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Keywords: ride-through . reaffirmation . redemption . surrender .

Secured debt: "Ride Through" still viable after BAPCPA? Can debtor keep keep property by making payments if reaffirmation submitted and rejected by court?

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Case Summary Dumont v. Ford Motor Credit Co. (In re Dumont), 581 F. 3d 1104, 9th Cir., 9/15/2009,7,NA

Dumont v. Ford Motor Credit Co. (In re Dumont), 581 F. 3d 1104 (9th Cir. 2009)

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Secured Debts > Ride Through

Secured debt: "Ride Through" still viable after BAPCPA? Can debtor keep keep property by making payments if reaffirmation submitted and rejected by court?

41 Cases , IssueID 21

Ch 7 Means Test
Form 22A, Line 42
Ch 13 Means Test
Form 22C Line 47

Topic Description:

Before the passage of BAPCPA in 2005, five Circuit Courts had held that a "fourth option" existed in addition to the choices of "redemption" "reaffirmation" and "surrender".

This fourth option was nicknamed the "ride through" which essentially meant that the debtor's personal liability for the original debt was discharged, but the creditor was precluded from repossessing the item so long as the debtor remained current on the original contract payments.

In a "ride through" scenario, if the item suddenly becomes worthless, due to, say a car accident or deterioration, the debtor can simply stop making payments, surrender the now-worthless property, and owe not a penny more.

Understandably, ride through is an attractive option that consumer bankruptcy lawyers advocated for their clients in the jurisdictions that allowed it.

The question now is whether this option still exists.

At first blush, it looks like BAPCPA eliminated the "ride through" option, and many courts have ruled that way.

However, a strong argument has been made and followed by some courts that IF a debtor submits a reaffirmation agreement for approval, the court can effectively grant a "backdoor ride through" by disallowing the reaffirmation -- thereby satisfying the new law's requirement that the debtor pick one of the three options -- in this case reaffirmation.
The judge cooperates in setting up the ride through by disapproving of the reaffirmation on the grounds that the "ride through" option will give the debtor a much better deal, and as a consequence, the reaffirmation is not "in the debtor's best interest" as required by law.

End result: the contract goes forward under state law, whatever it happens to be. The Federal judges ruling on a matter of Federal Bankruptcy law is limited to only those provisions affected by it -- in this case, the debtor's personal liability for the debt is NOT reaffirmed, other aspects of the contract may still be enforceable under state law.

In some states, this means that that, as long as the debtor remains current on the payments, the property can't be repossessed, but the debtor is is no longer personally liable for unpaid amounts in the case of a default, but the property must be surrendered)

The Columbia Law Review Article makes the case that ride through should survive in those jurisdictions that allowed it.

Lines of Cases:

A:

Ride through not permitted if debtor did not propose a reaffirmation

B::

Depends on state law issues re waver of right to repossess if current payments are accepted

C:

"Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm

D:

Attorney "Backdoor Ride Through Catch 22": Must sign off on reaffirmation as being in debtor's best interest, so judge can reject as NOT being in debtor's best interest.

E:

"Everything else..."

Topic Background / Overview:

When deciding whether the three options listed in § 521(2) (surrender, redeem, reaffirm) were exclusive, the circuit courts split five-to-five on how to interpret the "if applicable" language and § 521(2)(C).

Five circuit courts held that the three options listed in § 521(2) were not exclusive, and that the section was procedural. These courts believed that the phrase "if applicable" meant that, in some circumstances,the debtor did not have to choose to redeem or reaffirm his debt or surrender his property. Also, the courts considered it important that § 521(2)(C) stated that the language used in § 521(2)(A) and (B) "shall not alter the debtor's . . . rights." If § 521(2)(A) and (B) did not alter debtors' rights, then the sections must have been purely procedural and thus did not foreclose any additional options.

  • Type A = Ride through not permitted if debtor did not propose a reaffirmation
  • Type B = Depends on state law issues re waver of right to repossess if current payments are accepted
  • Type C = "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm
  • Type D = Attorney "Backdoor Ride Through Catch 22": Must sign off on reaffirmation as being in debtor's best interest, so judge can reject as NOT being in debtor's best interest.
  • Type E = "Everything Else"
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Cases for Zip , California Northern District Bankruptcy Court

Ninth Circuit Cases

In re Barron

Bankr.D.Arizona - 441 BR 131 - 2010-12-14 - ,

Google ID#: 11605297745989459780
(Type : )

Court cannot review a reaffirmation agreement if counsel does not execute a declaration in support of the reaffirmation as required by 524(c)(3). Counsel cannot opt out of representing debtor on the issue of reaffirmation. In the past court as allowed it but will not allow it any longer.

Dumont v. Ford Motor Credit Co. (In re Dumont)

9th Cir. - 581 F. 3d 1104 - 2009-09-15 - 7 , NA

Google ID#: 9021870462007526958
(Type A : Ride through not permitted if debtor did not propose a reaffirmation )

"At least where the debtor has not attempted to reaffirm, our decision in Parker has been superseded by BAPCPA."

In re Hamilton

Bankr.D.Alaska - ___ B.R. ___ - 2009-06-09 - 7 , NA

Google ID#: 7756942365058066683
(Type C : "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm )

"For the reasons stated on the record, the reaffirmation creates an undue hardship per 11 U.S.C. § § 524(m). In this instance, the collateral at issue is real property. There is some debate whether the doctrine of "backdoor ride-through" survived BAPCPA with respect to personal property."[1] Courts are agreed, however, that BAPCPA's changes, including termination of the automatic stay and ipso facto post-petition defaults, do not apply where real property secures a debt, and debtors may still retain, or ride through, real property without reaffirmation or redemption so long as payments to the creditor are current.[2] Therefore,

IT IS ORDERED that the court disapproves the reaffirmation agreement per 11 U.S.C. § § 524(m). Debtor and the creditor are given 20 days from the date of this order within which to file a request for reconsideration of this order.

[1] The BAP held in In re Dumont, 383 BR 481 (9th Cir BAP 2008) that the ride-through doctrine with respect to personal property did not survive the enactment of BAPCPA in 2005, but in that case no reaffirmation agreement had been filed. Dumont favorably cited In re Moustafi, 371 BR 434 (Bankr D AZ 2007) in which a reaffirmation agreement involving personal property had been filed, but the court disapproved it as not being in the debtor's interest. In Moustafi, the court allowed "backdoor ride-through" per §524(m), though it did not cite that section specifically (i.e., the creditor could not declare a default post-discharge so long as the payments were current and debtor had sought reaffirmation, but the court denied approval). The "backdoor ride-through" concept is explained in Will the Ride-Through Ride Again, 108 Columbia LR 882 (2008). A secured creditor in this situation would be wise to seek relief from stay or affirmative approval to repossess in order to avoid running afoul of the automatic stay under 11 USC § 362(a) or the discharge injunction under 11 USC § 524(a), should these statutes protect the debtor in a "backdoor ride-through" scenario. Most courts that have discussed the issue have found "backdoor ride-through" is available. Coastal Federal Credit Union v Hardiman, 398 BR 161. 181-88 (EDNC 2008); In re Schmidt, 397 BR 481, 485-86 (Bankr D MD 2008) [dicta]; In re Chim, 381 BR 191, 198-99 (Bankr D MD 2008); In re Hudain, 364 BR 211, 218-19 (Bankr ED VA 2007); and, In re Blakeley, 363 BR 225, 231 (Bankr D VT 2007).

[2] In re Hart, 402 B.R. 78, 82 (Bankr. D. Del. 2009), In re Caraballo, 386 B.R. 398, 401-02 (Bankr. D. Conn. 2008), In re Wilson, 372 B.R. 816, 820 (Bankr. D.S.C. 2007), In re Bennett, 2006 WL 150842 (Bankr. M.D.N.C. 2006)."

In re Jensesn

Banrk. C.D.Cal - 407 B.R. 378 - 2009-04-28 - 7 ,

Google ID#: 8903358563729138555
(Type E : )

Detailed discussion of current status of "ride Through" opitons

In re Moustafi

Bankr.D.Ariz - 371 B.R. 434 - 2007-06-04 - 7 , NA

Google ID#: 11049440995269440043
(Type C : "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm )

"The Debtor complied with the requirements of the Bankruptcy Code by timely filing her statement of intention and timely entering into a reaffirmation agreement with the credit union that holds a security interest in her car. That reaffirmation agreement will not, however, be approved because the Debtor's net monthly income is less than her expenses and because the car is worth less than what she owes on it. Despite the changes made to the Bankruptcy Code by the Bankruptcy Abuse Prevention and Consumer Protection Act ("BAPCPA"), a debtor may still, under certain limited circumstances, retain a car even without a court approved reaffirmation agreement. This is such a case."

In re Quintero

Bankr. N.D. Cal. - 2006 WL 1351623 - 2006-05-17 - ,

Google ID#:
(Type C : "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm )

section 521(a)(6) does not require reaffirmation agreement to be approved

In re Parker

9th Cir. - 139 F.3d 668 - 1998-03-17 - ,

Google ID#: 16962936717287705780
(Type : )

Main 9th Circuit authority before BAPCPA. - Allowing ride through.

Other Circuits

Hall v Ford Motor Credit co. LLC

Kansas Supreme Court - No 103.370 - 2011-05-02 - ,

Google ID#: 15374112152432393462
(Type B : Depends on state law issues re waver of right to repossess if current payments are accepted )

Under Kansas law, creditor can repo pickup truck if there is no reaffirmation, even though payments are current.

In re Grisham

Bankr. N.D. - 436 B.R. 896 - 2010-08-07 - 7 ,

Google ID#: 8252149452422096536
(Type : )

Court refused to approve reaffirmation that imposed undue hardship on debtor where loan was $17K on a $16K truck with an APR of 17.5%, and incime from social security and unemployment not sufficient.

In re Law

Bankr. W.D. Pa. - 421 B.R. 735 - 2010-01-19 - ,

Google ID#: 7991550619724689971
(Type E : )

A debtor can ride through on a real estate loan, and need not reaffirm.

Daimler Chrysler Financial Services v. Jones

4th Cir. - 591 F.3d. 308 - 2010-01-11 - ,

Google ID#: 6590911306489204057
(Type A : Ride through not permitted if debtor did not propose a reaffirmation )

Ride through not available if debtor fails to state whether he intends to redeem or reaffirm.

In re Perkins

Bankr. M. North Carolina - 418 B.R. 680 - 2009-11-19 - 7 ,

Google ID#: 5472198545361814092
(Type C : "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm )

reaffirmation rejected because it was untimely filed, creditor cannot repossess as long as payments are current.

In re Nouchanthavong

Bankr. N.D. Iowa - No. 09-02181 - 2009-11-13 - 7 ,

Google ID#: 7712823413260853656
(Type E : )

Court refused to approve reaffirmation for unsecured debt cosigned with debtor's mother, because reaffirmation would be of no benefit to debtor. Debtor is still free to continue making "voluntary" payments once personal liability is discharged.

In re Linderman

Bankr.M.D.Florida - ____ - 2009-10-09 - ,

Google ID#: 7074356228812604016
(Type A : Ride through not permitted if debtor did not propose a reaffirmation )

Third, the new Section 362(h)[3] provides that the automatic stay terminates with respect to personal property if the debtor does not timely file a statement of intention or does not timely perform the stated intention by the statutory deadline. Now, debtors cannot retain personal property securing a debt anywhere in the country without first attempting to reaffirm the debt or to redeem the property.

