Source: http://kingsburylaw.blogspot.com/2010/
Timestamp: 2018-06-24 01:07:52
Document Index: 284833075

Matched Legal Cases: ['§ 362', '§ 46', '§ 362', '§ 521', '§ 521', '§ 524', '§ 722', '§ 521', '§ 362', '§ 46', '§ 46', '§ 521', '§ 521', '§ 521', '§ 521', '§ 362', '§ 521', '§ 521', '§ 521', '§ 521', '§ 521', '§ 521', '§ 521', '§ 521', '§ 46', '§ 46', '§ 46', '§ 46']

Bankruptcy Chapter 7 & 13 Minnesota: 2010
A lot of people can benefit from credit counseling services. Hopefully you can ferret out which one is a good one from the vast array of credit counseling companies who purport they are there to help you but in reality are interested really in lining their own pockets. I found a good article on line on some questions you should ask when considering using one of these companies to help you.
http://www.foxbusiness.com/personal-finance/2010/09/28/questions-help-right-credit-counselor/?cmpid=partner_aol
Good luck and remember....if you have questions or a need for an experienced bankruptcy lawyer we are here to help.
Posted by Dave Kingsbury Bankruptcy Attorney at 12:20 PM No comments:
Consumer bankruptcy filings up...Again
Recent statistics reflect that consumer bankruptcy filings in the first 6 months of 2010 totaled 770,117. That is a 14 % increase over last year for the same period and as a matter of fact is the highest total since the Bankruptcy Abuse Prevention and Consumer Protection Act (so-called) was passed in 2005 in an attempt to decrease the amount of bankruptcy filings. Typical government reaction to a problem....try to put a bandaid on something to make it look good instead of making real attempts to resolve the problems that push people into bankruptcy like high unemployment, high medical costs and low rates of insurance, predatory lenders and credit card issuers, etc. Since then we've had some efforts at reigning in the mortgage companies and the credit card issuers.....hopefully it will help. Unfortunately the housing market collapse and the attendant high unemployment are factors that will be around and impacting the American economy for some time to come.
For information on consumer and small business bankruptcy in Minnesota please connect with us at www.kingsburylawoffice.com
Posted by Dave Kingsbury Bankruptcy Attorney at 2:29 PM No comments:
I must have some spare time on my hands....been reading a few articles in various newspapers. A timely issue is that of debt settlement companies and are they really providing a bonafide benefit/service for a reasonable fee. Frankly....not so much. Let's face it...the economy is in the tank...people are in financial turmoil/stress...perfect environment for the vultures to come out to take advantage.
The debt settlement industry has gotten HUGE....everywhere you turn in print, TV, internet, radio....you name it...someone is hawking a debt settlement or debt "management" program. I actually had a guy connect with me a couple of months ago...personal referral from a lawyer I've done business with. He sent me an email saying that I could make "Tens of thousands of dollars a month for only an hour a day of my time"----I sent him an email back saying it sounded a hell of a lot like a late night television infomercial for flipping houses with a real estate scheme used to before the housing market blew up. He apparently was insulted....cried foul to the guy that referred him to me and that lawyer says he won't refer me bankruptcy cases anymore. Tell you what...if the price of doing business with that guy is acting in concert with his "buddy" to defraud and victimize people like my clients I don't want anything to do with him anyway. My sense was he was going to get a piece of whatever potential business was generated by the referral and he didn't like the fact that I turned his pal down.
Back the the article. Says the the Better Business Bureau of Minnesota and North Dakota is warning people about misleading debt settlement companies that claim to have a program that can easily either eliminate or reduce credit card debt. Since the recession started...which would be what...late 07' I guess...over 3,500 hundred complaints. 3,500...that's a big number and that is just in 2 states. Plus quite a number of state's attorney generals offices (including Minnesota's) have gone after numerous places like Credit Solutions, Debt Rx USA, Financial Freedom of America, Debt Settlement America, Clear Your Debt and Swift Rock Financial Solutions (never heard of that last one).
Most complaints to the Better Business Bureau allege that instead of having the debt settled as promised the debtors were often sued by their creditors and driven deeper in debt all the while thinking that whatever company they had hired where going to be "fixing" everything for them. Some of them ended up having their wages garnished.... WHILE they were in a program of debt settlement.
First off....it is never an easy or a quick process that comes without any pain. Don't care how they advertise it...it just ain't so. Plus...there is the significant impact on the debtor's credit score. The creditors don't always stop reporting late payments/missed payments to the credit bureaus...hardly...I think they usually do...debt management program or not. Plus, one thing that I've notice in my practice. They never tell people that if they settle a debt for less than what was owed that the debtor will be issued a 1099 at the end of the year. So guess what? It is an income earning event as far as the IRS is concerned and you have to pay taxes on that "income" at your regular tax rate. Why do they rarely tell people about this? Because 99% of the people looking into it would decide there is a small benefit to be had if they also have to pay taxes on any forgiven debt. Conveniently not part of the conversation I guess.
