

The so-called "hanging paragraph" added after §1325(a)(9) in BAPCPA provides that §506 is inapplicable to car loans incurred within 910 days of the bankruptcy filing. This provision clearly means that such "910 claims" must be paid in full through the Plan where the debtor retains the car. Some debtors, however, have made the argument that this provision precludes a deficiency when the debtor surrenders a car subject to a 910-claim. The argument is that the since the secured creditor is considered fully secured for valuation purposes, the creditor must be fully secured for all purposes. As such, they argue that the value of the car is the amount of the debt. Therefore, the surrender of a car subject to a 910-claim means that the claim is "satisfied", and the secured creditor is not entitled to assert a deficiency claim.

This argument was adopted by a Tennessee Court in In re Ezell, 338 B.R. 330 (Bankr. E.D. Tenn. 3/13/06). While the Ezell case is currently being appealed, it recently was followed by Judge Killian in the Northern District of Florida (In re Brown) and another Bankruptcy Court in Tennessee (In re Fee). The holding in Ezell was rejected by Judge Cooper in Kentucky (In re Duke, 7/12/06). We will keep you posted on how the law develops on this issue.

Dennis LeVine & Associates, P.A.

103 S. Boulevard

Tampa, Florida 33606

Toll Free - (877) 222-9529

Dennis J. LeVine is Board Certified in both business and consumer bankruptcy law by the American Board of Certification. Mr. LeVine was admitted to the Florida Bar in 1983, and practices in the federal courts of all three Florida districts. He has concentrated his practice in bankruptcy and collection law for 20 years.

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