The issue then becomes what happens if a debt is secured by real property. Does the old split among the circuits still exist or did BAPCPA somehow resolve the split by eliminating or by allowing the ride-through option as to real property? Several bankruptcy courts have held that, in their jurisdiction which previously allowed the ride-through option, BAPCPA did not alter the result as to real property. In re Waller, 394 B.R. 111 (Bankr. S.C. 2008); In re Caraballo, 386 B.R. 398 (Bankr. Conn. 2008); In re Wilson, 372 B.R. 816 (Bankr. S. C. 2007); In re Bennet, No. 06-80241, 2006 WL 1540842 (Bankr. M.D. N.C. May 26, 2006). Each of these courts held that debtors owning real estate encumbered by mortgage loans can retain their homes by making regular payments and need not redeem or reaffirm, finding that BAPCPA, first, made no significant change to Section 521(a)(2)(A), and, second, that the three new or altered provisions in BAPCPA (Sections 521(a)(6), 521(a)(2)(C), and 362(h)) only removed the ride-through option as to personal property. BAPCPA essentially is silent as to whether a debtor is required to either reaffirm or redeem real property. Therefore, in concluding that the ride-through option survives as to real but not personal property, each of these courts ultimately rested their opinions upon the established law that existed in their particular jurisdiction prior to BAPCPA.

The debtor now argues that this Court should ignore the Eleventh Circuit opinion in Taylor and hold that, because BAPCPA only required a debtor to expressly reaffirm a debt or redeem personal property, it implicitly allows debtors to make other decisions, such as using the ride-through option, in connection with real property. The Court rejects the debtor's position.

The Eleventh Circuit was clear under the still unchanged language of Section 521(a)(2)(A)a debtor must act either to redeem or to reaffirm a debt if the debtor desires to retain the collateral. The appellate decision makes no distinction between real or personal property; nor is any distinction merited. The Eleventh Circuit looked at the plain language of the statute and interpreted the language to prohibit ride-through, regardless of the type of property involved. The modifications enacted by BAPCPA simply support the Eleventh Circuit's conclusion as to personal property. Nationally, debtors no longer can keep personal property without reaffirming the debt or redeeming the property. All debtors are treated similarly in every circuit.

The Court acknowledges that a split apparently still exists as to real property collateral. Certain courts in jurisdictions that previously allowed the ride-through option have returned to pre-BAPCPA law to conclude that the option remains viable for real property. However, such is not the case in this circuit. The Eleventh Circuit clearly has stated that a Chapter 7 debtor must either redeem or reaffirm a debt if the debtor wants to keep the collateral. As to personal property, the ruling is national. As to real property, the decision in Taylor is still applicable and controlling, unless and until the Eleventh Circuit rules otherwise.

Accordingly, the debtor in this case may surrender the real property, or, if he chooses, he may either redeem the property or reaffirm the debt in order to comply with Section 521(a)(2)(A).[4] The Court will grant Riverside's motion (Doc. No. 14) and compel the debtor to file an amended statement of intention and perform the appropriate action within 30 days of the entry of this order. In the interim, the Clerk is directed to defer entry of the discharge for a sixty-day period to ensure the debtor's compliance with this order. A separate order consistent with this Memorandum Opinion shall be entered.

In re Morton (Ford Motor Credit Co. v. Morton)

bankr. 6th Cir. - 410 B.R. 556 - 2009-09-09 - ,

Google ID#: 16095502097696863632
(Type D : Attorney "Backdoor Ride Through Catch 22": Must sign off on reaffirmation as being in debtor's best interest, so judge can reject as NOT being in debtor's best interest. )

"Attorney-certified reaffirmation agreements are effective upon filing so long as there is no presumption of undue hardship"

In re Hart

Bankr.D.Delaware - 402 B.R. 78 - 2009-03-10 - ,

Google ID#: 14025008805483322704
(Type C : "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm )

The Court makes two findings. First, under the Third Circuit's opinion in Price[2] and section 521 of the Bankruptcy Code, the debtors' loans may "pass through" the bankruptcy case unaffected if the debtors declare their intention to retain the collateral and continue to make regular payments, which the debtors have done.[3] Second, the Court disapproves the reaffirmation agreement under section 524(m) of the Bankruptcy Code because the presumption of undue hardship has not been rebutted.

In re Baker

D.Delaware - 400 B.R. 136 - 2009-01-29 - 7 ,

Google ID#: 15624132961094368634
(Type C : "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm )

Creditor violated automatic stay by reposessing vehicle after bankruptcy discharge even though debtor had taken advantage of "backdoor ridetrhough" (see earlier Baker ruling at 390 BR 424).

In re Minardi

N.D.Oklahoma - 399 B.R. 841 - 2009-01-23 - ,

Google ID#: 11883250454578921841
(Type D : Attorney "Backdoor Ride Through Catch 22": Must sign off on reaffirmation as being in debtor's best interest, so judge can reject as NOT being in debtor's best interest. )

Attorney attempts to get clever to allow reaffirmation agreement disaproved, by letting debtor go pro se as to reaffirmation. Court says attorney can't limit his represenation like that. Attorney left with Catch 22, and has to sign off on reaffirmation being in debtor's best interest, in order to file it -- so the judge can reject it.... What's an attorney to do??? And pity the poor confused client trying to make sense of it all.....

In re Schmidt

Bankr. W.D.Missouri - 397 B.R. 481 - 2008-11-17 - ,

Google ID#: 16702856082031098033
(Type C : "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm )

Real estate case, where attorney had signed off on the reaffirmation of a mortgage, but court disapproved of it anyway,
"The next question is what is the consequence of the decision not to approve these Agreements. Does that mean that Wells Fargo has the authority to foreclose on the mortgages, even if the Debtor remains current in his payments? I previously held, as to motor vehicles, that ipso facto provisions in security agreements are not enforceable under Missouri law against a debtor who attempted unsuccessfully to reaffirm the debt.[16] The same is specifically so under Missouri law as to second mortgage loans as well,[17] including the one held by Wells Fargo here.

In any event, the Debtor here has fully complied with any obligations he may have under § 521 by submitting the Reaffirmation Agreements, even though the Court does not approve them. I note that the Eighth Circuit has never ruled on the question of whether a bankruptcy debtor who is current on an installment obligation is required by § 521 to either reaffirm or redeem the debt, or surrender the property. Prior to the enactment of BAPCPA, there was a very clear split of authority among the courts, including the bankruptcy courts in this district,[18] on the question of whether debtors who were current with payments on secured debts were limited to the options of surrender, reaffirmation, or redemption found in § 521(a)(2), or whether they could also choose to simply continue making payments and retain possession of the property, known as the "fourth option" 486 or "ride through."[19] If the "fourth option" is available, a debtor who later defaults would expect to have the collateral repossessed or foreclosed, but the bankruptcy discharge would serve to eliminate personal liability for any deficiency claim after the sale of such collateral.

However, BAPCPA's amendments to the Code may have changed the analysis of that issue. Specifically, as part of BAPCPA, Congress added § 362(h) and § 521(a)(6) to the Code, which effectively eliminated the fourth option, but only as to personal property. Many of the pre-BAPCPA decisions on both sides of the issue focused on the meaning of the phrase "if applicable" in § 521(a)(2)(A), in which the debtor is to specify that the property is claimed exempt, that the debtor intends to redeem such property, or that the debtor intends to reaffirm the debt.[20] However, since BAPCPA specifies adverse consequences only as to personal property, some courts have held that § 521(a)(2)(A) is only "applicable" if the debt is secured by personal property, and a debtor need not specify one of the three options as to real property.[21] I leave that issue for a case in which I am asked to decide it."

Coastal Federal Credit Union v Hardiman

E.D.N.C. - 398 BR 161 - 2008-10-28 - ,

Google ID#: 2118928967638828500
(Type C : "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm )

Coastal underestimates the real-world consequences to a debtor who engages in such foolish practices. Coastal admits that, under the bankruptcy court's decision in this case, all portions of the Hardimans' vehicle contract (including the lien), save for the threat of a personal deficiency judgment, "ride through" the bankruptcy. Indeed, "`[i]t is well-settled that a bankruptcy discharge extinguishes only one mode of enforcing a claim namely, an action against the debtor in personam while leaving intact another namely, an action against the debtor in rem.' `Thus, liens on property remain enforceable after discharge....'" In re Anderson, 348 B.R. 652, 655 (Bankr.D.Del.2006) (quoting Johnson v. Home State Bank, 501 U.S. 78, 84, 111 S.Ct. 2150, 115 L.Ed.2d 66 (1991) & In re Holloway, 81 F.3d 1062, 1063 n. 1 (11th Cir.1996), respectively (internal citations omitted)); see Estate of Lellock v. Prudential Ins. Co. of Am., 811 F.2d 186, 188-189 (3d Cir.1987): Chandler Bank of Lyons v. Ray, 804 F.2d 577, 578-79 (10th Cir.1986) (per curiam). Should a debtor fail to uphold a contractual duty to make timely payments, insure the collateralized vehicle, or otherwise violate any other provision of the underlying contract (including the lien), the creditor would be able to seek to repossess the vehicle under state law if the contract permits. See, e.g., Belanger, 962 F.2d at 349.

Moreover, and significantly, even if the bankruptcy court refuses to approve the uncounseled debtor's reaffirmation agreement, that result does not mean that in all cases the debtor will be allowed to "ride through" the bankruptcy with the collateral. Rather, just like pre-BAPCPA, a "creditor can obtain relief under § 362(d) for `cause.' Cause is not defined in the Code and a bankruptcy court has broad discretion to lift the stay in `appropriate circumstances.'" In re Cooper, 296 B.R. 410, 412 (Bankr.E.D.Va.2002) (footnote omitted) (quoting In re Holtkamp, 669 F.2d 505, 508 (7th Cir.1982)). In attempting to demonstrate "cause," a creditor usually would need to show some "affirmative harm." Cooper, 296 B.R. at 412. In evaluating "cause," a bankruptcy court would examine "the debtor's `previous payment record, a comparison of the value of the collateral and the amount of debt, and other relevant facts.'" Id. at 412 (quoting In re Boodrow, 126 F.3d 43, 52 (2d Cir. 1997)); accord Price, 370 F.3d at 373, 377; Am. Nat'l Bank & Trust Co. v. DeJournette, 222 B.R. 86, 92-97 (W.D.Va.1998). Further, if the debtor had no equity in the property, the bankruptcy court could terminate the automatic stay. See 11 U.S.C. § 362(d) ("On request of a party in interest 184 and after notice and a hearing, the court shall grant relief from the stay ... if... the debtor does not have an equity in such property; and ... such property is not necessary to an effective reorganization...."). Thus, the creditor is not as helpless as Coastal implies.

Additionally, a rational debtor would not only have to be concerned with the legal consequences of the contract including the lien, but also with the practical consequences of mistreating the vehicle. "The automobile is a crucial piece of property for many individuals and integral to most Americans' daily lives." Christopher M. Hogan, Note, Will the Ride-Through Ride Again?, 108 Colum. L.Rev. 882, 907 (2008) (citation omitted). "[T]he automobile is [often] the only way to retain employment or seek education anywhere far from the home. When a debtor files for bankruptcy, his car will be one of the most, if not the most, important pieces of property that he will want to keep." Id. (citation omitted). A debtor cannot simply mistreat such a vehicle without serious consequences. If a debtor mistreats the vehicle, the debtor will very likely need to purchase another vehicle, which will very likely require a new loan at far more unfavorable terms than the previous one, given the debtor's status as formerly bankrupt. And the debtor cannot expect to simply refile for bankruptcy to escape this new debt. See 11 U.S.C. § 727(a)(8) (prohibiting a Chapter 7 discharge where "the debtor has been granted a discharge ... in a case commenced within 8 years before the date of the filing of the petition").

Ultimately, it is not this court's role to analyze whether the language in BAPCPA constitutes good policy. See, e.g., Sunterra, 361 F.3d at 268-69. Likewise, it is not this court's role to determine whether Congress could have done a better job in drafting BAPCPA. See id. at 269. Rather, under the governing principles of statutory construction, this court must analyze whether it is plausible that Congress could have chosen to spare uncounseled debtors whose reaffirmation agreements were not approved by the bankruptcy court from automatically losing the protection of the automatic stay, becoming subject to any applicable ipso facto clause, and becoming subject to both repossession and a personal deficiency judgment. For the reasons discussed, Congress could plausibly have chosen the result that flows from BAPCPA's plain language. Accordingly, the absurdity exception does not apply.

In re Waller

Bankr.D.S.C. - 394 B.R. 111 - 2008-09-25 - ,

Google ID#: 16682034567324957977
(Type : )

Debtors who are current with payments on debts secured by real property are not limited to the options of surrender, reaffirmation, or redemption found in § 521(a)(2), but may also choose to continue with the payments and retain possession of the property. This option, commonly known as "ride-through," was embraced by a number of federal judicial circuits, prior to the enactment of the 2005 Amendments and applied to both real property and personal property. See, e.g., Home Owners Funding Corp. v. Belanger (In re Belanger), 962 F.2d 345, 347 (4th Cir.1992); In re Price, 370 F.3d 362, 379 (3d Cir.2004); McClellan Fed. Credit Union v. Parker (In re Parker), 139 F.3d 668, 673 (9th Cir.1998); Capital Comm. Fed. Credit Union v. Boodrow (In re Boodrow), 126 F.3d 43, 51 (2d Cir. 1997); Lowry Fed. Credit Union v. West, 882 F.2d 1543, 1547 (10th Cir.1989).

This Court recently confirmed the viability of the "ride-through" option for debts secured by real property. In re Wilson, 372 B.R. 816, 820 (Bankr.D.S.C.2007). In Wilson, the Court noted the changes made to the Bankruptcy Code by the 2005 Amendments and stated that the changes apply only to debts secured by personal property. Id. at 818. The relevant language of § 521(a)(2)(C) provides that "nothing in subparagraphs (A) and (B) of this paragraph shall alter the debtor's or the trustee's rights with regard to such property under this title, except as provided in section 362(h)." 11 U.S.C. § 521(a)(2)(C). Section 362(h) employs limiting language that terminates the automatic stay as to personal property when the debtor fails to state an intention to surrender, reaffirm, redeem, or does not perform the stated intention within a prescribed period. Wilson at 818, citing, 11 U.S.C. § 362(h). The plain language of §§ 521(a)(2)(C) and 362(h) "limits their application 114 to a debtor's rights with regard to personal property." Id.

It is presumed that Congress enacts legislation "with knowledge of the law, including knowledge of the interpretation that courts have given to an existing statute." In re Bennet, No. 06-80241, 2006 WL 1540842, at *1 (Bankr.M.D.N.C. May 26, 2006), citing, U.S. v. Langley, 62 F.3d 602, 605 (4th Cir.1995). For this reason, the right of debtors to continue current payments on debts secured by real property and retain the collateral established in Belanger remains intact. Id., See also, Wilson at 819. Congress curtailed the ride-through option for debts secured by personal property but not with regard to debts secured by real property. See, In re Caraballo, 386 B.R. 398, 402 (Bankr. D.Conn.2008). "Limiting a debtor to the three choices of surrender, redeem, or reaffirm for real property would impair the debtor's ability to obtain a fresh start, which is one of the primary purposes of bankruptcy law." Wilson at 819, citing, Local Loan Co. v. Hunt, 292 U.S. 234, 244, 54 S.Ct. 695, 699, 78 L.Ed. 1230 (1934).

In this case, the Reaffirmation Agreements are not in Debtors' best interest because Debtors can retain the real property without reaffirming the debt. For this reason, approval of the Reaffirmation Agreements is denied.

In re Baker

D.Delaware - 390 B.R. 524 - 2008-06-10 - ,

Google ID#: 7567158202155091391
(Type C : "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm )

The Court finds that, under the Third Circuit's opinion in Price,[2] the Debtors' car loan "passed through" the bankruptcy case unaffected because the Debtors timely entered into a reaffirmation agreement and they are current with their payments. The Court further finds that there was no basis for repossession under Delaware law because the only default that Creditor could assert was based on an unenforceable ipso facto clause. Finally, because the repossession of the Debtors' vehicle was a violation of the discharge injunction, the Court will order Creditor to return the vehicle and will award compensatory damages to the Debtors.
Note: Affirmed at 400 B.R. 136 where court held creditor in violating automatic stay for reposessing vehicle after discharge.)

In re Caraballo

Bankr.D.Connecticut - 386 BR 398 - 2008-04-29 - ,

Google ID#: 1257903398197402351
(Type : )

Boodrow and Sokolowski permitted application of the ride through option with respect to both real property and personal property.[5] Code § § 521(a)(6) and 362(h) abrogated the ride through option as it pertains to personal property. However, courts have concluded that the ability of a debtor to choose the ride though option as it relates to real property was not abrogated by BAPCPA. See In re Wilson, 372 B.R. 816, 820 (Bankr.D.S.C.2007) ("[T]he Court finds that ... controlling precedent in the Fourth Circuit ... provides for a `ride through' option for real property that was unaffected by the BAPCPA amendments."); In re Bennett, No. 06-80241, 2006 WL 1540842, at *1 (Bankr.M.D.N.C. May 26, 2006) ("[T]he court finds that 402 debtors ... continue to have the right ... to retain real property without being required to reaffirm or redeem, so long as payments to the creditor are current.").

The court "assume[s] that Congress passed each subsequent law with full knowledge of the existing legal landscape...." Northwest Airlines Corp. v. Association of Flight Attendants-CWA (In re Northwest Airlines Corp)., 483 F.3d 160, 169 (2d Cir.2007). See also Garcia v. Teitler, 443 F.3d 202, 207 (2d Cir.2006) ("We should assume ... that Congress legislated against a background of law already in place and the historical development of that law." (citation and internal quotation marks omitted) (modification in original)). For this court, the pre-BAPCPA "existing landscape" is defined by Boodrow, Sokolowski and cases interpreting those decisions which held that the ride through option applied to real property and personal property. Accordingly, this court must conclude that when Congress eliminated the ride through option for personal property in BAPCPA, Congress was aware that there was a ride through option for real property and intended to leave it intact post-BAPCPA. Consequently, the court agrees with the Bennett and the Wilson courts and concludes that debtors are permitted to take advantage of the ride through option with respect to relevant real property. As a result, the court also must find and/or conclude that the Reaffirmation Agreements are not in the Debtor's best interest and must be disapproved.

III. CONCLUSION

For the reasons discussed above, the court amends the Second Finding and concludes that the Reaffirmation Agreements are not in the best interest of the Debtor because she could retain the subject real property without reaffirming the Debt. As a result, marginal orders will enter (1) disapproving the Reaffirmation Agreements and (2) denying the Motions.

In re Chim

Bankr.D.Maryland - 381 B.R. 191 - 2008-01-25 - ,

Google ID#: 11444900319920261417
(Type C : "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm )

Court lays out the step by step approach to a "back door ride through" via rejection of a reaffirmation agreement.

"Further, at the hearing, it became clear that one of the Debtor's primary reasons for entering into the Reaffirmation Agreement is her concern that, if the Court disapproved the Reaffirmation Agreement, the Lender could exercise the creditorrelief provisions of Sections 362(h), 521(a)(6) and 521(d) by, among other 193 things, declaring a default under the ipso facto[2] provision of her loan contract and repossessing the vehicle notwithstanding the fact that she remains current on the loan. The Court finds and concludes that the Debtor has complied with the requirements of Section 521(a)(2) by timely stating her intention to reaffirm the loan and by timely entering into the Reaffirmation Agreement with the Lender. Therefore, the provisions of Sections 362(h), 521(a)(6) and 521(d) do not apply, and the automatic stay remains in place with respect to the vehicle, the vehicle remains property of the estate, the Debtor is hot obligated to turn over possession of the vehicle, and the Lender may not exercise remedies as a result of default under the ipso facto provision under the loan agreement. Stated otherwise, where a debtor timely complies with Section 521(a)(2), the mere fact that the Court does not approve the reaffirmation agreement does not trigger the creditor relief provisions of Sections 362(h), 521(a)(6) or 521(d), Accordingly, the Debtor's concern that the Lender may invoke the creditor-relief provisions of Sections 362(h), 521(a)(6) or 521(d) if the Court disapproves the Reaffirmation Agreement is not warranted, and is not sufficient to overcome the presumption of undue hardship."

In re Stevens

Bankr.E.D.Virgina - 365 B.R. 610 - 2007-03-09 - ,

Google ID#: 702440142184771044
(Type C : "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm )

"The Court is cognizant that if it does not approve the Reaffirmation Agreement, it will be rendered unenforceable. However, this does not mean that the Debtor will lose her Vehicle. The Court has previously ruled that the need for a debtor to retain a vehicle is not, in and of itself, sufficient to overcome the presumption of undue hardship. In re Husain, 364 B.R. 211, 217-19 (Bankr.E.D.Va.2007). Furthermore, whether or not the Reaffirmation Agreement should be approved is separate and distinct from the "performance" requirements of § 362(h) and § 521(a) of the Bankruptcy Code. Id.

As the Debtor has done everything in her capacity to comply with the requirements of § 362(h) and § 521(a) of the Bankruptcy Code, § 521(d) of the Bankruptcy Code is inapplicable to this case. The automatic stay and the discharge injunction will continue to protect the property of the Debtor. The Debtor is current on her payments due under the note held by National Auto Sales and is maintaining the required insurance on the Vehicle postpetition. National Auto Sales may continue to accept payments from the Debtor, 11 U.S.C. § 524(1)(1), but it may not repossess the Vehicle without violating the automatic stay and the discharge injunction unless there is a subsequent payment or insurance default. In re Husain, 364 B.R. at 219-20, citing In re Riggs, No. 06-60346, 2006 WL 2990218, at *3 (Bankr. W.D.Mo. Oct.12, 2006) (declining to approve reaffirmation agreement on undue hardship grounds, finding debtor had fully performed duties under § 521(a) notwithstanding court's ruling that agreement would be disapproved and unenforceable; and holding § 521(d) was not triggered and secured creditor could not repossess collateral based solely upon default under security agreement's ipso facto clause; collateral could be repossessed only in event of a payment or insurance default or if creditor's position is or became "significantly impaired.")."

In re Hussain

Bankr. E.D.Virginia - 364 B.R. 211 - 2007-03-05 - ,

Google ID#: 5122241988197630620
(Type C : "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm )

"In this, case, the Court finds that the Debtors fully and timely performed their duties under 11 U.S.C § 521(a) and under 11 U.S.C § 362(h) in filing the statement of intention and in signing and filing the reaffirmation Agreement(s) and sending the executed Agreement(s) to the applicable creditors within the prescribed time limits. As the Court has found that the Debtors fully complied with all of the requirements of § 362(h) and § 521(a) of the Bankruptcy Code, any ipso facto clause that may be contained in the original loan documents between the Debtors and the creditors cannot be revived by the newlycreated provisions of § 521(d) of the Bankruptcy Code. The bankruptcy filing does not in and of itself trigger an automatic default in the underlying loan documents. In re Belanger, 962 F.2d at 348. Once the discharge is granted, the creditors may not repossess the vehicles without violating the discharge injunction unless there is a subsequent payment or insurance default. In re Riggs, No. 06-60346, 2006 WL 2990218, at *3 (Bankr.W.D.Mo. Oct.12, 2006) (declining to approve reaffirmation agreement on undue hardship grounds, finding debtor had fully performed duties under § 521(a) notwithstanding court's ruling that agreement would be disapproved and unenforceable; and holding § 521(d) was not triggered and secured creditor could not repossess collateral based solely upon default under security agreement's ipso facto clause; collateral could be repossessed only in event of a payment or insurance default or if creditor's 220 position is or became "significantly impaired."); In re Quintero, 2006 WL 1351623."

In re Blakeley

Bankr.D.Utah - 363 BR 225 - 2007-01-17 - ,

Google ID#: 7572009884430292114
(Type C : "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm )

"Because Debtor has fully complied with all of the requirement under each of the above subsections, none of the remedies contained in the subsections apply to this Debtor or her vehicle. It is not necessary for the Court to approve the reaffirmation agreement in order for the Debtor to comply with § 521 or § 362(h). This means that so long as the Debtor timely makes all required payments under the vehicle purchase contract, and complies with all other requirements under the contract, the Debtor may "ride through" the bankruptcy and retain possession of the vehicle notwithstanding the fact that the Court refused to accept the reaffirmation agreement.

While BAPCPA has done away with simple "ride through" in bankruptcy, it has not entirely eliminated the possibility that a debtor can "ride through" a bankruptcy and retain possession of secured personal property. Under the limited circumstances stated above, where a debtor timely complies with all requirements, under §§ 521 and 362(h), the debtor can "ride through" the bankruptcy notwithstanding a bankruptcy court's refusal to approve the reaffirmation agreement.

Because the Debtor fully complied with the requirements under § 521, the Bankruptcy Codes limitations on contract; ipso facto clauses remain in effect and the Credit Union is prohibited from declaring the contract in default by virtue of the Debtor's insolvency or bankruptcy.

Based upon the above, the court finds that so long as the Debtor adheres to the terms of the contract, the Debtor is entitled to remain in possession of the vehicle regardless of the Court's approval or refusal to approve the reaffirmation agreement. With all other things being, equal, the only question left is whether it is in the Debtor's best interest for the Debtor to be personally liable on any deficiency in the event that the vehicle is repossessed. The answer is no, and for that reason, the Court will deny approval of the reaffirmation agreement. Based upon the above, it is hereby"

In re Donald

Bankr.E.D.N.C. - 343 B.R. 524 - 2006-06-12 - 7 ,

Google ID#: 14394918521098274550
(Type C : "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm )

The court approached its analysis of the "ride-through" option under BAPCPA in same manner it considered the "ride-through" option in Belanger. In re Belanger, 118 B.R. 368, (Bankr.E.D.N.C. 1990), aff'd, 962 F.2d 345 (4th Cir.1992). The court is aware, as it was in Belanger, that providing a fresh start for honest debtors is one of the "primary purposes" of the bankruptcy law, and that a limiting interpretation contrary to that purpose "should not be adopted unless it is clearly required by the statute." Belanger, 118 B.R. at 370, aff'd, 962 F.2d 345.

There are good arguments that the "ride-through" option still is available to chapter 7 debtors, but the two courts that have considered the issue have concluded that the "ride-through" option was terminated by amendments to the Bankruptcy Code made by BAPCPA. In re Craker, 337 B.R. 549 (Bankr.M.D.N.C.2006); In re Rowe, 342 B.R. 341 (Bankr.D.Kan.2006). These are well reasoned decisions, and the court agrees with the conclusion they reach. Congress chose not to change § 521(2)(A) and (B) (now § 521(a)(2)(A) and (B)), the principal sections that supported the "ride-through" option, but the elimination of the "ride-through" was accomplished by changes to § 521(2)(C) (now 521(a)(2)(C)) and the addition of 540 § 362(h), § 521(a)(6) and § 521(d). The court is convinced that termination of the "ride-through" option is what Congress intended.[10]

The court must now address the debtors' alternative argument.

May a Debtor Comply with §§ 521(a)(2), 362(h), 521(c)(6) and 521(d) by Entering into a Reaffirmation Agreement that Is Unenforceable?

The debtors contend that a chapter 7 debtor may avoid all of the consequences arising from §§ 362(h), 521(a)(6), and 521(d) by executing a reaffirmation agreement, even in circumstances where the reaffirmation agreement is, or will become, unenforceable. Whether the reaffirmation agreement is ultimately disapproved or deemed enforceable, the debtors argue, are issues that are separate and distinct from the act of entering into the agreement. According to the debtors, the consequences arising from §§ 362(h), 521(a)(6), and 521(d) are triggered upon the debtor's failure to enter into the agreement, not by the court's disapproval of the agreement or a determination that the agreement is unenforceable. Coastal, however, maintains that to avoid the consequences arising from §§ 362(h), 521(a)(6), and 521(d) a debtor must enter into a reaffirmation agreement and that the agreement must be enforceable.

The debtors' argument is creative and appealing, and indeed it may prevail in some circumstances. But to adopt the debtors' position in this case would be tantamount to abrogating the requirements of § 362(h) and § 521(d). For the debtors to be able to retain their 1999 Lexus ES-V6, they must either redeem the vehicle or reaffirm their obligation to Coastal. Rather than facing the consequences of a termination of the stay under § 362(h) and the elimination under § 521(d) of the limitations on the enforcement of Coastal's ipso facto clause, the debtors chose to reaffirm the indebtedness. The court agrees that reaffirmation was a wise decision and finds that the reaffirmation agreement is in the best interest of the debtors and will not cause them any undue hardship. Accordingly, the reaffirmation will be approved.

This does not mean that the debtors' argument will always fail. Section 524(c) sets forth the requirements that must be met for a reaffirmation agreement to be enforceable. Several of those requirements do not involve the debtor, and whether or not an agreement is enforceable may often be beyond the debtor's control. For example, an agreement prepared by a creditor may be unenforceable because the agreement does not contain the disclosures required by § 524(c) and (k). See, e.g., In re Quintero, 2006 WL 1351623 at *3 (finding agreement unenforceable due to creditor's failure to timely comply with § 524(k) and, on that basis, prohibiting creditor from repossessing 541 car). (Bankr.N.D.Cal.2006). Furthermore, an agreement may be unenforceable under § 524(c)(3) because it is not filed with the court.

In some circumstances a reaffirmation agreement entered into by the debtor in good faith may satisfy the requirements of § 362(h), § 521(a)(6) and § 521(d) where the court disapproves the reaffirmation agreement under § 524(c)(6), especially where the debtor intends to perform under the reaffirmation agreement and where disapproval by the court is beyond the debtor's control.[11]

It also is worth acknowledging that, ultimately, whether or not the "ride-through" option survives the new statutory hurdles may not make much of a difference to many debtors and creditors because in this circuit, and also in those that do not recognize the "fourth option," debtors continue to submit payments when due and creditors continue to accept them. Creditors frequently acquiesce in ride-through because chapter 7 debtors "usually become[] better able to afford paying secured debts, and this gain in creditworthiness may mote than `offset the creditor's loss of recourse against the debtor personally after discharge." Jean Braucher, Rash and Ride-Through Redux: The Terms for Holding On to Cars, Homes and Other Collateral Under the 2005 Act, 13 Am. Bankr.Inst. L.Rev. 457, 476 (Winter 2005). Creditors usually prefer payment to repossession, and in most cases where the debtors are current with their installment obligations, the secured creditor will be paid in full, the debtor will keep the property, and, fortunately, whether or not the "ride-through" option is available will not matter.

In re Rowe

D.Kan. - 342 B.R. 341 - 2006-05-10 - ,

Google ID#: 1071263325083500652
(Type B : Depends on state law issues re waver of right to repossess if current payments are accepted )

"ride through option not available after BAPCPA. No protection by stay. but "although Congress technically eliminated the "fourth option," as now there are consequences for failing to obtain a right of continued possession through redemption or reaffirmation, as applied to consumer transactions, in Kansas the creditor's remedy of expiration of the stay in many cases will be illusory, because the conditions to declare a default and obtain possession of the collateral will not be present under Kansas law when the 352*352 debtor remains current on the obligation and there is no other basis for finding significant impairment" (BUT See Hall v Ford Motor Credit co. LLC, (Kansas S.Ct 2011)

In re Price

3rd Cir - 370 B.R. 362 - 2004-02-03 - ,

Google ID#: 3822800023471030309
(Type : )

Main 3rd Circuit authority before BAPCPA.

In re Burr

1st Cir. - 160 F.3d 843 - 1998-11-25 - ,

Google ID#: 13859586450413514490
(Type : )

Main 1st Circuit authority before BAPCPA. - NOT allowing ride through.

In re Boodrow

2d Cir - 126 F.3d. 43 - 1997-09-12 - ,

Google ID#: 15036954109872325970
(Type : )

Main 2nd Circuit authority before BAPCPA. - Allowing ride through.

In re Johnson

5th Cir - 89 F.3d 249 - 1996-07-26 - ,

Google ID#: 55814360578555588
(Type : )

Main 5th Circuit authority before BAPCPA. - NOT allowing ride through.

In re Taylor

11th Cir. - 3 F.3d 1512 - 1993-10-13 - ,

Google ID#: 2665620218587266004
(Type : )

Main 11th Circuit authority before BAPCPA. - NOT allowing ride through.

In re Belanger

4th Cir. - 962 F.2d 345 - 1992-04-27 - ,

Google ID#: 13209982855477841840
(Type : )

Main 4th Circuit authority before BAPCPA. - Allowing ride through.

In re Edwards

7th Cir - 901 F.2d 1387 - 1990-04-27 - ,

Google ID#: 4937494646125081785
(Type : )

Main 7th Circuit authority before BAPCPA. - NOT allowing ride through.

Lowry Fed. Credit Union v. West

10th Cir - 882 F.2d 1543 - 1989-08-18 - ,

Google ID#: 2164148674756354577
(Type : )

Main 10th Circuit authority before BAPCPA. - Allowing ride through.

In re Bell

6th Cir - 700 F.2d 1053 - 1983-02-22 - ,

Google ID#: 4469311618811621767
(Type : )

Main 6th Circuit authority before BAPCPA. - NOT allowing ride through.

In re Bennet

Bankr. M.D.N.C. - - - ,

Google ID#:
(Type : )

A debtor can ride through on real property but disagreeing about the role of the court in approving a reaffirmation on a real property loan for an unrepresented debtor.

In re Law

1/19/2010 - 421 B.R. 735 - - ,

Google ID#: 7991550619724689971
(Type E : )

Pro se debtor's reaffirmation of mortgage was of no benefit so court delayed entry of discharge so she could rescind the agreement. because, persuant to In re Price, 370 F.2d 362 (3rd cir 2004). Because debt was secured by real property, court could not rescind the agreement, but debtor could, so court allowed 60 days for her to do so if she wished.

In re Pope

Bankr. E.D.Va - - - 2011 ,

Google ID#: 328449291181308593
(Type E : )

Court will not reaffirm mortgage because ride through is still valid for mortgages and reaffirmation would not be in debtor's best interest. Fact that lender is demanding reaffirmation to get a loan modification does not change result. Court will reaffirm the modification once it has done, but it will not reaffirm original debto as a condition of the loan modification.

Hall v Ford Motor Credit co. LLC

Kansas Supreme Court - No 103.370 - 2011-05-02 - ,

Google ID#: 15374112152432393462
(Type B : Depends on state law issues re waver of right to repossess if current payments are accepted )

Under Kansas law, creditor can repo pickup truck if there is no reaffirmation, even though payments are current.

In re Barron

Bankr.D.Arizona - 441 BR 131 - 2010-12-14 - ,

Google ID#: 11605297745989459780
(Type : )

Court cannot review a reaffirmation agreement if counsel does not execute a declaration in support of the reaffirmation as required by 524(c)(3). Counsel cannot opt out of representing debtor on the issue of reaffirmation. In the past court as allowed it but will not allow it any longer.

In re Grisham

Bankr. N.D. - 436 B.R. 896 - 2010-08-07 - 7 ,

Google ID#: 8252149452422096536
(Type : )

Court refused to approve reaffirmation that imposed undue hardship on debtor where loan was $17K on a $16K truck with an APR of 17.5%, and incime from social security and unemployment not sufficient.

In re Law

Bankr. W.D. Pa. - 421 B.R. 735 - 2010-01-19 - ,

Google ID#: 7991550619724689971
(Type E : )

A debtor can ride through on a real estate loan, and need not reaffirm.

Daimler Chrysler Financial Services v. Jones

4th Cir. - 591 F.3d. 308 - 2010-01-11 - ,

Google ID#: 6590911306489204057
(Type A : Ride through not permitted if debtor did not propose a reaffirmation )

Ride through not available if debtor fails to state whether he intends to redeem or reaffirm.

In re Perkins

Bankr. M. North Carolina - 418 B.R. 680 - 2009-11-19 - 7 ,

Google ID#: 5472198545361814092
(Type C : "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm )

reaffirmation rejected because it was untimely filed, creditor cannot repossess as long as payments are current.

In re Nouchanthavong

Bankr. N.D. Iowa - No. 09-02181 - 2009-11-13 - 7 ,

Google ID#: 7712823413260853656
(Type E : )

Court refused to approve reaffirmation for unsecured debt cosigned with debtor's mother, because reaffirmation would be of no benefit to debtor. Debtor is still free to continue making "voluntary" payments once personal liability is discharged.

In re Linderman

Bankr.M.D.Florida - ____ - 2009-10-09 - ,

Google ID#: 7074356228812604016
(Type A : Ride through not permitted if debtor did not propose a reaffirmation )

Third, the new Section 362(h)[3] provides that the automatic stay terminates with respect to personal property if the debtor does not timely file a statement of intention or does not timely perform the stated intention by the statutory deadline. Now, debtors cannot retain personal property securing a debt anywhere in the country without first attempting to reaffirm the debt or to redeem the property.

The issue then becomes what happens if a debt is secured by real property. Does the old split among the circuits still exist or did BAPCPA somehow resolve the split by eliminating or by allowing the ride-through option as to real property? Several bankruptcy courts have held that, in their jurisdiction which previously allowed the ride-through option, BAPCPA did not alter the result as to real property. In re Waller, 394 B.R. 111 (Bankr. S.C. 2008); In re Caraballo, 386 B.R. 398 (Bankr. Conn. 2008); In re Wilson, 372 B.R. 816 (Bankr. S. C. 2007); In re Bennet, No. 06-80241, 2006 WL 1540842 (Bankr. M.D. N.C. May 26, 2006). Each of these courts held that debtors owning real estate encumbered by mortgage loans can retain their homes by making regular payments and need not redeem or reaffirm, finding that BAPCPA, first, made no significant change to Section 521(a)(2)(A), and, second, that the three new or altered provisions in BAPCPA (Sections 521(a)(6), 521(a)(2)(C), and 362(h)) only removed the ride-through option as to personal property. BAPCPA essentially is silent as to whether a debtor is required to either reaffirm or redeem real property. Therefore, in concluding that the ride-through option survives as to real but not personal property, each of these courts ultimately rested their opinions upon the established law that existed in their particular jurisdiction prior to BAPCPA.

The debtor now argues that this Court should ignore the Eleventh Circuit opinion in Taylor and hold that, because BAPCPA only required a debtor to expressly reaffirm a debt or redeem personal property, it implicitly allows debtors to make other decisions, such as using the ride-through option, in connection with real property. The Court rejects the debtor's position.

The Eleventh Circuit was clear under the still unchanged language of Section 521(a)(2)(A)a debtor must act either to redeem or to reaffirm a debt if the debtor desires to retain the collateral. The appellate decision makes no distinction between real or personal property; nor is any distinction merited. The Eleventh Circuit looked at the plain language of the statute and interpreted the language to prohibit ride-through, regardless of the type of property involved. The modifications enacted by BAPCPA simply support the Eleventh Circuit's conclusion as to personal property. Nationally, debtors no longer can keep personal property without reaffirming the debt or redeeming the property. All debtors are treated similarly in every circuit.

The Court acknowledges that a split apparently still exists as to real property collateral. Certain courts in jurisdictions that previously allowed the ride-through option have returned to pre-BAPCPA law to conclude that the option remains viable for real property. However, such is not the case in this circuit. The Eleventh Circuit clearly has stated that a Chapter 7 debtor must either redeem or reaffirm a debt if the debtor wants to keep the collateral. As to personal property, the ruling is national. As to real property, the decision in Taylor is still applicable and controlling, unless and until the Eleventh Circuit rules otherwise.

Accordingly, the debtor in this case may surrender the real property, or, if he chooses, he may either redeem the property or reaffirm the debt in order to comply with Section 521(a)(2)(A).[4] The Court will grant Riverside's motion (Doc. No. 14) and compel the debtor to file an amended statement of intention and perform the appropriate action within 30 days of the entry of this order. In the interim, the Clerk is directed to defer entry of the discharge for a sixty-day period to ensure the debtor's compliance with this order. A separate order consistent with this Memorandum Opinion shall be entered.

Dumont v. Ford Motor Credit Co. (In re Dumont)

9th Cir. - 581 F. 3d 1104 - 2009-09-15 - 7 , NA

Google ID#: 9021870462007526958
(Type A : Ride through not permitted if debtor did not propose a reaffirmation )

"At least where the debtor has not attempted to reaffirm, our decision in Parker has been superseded by BAPCPA."

In re Morton (Ford Motor Credit Co. v. Morton)

bankr. 6th Cir. - 410 B.R. 556 - 2009-09-09 - ,

Google ID#: 16095502097696863632
(Type D : Attorney "Backdoor Ride Through Catch 22": Must sign off on reaffirmation as being in debtor's best interest, so judge can reject as NOT being in debtor's best interest. )

"Attorney-certified reaffirmation agreements are effective upon filing so long as there is no presumption of undue hardship"

In re Hamilton

Bankr.D.Alaska - ___ B.R. ___ - 2009-06-09 - 7 , NA

Google ID#: 7756942365058066683
(Type C : "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm )

"For the reasons stated on the record, the reaffirmation creates an undue hardship per 11 U.S.C. § § 524(m). In this instance, the collateral at issue is real property. There is some debate whether the doctrine of "backdoor ride-through" survived BAPCPA with respect to personal property."[1] Courts are agreed, however, that BAPCPA's changes, including termination of the automatic stay and ipso facto post-petition defaults, do not apply where real property secures a debt, and debtors may still retain, or ride through, real property without reaffirmation or redemption so long as payments to the creditor are current.[2] Therefore,

IT IS ORDERED that the court disapproves the reaffirmation agreement per 11 U.S.C. § § 524(m). Debtor and the creditor are given 20 days from the date of this order within which to file a request for reconsideration of this order.

[1] The BAP held in In re Dumont, 383 BR 481 (9th Cir BAP 2008) that the ride-through doctrine with respect to personal property did not survive the enactment of BAPCPA in 2005, but in that case no reaffirmation agreement had been filed. Dumont favorably cited In re Moustafi, 371 BR 434 (Bankr D AZ 2007) in which a reaffirmation agreement involving personal property had been filed, but the court disapproved it as not being in the debtor's interest. In Moustafi, the court allowed "backdoor ride-through" per §524(m), though it did not cite that section specifically (i.e., the creditor could not declare a default post-discharge so long as the payments were current and debtor had sought reaffirmation, but the court denied approval). The "backdoor ride-through" concept is explained in Will the Ride-Through Ride Again, 108 Columbia LR 882 (2008). A secured creditor in this situation would be wise to seek relief from stay or affirmative approval to repossess in order to avoid running afoul of the automatic stay under 11 USC § 362(a) or the discharge injunction under 11 USC § 524(a), should these statutes protect the debtor in a "backdoor ride-through" scenario. Most courts that have discussed the issue have found "backdoor ride-through" is available. Coastal Federal Credit Union v Hardiman, 398 BR 161. 181-88 (EDNC 2008); In re Schmidt, 397 BR 481, 485-86 (Bankr D MD 2008) [dicta]; In re Chim, 381 BR 191, 198-99 (Bankr D MD 2008); In re Hudain, 364 BR 211, 218-19 (Bankr ED VA 2007); and, In re Blakeley, 363 BR 225, 231 (Bankr D VT 2007).

[2] In re Hart, 402 B.R. 78, 82 (Bankr. D. Del. 2009), In re Caraballo, 386 B.R. 398, 401-02 (Bankr. D. Conn. 2008), In re Wilson, 372 B.R. 816, 820 (Bankr. D.S.C. 2007), In re Bennett, 2006 WL 150842 (Bankr. M.D.N.C. 2006)."

In re Jensesn

Banrk. C.D.Cal - 407 B.R. 378 - 2009-04-28 - 7 ,

Google ID#: 8903358563729138555
(Type E : )

Detailed discussion of current status of "ride Through" opitons

In re Hart

Bankr.D.Delaware - 402 B.R. 78 - 2009-03-10 - ,

Google ID#: 14025008805483322704
(Type C : "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm )

The Court makes two findings. First, under the Third Circuit's opinion in Price[2] and section 521 of the Bankruptcy Code, the debtors' loans may "pass through" the bankruptcy case unaffected if the debtors declare their intention to retain the collateral and continue to make regular payments, which the debtors have done.[3] Second, the Court disapproves the reaffirmation agreement under section 524(m) of the Bankruptcy Code because the presumption of undue hardship has not been rebutted.

In re Baker

D.Delaware - 400 B.R. 136 - 2009-01-29 - 7 ,

Google ID#: 15624132961094368634
(Type C : "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm )

Creditor violated automatic stay by reposessing vehicle after bankruptcy discharge even though debtor had taken advantage of "backdoor ridetrhough" (see earlier Baker ruling at 390 BR 424).

In re Minardi

N.D.Oklahoma - 399 B.R. 841 - 2009-01-23 - ,

Google ID#: 11883250454578921841
(Type D : Attorney "Backdoor Ride Through Catch 22": Must sign off on reaffirmation as being in debtor's best interest, so judge can reject as NOT being in debtor's best interest. )

Attorney attempts to get clever to allow reaffirmation agreement disaproved, by letting debtor go pro se as to reaffirmation. Court says attorney can't limit his represenation like that. Attorney left with Catch 22, and has to sign off on reaffirmation being in debtor's best interest, in order to file it -- so the judge can reject it.... What's an attorney to do??? And pity the poor confused client trying to make sense of it all.....

In re Schmidt

Bankr. W.D.Missouri - 397 B.R. 481 - 2008-11-17 - ,

Google ID#: 16702856082031098033
(Type C : "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm )

Real estate case, where attorney had signed off on the reaffirmation of a mortgage, but court disapproved of it anyway,
"The next question is what is the consequence of the decision not to approve these Agreements. Does that mean that Wells Fargo has the authority to foreclose on the mortgages, even if the Debtor remains current in his payments? I previously held, as to motor vehicles, that ipso facto provisions in security agreements are not enforceable under Missouri law against a debtor who attempted unsuccessfully to reaffirm the debt.[16] The same is specifically so under Missouri law as to second mortgage loans as well,[17] including the one held by Wells Fargo here.

In any event, the Debtor here has fully complied with any obligations he may have under § 521 by submitting the Reaffirmation Agreements, even though the Court does not approve them. I note that the Eighth Circuit has never ruled on the question of whether a bankruptcy debtor who is current on an installment obligation is required by § 521 to either reaffirm or redeem the debt, or surrender the property. Prior to the enactment of BAPCPA, there was a very clear split of authority among the courts, including the bankruptcy courts in this district,[18] on the question of whether debtors who were current with payments on secured debts were limited to the options of surrender, reaffirmation, or redemption found in § 521(a)(2), or whether they could also choose to simply continue making payments and retain possession of the property, known as the "fourth option" 486 or "ride through."[19] If the "fourth option" is available, a debtor who later defaults would expect to have the collateral repossessed or foreclosed, but the bankruptcy discharge would serve to eliminate personal liability for any deficiency claim after the sale of such collateral.

However, BAPCPA's amendments to the Code may have changed the analysis of that issue. Specifically, as part of BAPCPA, Congress added § 362(h) and § 521(a)(6) to the Code, which effectively eliminated the fourth option, but only as to personal property. Many of the pre-BAPCPA decisions on both sides of the issue focused on the meaning of the phrase "if applicable" in § 521(a)(2)(A), in which the debtor is to specify that the property is claimed exempt, that the debtor intends to redeem such property, or that the debtor intends to reaffirm the debt.[20] However, since BAPCPA specifies adverse consequences only as to personal property, some courts have held that § 521(a)(2)(A) is only "applicable" if the debt is secured by personal property, and a debtor need not specify one of the three options as to real property.[21] I leave that issue for a case in which I am asked to decide it."

Coastal Federal Credit Union v Hardiman

E.D.N.C. - 398 BR 161 - 2008-10-28 - ,

Google ID#: 2118928967638828500
(Type C : "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm )

Coastal underestimates the real-world consequences to a debtor who engages in such foolish practices. Coastal admits that, under the bankruptcy court's decision in this case, all portions of the Hardimans' vehicle contract (including the lien), save for the threat of a personal deficiency judgment, "ride through" the bankruptcy. Indeed, "`[i]t is well-settled that a bankruptcy discharge extinguishes only one mode of enforcing a claim namely, an action against the debtor in personam while leaving intact another namely, an action against the debtor in rem.' `Thus, liens on property remain enforceable after discharge....'" In re Anderson, 348 B.R. 652, 655 (Bankr.D.Del.2006) (quoting Johnson v. Home State Bank, 501 U.S. 78, 84, 111 S.Ct. 2150, 115 L.Ed.2d 66 (1991) & In re Holloway, 81 F.3d 1062, 1063 n. 1 (11th Cir.1996), respectively (internal citations omitted)); see Estate of Lellock v. Prudential Ins. Co. of Am., 811 F.2d 186, 188-189 (3d Cir.1987): Chandler Bank of Lyons v. Ray, 804 F.2d 577, 578-79 (10th Cir.1986) (per curiam). Should a debtor fail to uphold a contractual duty to make timely payments, insure the collateralized vehicle, or otherwise violate any other provision of the underlying contract (including the lien), the creditor would be able to seek to repossess the vehicle under state law if the contract permits. See, e.g., Belanger, 962 F.2d at 349.

Moreover, and significantly, even if the bankruptcy court refuses to approve the uncounseled debtor's reaffirmation agreement, that result does not mean that in all cases the debtor will be allowed to "ride through" the bankruptcy with the collateral. Rather, just like pre-BAPCPA, a "creditor can obtain relief under § 362(d) for `cause.' Cause is not defined in the Code and a bankruptcy court has broad discretion to lift the stay in `appropriate circumstances.'" In re Cooper, 296 B.R. 410, 412 (Bankr.E.D.Va.2002) (footnote omitted) (quoting In re Holtkamp, 669 F.2d 505, 508 (7th Cir.1982)). In attempting to demonstrate "cause," a creditor usually would need to show some "affirmative harm." Cooper, 296 B.R. at 412. In evaluating "cause," a bankruptcy court would examine "the debtor's `previous payment record, a comparison of the value of the collateral and the amount of debt, and other relevant facts.'" Id. at 412 (quoting In re Boodrow, 126 F.3d 43, 52 (2d Cir. 1997)); accord Price, 370 F.3d at 373, 377; Am. Nat'l Bank & Trust Co. v. DeJournette, 222 B.R. 86, 92-97 (W.D.Va.1998). Further, if the debtor had no equity in the property, the bankruptcy court could terminate the automatic stay. See 11 U.S.C. § 362(d) ("On request of a party in interest 184 and after notice and a hearing, the court shall grant relief from the stay ... if... the debtor does not have an equity in such property; and ... such property is not necessary to an effective reorganization...."). Thus, the creditor is not as helpless as Coastal implies.

Additionally, a rational debtor would not only have to be concerned with the legal consequences of the contract including the lien, but also with the practical consequences of mistreating the vehicle. "The automobile is a crucial piece of property for many individuals and integral to most Americans' daily lives." Christopher M. Hogan, Note, Will the Ride-Through Ride Again?, 108 Colum. L.Rev. 882, 907 (2008) (citation omitted). "[T]he automobile is [often] the only way to retain employment or seek education anywhere far from the home. When a debtor files for bankruptcy, his car will be one of the most, if not the most, important pieces of property that he will want to keep." Id. (citation omitted). A debtor cannot simply mistreat such a vehicle without serious consequences. If a debtor mistreats the vehicle, the debtor will very likely need to purchase another vehicle, which will very likely require a new loan at far more unfavorable terms than the previous one, given the debtor's status as formerly bankrupt. And the debtor cannot expect to simply refile for bankruptcy to escape this new debt. See 11 U.S.C. § 727(a)(8) (prohibiting a Chapter 7 discharge where "the debtor has been granted a discharge ... in a case commenced within 8 years before the date of the filing of the petition").

Ultimately, it is not this court's role to analyze whether the language in BAPCPA constitutes good policy. See, e.g., Sunterra, 361 F.3d at 268-69. Likewise, it is not this court's role to determine whether Congress could have done a better job in drafting BAPCPA. See id. at 269. Rather, under the governing principles of statutory construction, this court must analyze whether it is plausible that Congress could have chosen to spare uncounseled debtors whose reaffirmation agreements were not approved by the bankruptcy court from automatically losing the protection of the automatic stay, becoming subject to any applicable ipso facto clause, and becoming subject to both repossession and a personal deficiency judgment. For the reasons discussed, Congress could plausibly have chosen the result that flows from BAPCPA's plain language. Accordingly, the absurdity exception does not apply.

In re Waller

Bankr.D.S.C. - 394 B.R. 111 - 2008-09-25 - ,

Google ID#: 16682034567324957977
(Type : )

Debtors who are current with payments on debts secured by real property are not limited to the options of surrender, reaffirmation, or redemption found in § 521(a)(2), but may also choose to continue with the payments and retain possession of the property. This option, commonly known as "ride-through," was embraced by a number of federal judicial circuits, prior to the enactment of the 2005 Amendments and applied to both real property and personal property. See, e.g., Home Owners Funding Corp. v. Belanger (In re Belanger), 962 F.2d 345, 347 (4th Cir.1992); In re Price, 370 F.3d 362, 379 (3d Cir.2004); McClellan Fed. Credit Union v. Parker (In re Parker), 139 F.3d 668, 673 (9th Cir.1998); Capital Comm. Fed. Credit Union v. Boodrow (In re Boodrow), 126 F.3d 43, 51 (2d Cir. 1997); Lowry Fed. Credit Union v. West, 882 F.2d 1543, 1547 (10th Cir.1989).

This Court recently confirmed the viability of the "ride-through" option for debts secured by real property. In re Wilson, 372 B.R. 816, 820 (Bankr.D.S.C.2007). In Wilson, the Court noted the changes made to the Bankruptcy Code by the 2005 Amendments and stated that the changes apply only to debts secured by personal property. Id. at 818. The relevant language of § 521(a)(2)(C) provides that "nothing in subparagraphs (A) and (B) of this paragraph shall alter the debtor's or the trustee's rights with regard to such property under this title, except as provided in section 362(h)." 11 U.S.C. § 521(a)(2)(C). Section 362(h) employs limiting language that terminates the automatic stay as to personal property when the debtor fails to state an intention to surrender, reaffirm, redeem, or does not perform the stated intention within a prescribed period. Wilson at 818, citing, 11 U.S.C. § 362(h). The plain language of §§ 521(a)(2)(C) and 362(h) "limits their application 114 to a debtor's rights with regard to personal property." Id.

It is presumed that Congress enacts legislation "with knowledge of the law, including knowledge of the interpretation that courts have given to an existing statute." In re Bennet, No. 06-80241, 2006 WL 1540842, at *1 (Bankr.M.D.N.C. May 26, 2006), citing, U.S. v. Langley, 62 F.3d 602, 605 (4th Cir.1995). For this reason, the right of debtors to continue current payments on debts secured by real property and retain the collateral established in Belanger remains intact. Id., See also, Wilson at 819. Congress curtailed the ride-through option for debts secured by personal property but not with regard to debts secured by real property. See, In re Caraballo, 386 B.R. 398, 402 (Bankr. D.Conn.2008). "Limiting a debtor to the three choices of surrender, redeem, or reaffirm for real property would impair the debtor's ability to obtain a fresh start, which is one of the primary purposes of bankruptcy law." Wilson at 819, citing, Local Loan Co. v. Hunt, 292 U.S. 234, 244, 54 S.Ct. 695, 699, 78 L.Ed. 1230 (1934).

In this case, the Reaffirmation Agreements are not in Debtors' best interest because Debtors can retain the real property without reaffirming the debt. For this reason, approval of the Reaffirmation Agreements is denied.

In re Baker

D.Delaware - 390 B.R. 524 - 2008-06-10 - ,

Google ID#: 7567158202155091391
(Type C : "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm )

The Court finds that, under the Third Circuit's opinion in Price,[2] the Debtors' car loan "passed through" the bankruptcy case unaffected because the Debtors timely entered into a reaffirmation agreement and they are current with their payments. The Court further finds that there was no basis for repossession under Delaware law because the only default that Creditor could assert was based on an unenforceable ipso facto clause. Finally, because the repossession of the Debtors' vehicle was a violation of the discharge injunction, the Court will order Creditor to return the vehicle and will award compensatory damages to the Debtors.
Note: Affirmed at 400 B.R. 136 where court held creditor in violating automatic stay for reposessing vehicle after discharge.)

In re Caraballo

Bankr.D.Connecticut - 386 BR 398 - 2008-04-29 - ,

Google ID#: 1257903398197402351
(Type : )

Boodrow and Sokolowski permitted application of the ride through option with respect to both real property and personal property.[5] Code § § 521(a)(6) and 362(h) abrogated the ride through option as it pertains to personal property. However, courts have concluded that the ability of a debtor to choose the ride though option as it relates to real property was not abrogated by BAPCPA. See In re Wilson, 372 B.R. 816, 820 (Bankr.D.S.C.2007) ("[T]he Court finds that ... controlling precedent in the Fourth Circuit ... provides for a `ride through' option for real property that was unaffected by the BAPCPA amendments."); In re Bennett, No. 06-80241, 2006 WL 1540842, at *1 (Bankr.M.D.N.C. May 26, 2006) ("[T]he court finds that 402 debtors ... continue to have the right ... to retain real property without being required to reaffirm or redeem, so long as payments to the creditor are current.").

The court "assume[s] that Congress passed each subsequent law with full knowledge of the existing legal landscape...." Northwest Airlines Corp. v. Association of Flight Attendants-CWA (In re Northwest Airlines Corp)., 483 F.3d 160, 169 (2d Cir.2007). See also Garcia v. Teitler, 443 F.3d 202, 207 (2d Cir.2006) ("We should assume ... that Congress legislated against a background of law already in place and the historical development of that law." (citation and internal quotation marks omitted) (modification in original)). For this court, the pre-BAPCPA "existing landscape" is defined by Boodrow, Sokolowski and cases interpreting those decisions which held that the ride through option applied to real property and personal property. Accordingly, this court must conclude that when Congress eliminated the ride through option for personal property in BAPCPA, Congress was aware that there was a ride through option for real property and intended to leave it intact post-BAPCPA. Consequently, the court agrees with the Bennett and the Wilson courts and concludes that debtors are permitted to take advantage of the ride through option with respect to relevant real property. As a result, the court also must find and/or conclude that the Reaffirmation Agreements are not in the Debtor's best interest and must be disapproved.

III. CONCLUSION

For the reasons discussed above, the court amends the Second Finding and concludes that the Reaffirmation Agreements are not in the best interest of the Debtor because she could retain the subject real property without reaffirming the Debt. As a result, marginal orders will enter (1) disapproving the Reaffirmation Agreements and (2) denying the Motions.

In re Chim

Bankr.D.Maryland - 381 B.R. 191 - 2008-01-25 - ,

Google ID#: 11444900319920261417
(Type C : "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm )

Court lays out the step by step approach to a "back door ride through" via rejection of a reaffirmation agreement.

"Further, at the hearing, it became clear that one of the Debtor's primary reasons for entering into the Reaffirmation Agreement is her concern that, if the Court disapproved the Reaffirmation Agreement, the Lender could exercise the creditorrelief provisions of Sections 362(h), 521(a)(6) and 521(d) by, among other 193 things, declaring a default under the ipso facto[2] provision of her loan contract and repossessing the vehicle notwithstanding the fact that she remains current on the loan. The Court finds and concludes that the Debtor has complied with the requirements of Section 521(a)(2) by timely stating her intention to reaffirm the loan and by timely entering into the Reaffirmation Agreement with the Lender. Therefore, the provisions of Sections 362(h), 521(a)(6) and 521(d) do not apply, and the automatic stay remains in place with respect to the vehicle, the vehicle remains property of the estate, the Debtor is hot obligated to turn over possession of the vehicle, and the Lender may not exercise remedies as a result of default under the ipso facto provision under the loan agreement. Stated otherwise, where a debtor timely complies with Section 521(a)(2), the mere fact that the Court does not approve the reaffirmation agreement does not trigger the creditor relief provisions of Sections 362(h), 521(a)(6) or 521(d), Accordingly, the Debtor's concern that the Lender may invoke the creditor-relief provisions of Sections 362(h), 521(a)(6) or 521(d) if the Court disapproves the Reaffirmation Agreement is not warranted, and is not sufficient to overcome the presumption of undue hardship."

In re Moustafi

Bankr.D.Ariz - 371 B.R. 434 - 2007-06-04 - 7 , NA

Google ID#: 11049440995269440043
(Type C : "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm )

"The Debtor complied with the requirements of the Bankruptcy Code by timely filing her statement of intention and timely entering into a reaffirmation agreement with the credit union that holds a security interest in her car. That reaffirmation agreement will not, however, be approved because the Debtor's net monthly income is less than her expenses and because the car is worth less than what she owes on it. Despite the changes made to the Bankruptcy Code by the Bankruptcy Abuse Prevention and Consumer Protection Act ("BAPCPA"), a debtor may still, under certain limited circumstances, retain a car even without a court approved reaffirmation agreement. This is such a case."

In re Stevens

Bankr.E.D.Virgina - 365 B.R. 610 - 2007-03-09 - ,

Google ID#: 702440142184771044
(Type C : "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm )

"The Court is cognizant that if it does not approve the Reaffirmation Agreement, it will be rendered unenforceable. However, this does not mean that the Debtor will lose her Vehicle. The Court has previously ruled that the need for a debtor to retain a vehicle is not, in and of itself, sufficient to overcome the presumption of undue hardship. In re Husain, 364 B.R. 211, 217-19 (Bankr.E.D.Va.2007). Furthermore, whether or not the Reaffirmation Agreement should be approved is separate and distinct from the "performance" requirements of § 362(h) and § 521(a) of the Bankruptcy Code. Id.

As the Debtor has done everything in her capacity to comply with the requirements of § 362(h) and § 521(a) of the Bankruptcy Code, § 521(d) of the Bankruptcy Code is inapplicable to this case. The automatic stay and the discharge injunction will continue to protect the property of the Debtor. The Debtor is current on her payments due under the note held by National Auto Sales and is maintaining the required insurance on the Vehicle postpetition. National Auto Sales may continue to accept payments from the Debtor, 11 U.S.C. § 524(1)(1), but it may not repossess the Vehicle without violating the automatic stay and the discharge injunction unless there is a subsequent payment or insurance default. In re Husain, 364 B.R. at 219-20, citing In re Riggs, No. 06-60346, 2006 WL 2990218, at *3 (Bankr. W.D.Mo. Oct.12, 2006) (declining to approve reaffirmation agreement on undue hardship grounds, finding debtor had fully performed duties under § 521(a) notwithstanding court's ruling that agreement would be disapproved and unenforceable; and holding § 521(d) was not triggered and secured creditor could not repossess collateral based solely upon default under security agreement's ipso facto clause; collateral could be repossessed only in event of a payment or insurance default or if creditor's position is or became "significantly impaired.")."

In re Hussain

Bankr. E.D.Virginia - 364 B.R. 211 - 2007-03-05 - ,

Google ID#: 5122241988197630620
(Type C : "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm )

"In this, case, the Court finds that the Debtors fully and timely performed their duties under 11 U.S.C § 521(a) and under 11 U.S.C § 362(h) in filing the statement of intention and in signing and filing the reaffirmation Agreement(s) and sending the executed Agreement(s) to the applicable creditors within the prescribed time limits. As the Court has found that the Debtors fully complied with all of the requirements of § 362(h) and § 521(a) of the Bankruptcy Code, any ipso facto clause that may be contained in the original loan documents between the Debtors and the creditors cannot be revived by the newlycreated provisions of § 521(d) of the Bankruptcy Code. The bankruptcy filing does not in and of itself trigger an automatic default in the underlying loan documents. In re Belanger, 962 F.2d at 348. Once the discharge is granted, the creditors may not repossess the vehicles without violating the discharge injunction unless there is a subsequent payment or insurance default. In re Riggs, No. 06-60346, 2006 WL 2990218, at *3 (Bankr.W.D.Mo. Oct.12, 2006) (declining to approve reaffirmation agreement on undue hardship grounds, finding debtor had fully performed duties under § 521(a) notwithstanding court's ruling that agreement would be disapproved and unenforceable; and holding § 521(d) was not triggered and secured creditor could not repossess collateral based solely upon default under security agreement's ipso facto clause; collateral could be repossessed only in event of a payment or insurance default or if creditor's 220 position is or became "significantly impaired."); In re Quintero, 2006 WL 1351623."

In re Blakeley

Bankr.D.Utah - 363 BR 225 - 2007-01-17 - ,

Google ID#: 7572009884430292114
(Type C : "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm )

"Because Debtor has fully complied with all of the requirement under each of the above subsections, none of the remedies contained in the subsections apply to this Debtor or her vehicle. It is not necessary for the Court to approve the reaffirmation agreement in order for the Debtor to comply with § 521 or § 362(h). This means that so long as the Debtor timely makes all required payments under the vehicle purchase contract, and complies with all other requirements under the contract, the Debtor may "ride through" the bankruptcy and retain possession of the vehicle notwithstanding the fact that the Court refused to accept the reaffirmation agreement.

While BAPCPA has done away with simple "ride through" in bankruptcy, it has not entirely eliminated the possibility that a debtor can "ride through" a bankruptcy and retain possession of secured personal property. Under the limited circumstances stated above, where a debtor timely complies with all requirements, under §§ 521 and 362(h), the debtor can "ride through" the bankruptcy notwithstanding a bankruptcy court's refusal to approve the reaffirmation agreement.

Because the Debtor fully complied with the requirements under § 521, the Bankruptcy Codes limitations on contract; ipso facto clauses remain in effect and the Credit Union is prohibited from declaring the contract in default by virtue of the Debtor's insolvency or bankruptcy.

Based upon the above, the court finds that so long as the Debtor adheres to the terms of the contract, the Debtor is entitled to remain in possession of the vehicle regardless of the Court's approval or refusal to approve the reaffirmation agreement. With all other things being, equal, the only question left is whether it is in the Debtor's best interest for the Debtor to be personally liable on any deficiency in the event that the vehicle is repossessed. The answer is no, and for that reason, the Court will deny approval of the reaffirmation agreement. Based upon the above, it is hereby"

In re Donald

Bankr.E.D.N.C. - 343 B.R. 524 - 2006-06-12 - 7 ,

Google ID#: 14394918521098274550
(Type C : "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm )

The court approached its analysis of the "ride-through" option under BAPCPA in same manner it considered the "ride-through" option in Belanger. In re Belanger, 118 B.R. 368, (Bankr.E.D.N.C. 1990), aff'd, 962 F.2d 345 (4th Cir.1992). The court is aware, as it was in Belanger, that providing a fresh start for honest debtors is one of the "primary purposes" of the bankruptcy law, and that a limiting interpretation contrary to that purpose "should not be adopted unless it is clearly required by the statute." Belanger, 118 B.R. at 370, aff'd, 962 F.2d 345.

There are good arguments that the "ride-through" option still is available to chapter 7 debtors, but the two courts that have considered the issue have concluded that the "ride-through" option was terminated by amendments to the Bankruptcy Code made by BAPCPA. In re Craker, 337 B.R. 549 (Bankr.M.D.N.C.2006); In re Rowe, 342 B.R. 341 (Bankr.D.Kan.2006). These are well reasoned decisions, and the court agrees with the conclusion they reach. Congress chose not to change § 521(2)(A) and (B) (now § 521(a)(2)(A) and (B)), the principal sections that supported the "ride-through" option, but the elimination of the "ride-through" was accomplished by changes to § 521(2)(C) (now 521(a)(2)(C)) and the addition of 540 § 362(h), § 521(a)(6) and § 521(d). The court is convinced that termination of the "ride-through" option is what Congress intended.[10]

The court must now address the debtors' alternative argument.

May a Debtor Comply with §§ 521(a)(2), 362(h), 521(c)(6) and 521(d) by Entering into a Reaffirmation Agreement that Is Unenforceable?

The debtors contend that a chapter 7 debtor may avoid all of the consequences arising from §§ 362(h), 521(a)(6), and 521(d) by executing a reaffirmation agreement, even in circumstances where the reaffirmation agreement is, or will become, unenforceable. Whether the reaffirmation agreement is ultimately disapproved or deemed enforceable, the debtors argue, are issues that are separate and distinct from the act of entering into the agreement. According to the debtors, the consequences arising from §§ 362(h), 521(a)(6), and 521(d) are triggered upon the debtor's failure to enter into the agreement, not by the court's disapproval of the agreement or a determination that the agreement is unenforceable. Coastal, however, maintains that to avoid the consequences arising from §§ 362(h), 521(a)(6), and 521(d) a debtor must enter into a reaffirmation agreement and that the agreement must be enforceable.

The debtors' argument is creative and appealing, and indeed it may prevail in some circumstances. But to adopt the debtors' position in this case would be tantamount to abrogating the requirements of § 362(h) and § 521(d). For the debtors to be able to retain their 1999 Lexus ES-V6, they must either redeem the vehicle or reaffirm their obligation to Coastal. Rather than facing the consequences of a termination of the stay under § 362(h) and the elimination under § 521(d) of the limitations on the enforcement of Coastal's ipso facto clause, the debtors chose to reaffirm the indebtedness. The court agrees that reaffirmation was a wise decision and finds that the reaffirmation agreement is in the best interest of the debtors and will not cause them any undue hardship. Accordingly, the reaffirmation will be approved.

This does not mean that the debtors' argument will always fail. Section 524(c) sets forth the requirements that must be met for a reaffirmation agreement to be enforceable. Several of those requirements do not involve the debtor, and whether or not an agreement is enforceable may often be beyond the debtor's control. For example, an agreement prepared by a creditor may be unenforceable because the agreement does not contain the disclosures required by § 524(c) and (k). See, e.g., In re Quintero, 2006 WL 1351623 at *3 (finding agreement unenforceable due to creditor's failure to timely comply with § 524(k) and, on that basis, prohibiting creditor from repossessing 541 car). (Bankr.N.D.Cal.2006). Furthermore, an agreement may be unenforceable under § 524(c)(3) because it is not filed with the court.

In some circumstances a reaffirmation agreement entered into by the debtor in good faith may satisfy the requirements of § 362(h), § 521(a)(6) and § 521(d) where the court disapproves the reaffirmation agreement under § 524(c)(6), especially where the debtor intends to perform under the reaffirmation agreement and where disapproval by the court is beyond the debtor's control.[11]

It also is worth acknowledging that, ultimately, whether or not the "ride-through" option survives the new statutory hurdles may not make much of a difference to many debtors and creditors because in this circuit, and also in those that do not recognize the "fourth option," debtors continue to submit payments when due and creditors continue to accept them. Creditors frequently acquiesce in ride-through because chapter 7 debtors "usually become[] better able to afford paying secured debts, and this gain in creditworthiness may mote than `offset the creditor's loss of recourse against the debtor personally after discharge." Jean Braucher, Rash and Ride-Through Redux: The Terms for Holding On to Cars, Homes and Other Collateral Under the 2005 Act, 13 Am. Bankr.Inst. L.Rev. 457, 476 (Winter 2005). Creditors usually prefer payment to repossession, and in most cases where the debtors are current with their installment obligations, the secured creditor will be paid in full, the debtor will keep the property, and, fortunately, whether or not the "ride-through" option is available will not matter.

In re Quintero

Bankr. N.D. Cal. - 2006 WL 1351623 - 2006-05-17 - ,

Google ID#:
(Type C : "Backdoor Ride Through" permitted where debtor unsuccessfully seeks to reaffirm )

section 521(a)(6) does not require reaffirmation agreement to be approved

In re Rowe

D.Kan. - 342 B.R. 341 - 2006-05-10 - ,

Google ID#: 1071263325083500652
(Type B : Depends on state law issues re waver of right to repossess if current payments are accepted )

"ride through option not available after BAPCPA. No protection by stay. but "although Congress technically eliminated the "fourth option," as now there are consequences for failing to obtain a right of continued possession through redemption or reaffirmation, as applied to consumer transactions, in Kansas the creditor's remedy of expiration of the stay in many cases will be illusory, because the conditions to declare a default and obtain possession of the collateral will not be present under Kansas law when the 352*352 debtor remains current on the obligation and there is no other basis for finding significant impairment" (BUT See Hall v Ford Motor Credit co. LLC, (Kansas S.Ct 2011)

In re Price

3rd Cir - 370 B.R. 362 - 2004-02-03 - ,

Google ID#: 3822800023471030309
(Type : )

Main 3rd Circuit authority before BAPCPA.

In re Burr

1st Cir. - 160 F.3d 843 - 1998-11-25 - ,

Google ID#: 13859586450413514490
(Type : )

Main 1st Circuit authority before BAPCPA. - NOT allowing ride through.

In re Parker

9th Cir. - 139 F.3d 668 - 1998-03-17 - ,

Google ID#: 16962936717287705780
(Type : )

Main 9th Circuit authority before BAPCPA. - Allowing ride through.

In re Boodrow

2d Cir - 126 F.3d. 43 - 1997-09-12 - ,

Google ID#: 15036954109872325970
(Type : )

Main 2nd Circuit authority before BAPCPA. - Allowing ride through.

In re Johnson

5th Cir - 89 F.3d 249 - 1996-07-26 - ,

Google ID#: 55814360578555588
(Type : )

Main 5th Circuit authority before BAPCPA. - NOT allowing ride through.

In re Taylor

11th Cir. - 3 F.3d 1512 - 1993-10-13 - ,

Google ID#: 2665620218587266004
(Type : )

Main 11th Circuit authority before BAPCPA. - NOT allowing ride through.

In re Belanger

4th Cir. - 962 F.2d 345 - 1992-04-27 - ,

Google ID#: 13209982855477841840
(Type : )

Main 4th Circuit authority before BAPCPA. - Allowing ride through.

In re Edwards

7th Cir - 901 F.2d 1387 - 1990-04-27 - ,

Google ID#: 4937494646125081785
(Type : )

Main 7th Circuit authority before BAPCPA. - NOT allowing ride through.

Lowry Fed. Credit Union v. West

10th Cir - 882 F.2d 1543 - 1989-08-18 - ,

Google ID#: 2164148674756354577
(Type : )

Main 10th Circuit authority before BAPCPA. - Allowing ride through.

In re Bell

6th Cir - 700 F.2d 1053 - 1983-02-22 - ,

Google ID#: 4469311618811621767
(Type : )

Main 6th Circuit authority before BAPCPA. - NOT allowing ride through.

In re Bennet

Bankr. M.D.N.C. - - - ,

Google ID#:
(Type : )

A debtor can ride through on real property but disagreeing about the role of the court in approving a reaffirmation on a real property loan for an unrepresented debtor.

In re Law

1/19/2010 - 421 B.R. 735 - - ,

Google ID#: 7991550619724689971
(Type E : )

Pro se debtor's reaffirmation of mortgage was of no benefit so court delayed entry of discharge so she could rescind the agreement. because, persuant to In re Price, 370 F.2d 362 (3rd cir 2004). Because debt was secured by real property, court could not rescind the agreement, but debtor could, so court allowed 60 days for her to do so if she wished.

In re Pope

Bankr. E.D.Va - - - 2011 ,

Google ID#: 328449291181308593
(Type E : )

Court will not reaffirm mortgage because ride through is still valid for mortgages and reaffirmation would not be in debtor's best interest. Fact that lender is demanding reaffirmation to get a loan modification does not change result. Court will reaffirm the modification once it has done, but it will not reaffirm original debto as a condition of the loan modification.

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How to use case law (it can be tricky)

If you're not familiar with what "case law" is, and how to use it, check out Chapter 7 of Nolo's LegalResearch: How to Find and Understand the Law for a guide to how to read through a case to get the parts that matter.

Also, you need to be familiar with the concept of "jurisdiction." Here are some helpful links:

When you read a case, check to make sure that the case's decision applies to your local district. Do this by looking at which court has decided the case -- either the U.S. Supreme Court, a court of appeal (listed here in large type), or a district court (listed in small type).  Your local district court judge is not bound to follow the opinion of judges from other district courts, but often they look to these cases for advice. Your local district, however, is bound  to follow decisions in cases from it governing circuit court. You'll see fairly few Supreme Court case here, but those cases are also binding on all districts."

Are these all the bankruptcy cases there are?

NO! NO! NO! This is a start for your research. New cases are constantly being decided. I update this when I have time. This is only a fraction of the actual published opinions out there. Dozens of cases are handed down nationwide every week. I catalog interesting ones when I have time. They are meant to serve as a starting point for your research -- NOT as a comprehensive listing of the current state of the law.

 

DISCLAIMER. By using this database you acknowledge and agree to the following:

This database does not contain every relevant case in every district on the topics covered; there are high priced services for that. This is free. It is offered to the public "as is" as an adjunct to the Nolo books, How to File Chapter 7 Bankruptcy, and Chapter 13 Bankruptcy: Keep Your Property and Repay Your Debts Over Time (10th Edition, 2010): which I co-author with attorney Stephen Elias.

This database is updated as time permits. Do not assume that it has the latest case in your district. We are still filling holes in the database -- and will always be. Use it as a place to start your reasearch, rather than the final answer to your question.

Some of these issues involve the discretion of the judge which can vary from judge to judge. So, even if you find a case just like yours where a judge went your way, as they say in the car biz, "your mileage may vary..."

If you're not familiar with what "case law" is, and how to use it, check out Chapter 7 of Nolo's LegalResearch: How to Find and Understand the Law for a guide to how to read through a case to get the parts that matter.

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