Frankly....I'm a bankruptcy attorney. If you've been reading my posts you know this already. Do I have any faith in debt management/settlement programs. Not much really. I read an article a number of years ago. The IRS had investigated something over 40 of these companies and decided to revoke the non-profit status of a number of them. How many? If you guessed ALL OF THEM---you'd be correct. Interesting eh? I think that sums it up right there. Considering the hit you take on your credit, the exposure to lawsuits, wage garnishments and bank account levy's (levys they can do w/o warning by the way...nothing like getting a notice from your bank telling you that a creditor cleaned out your account and now your checks are bouncing all over town) I'd suggest that bankruptcy....once you've gotten to that point makes a hell of a lot more sense. It's faster. It's cheaper. It protects you from lawsuits, levys and garnishments and discharges the debt giving you the relief you need to get a "fresh start" envisioned by the bankruptcy code and lets you move on with your life and start rebuilding your credit not weighted down by all that old debt. Honestly...by the time people come to me it is one of two things. Either their credit is bad...or it's real good but it's going to be really bad real soon. So---the things that have an adverse effect on your credit have already been set in motion long ago. I mention all of this because people often ask me how badly a bankruptcy filing is going to "hurt" their credit. Honestly it generally helps a heck of a lot more than it hurts. It's not the black kiss of death and it doesn't mean you'll never get credit again. It is scored as another event of your credit report and given a certain "weight"....just like a missed payment or something would be treated similarly. The real "penalty" for filing is that the cost of money goes up...probably for a year or two. Which means you'll pay higher interest for awhile. Most people...or a lot of them anyway are in that boat when they come to see me regardless. The difference is that the bankruptcy filing is a watershed event. Once it is filed you're no longer taking steps backward...you're actually going forward. Lots of variables work into a credit score. Longevity and stability of employment, income levels, current debt loads, regular payments, etc. Over the course of time the credit score generally goes up and as more time passes the bankruptcy filing itself isn't such a significant item....creditors you are wooing to give you a loan are more interested in how you are doing now, what kind of debt load you're carrying relative to your income and whether or not you've got some disposable income available to service new debt.
If you've got questions about bankruptcy we've got answers. Give me a call at 9952) 432-4388 or visit us at http://www.kingsburylawoffice.com/.
Bankruptcy Lawyer/Attorney
Posted by Dave Kingsbury Bankruptcy Attorney at 11:51 AM 7 comments:
Posted by Dave Kingsbury Bankruptcy Attorney at 5:02 PM 1 comment:
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Posted by Dave Kingsbury Bankruptcy Attorney at 11:04 AM 1 comment:
New exemption limits have come into effect in the state of Minnesota effective July 1, 2010. These will apply in bankruptcy cases where the debtor elects to use the state exemptions rather than the ones found in the Federal Bankruptcy Code (which were also raised this past April 1, 21010). Which exemption scheme to use will be determined by your attorney as that which gives you the most benefit depending on your individual circumstances. Usually we will chose the state exemptions over the Federal ones where there is a great deal of homestead equity as the Federal exemption is only $21,625 or $43,250 in a joint case. However considering the state of the real estate market these days it is a problem we don't see too much any longer. Other issues might be a potential personal injury claim which can be protected under the state exemptions to a much larger degree, etc.
Wedding Rings are exempt to the tune of $2,695.00---before last year they weren't exempt at all!
Posted by Dave Kingsbury Bankruptcy Attorney at 8:59 AM 2 comments:
One of the strong reasons compelling someone to hire an attorney to draft and file their bankruptcy paperwork turns on the fact that means testing is sometimes complicated, often tricky and how you plug in the numbers, what numbers you can plug in and why is constantly being shaped by case law. You can't rely on just reading the statute. Case in point. Recently Judge Kishel here in MN made a decision in a case wherein the debtor was utilizing debt service on a property that he no longer owned but was responsible for paying (divorce situation). See the case synopsis below............
Even though a debtor in Chapter 7 bankruptcy remained liable with the ex-spouse on residential mortgages relative to real estate that had been awarded to his ex-spouse per the court's order in the final judgment and decree those loans as creditors whose claims were collateralized by real property in which the debtor no longer had any interest as of the commencement of his bankruptcy case cannot be considered "secured creditors for the purposes of means testing even though he was still personally liable for the debt. Therefore he could not take the "secured debt" deduction for his monthly payments on these mortgages when calculating the "means test" analysis to determine whether he could rebut the presumption of abuse in his chapter 7 bankruptcy case. In re Robrock, 2010 WL 2142999 (Bkrtcy.D.Minn., Judge Kishel).
That is unfortunately a bad result for debtors in this jurisdiction. I've in the past used similar deductions to qualify a few of my clients for chapter 7 cases whereas otherwise they would not have been entitled to relief under that chapter. Now it appears that if it all hangs on debts of this nature (which, of course, is not the usual case) Chapter 7 will not be available and those debtors will most likely be looking at filing a Chapter 13 bankruptcy to reorganize their debt and paying back all or part of it in a 3 - 5 year plan structured through the bankruptcy court.
Posted by Dave Kingsbury Bankruptcy Attorney at 10:57 AM No comments:
In Minnesota the bankruptcy court has a history of not allowing cramdowns on mortgages that are totally unsecured by any value in the property. I think that's wrong...but until the 8th circuit or a higher court takes a case up and decides otherwise that is the way it is. I read a post the other day on http://www.redstate.com/ ,a conservative Blog and News site that was written by Michele Bachmann, a republican Congresswoman from Minnesota who gained her fame by planting a big kiss on then President Bush on national television. The post was in regard to a recently proposed Cramdown Housing bill that proposes to allow bankruptcy judges to cramdown mortgages where and when appropriate wherein she argues against it with a number of points...some of them valid and some of them thought provoking....others the typical nonsense that conservatives throw out there. I invite you to visit and read it.
My thoughts are this; First...if the finance industry who has the majority of the members of the house and senate in their collective pockets would be willing to work with people in good faith to modify all of these toxic mortgages that they wrote for people in the first place then this kind of legislation, however flawed, wouldn't need to be written or proposed in the first place. Second, she also makes a comment about how people would run to the bankruptcy instead of working out loan modifications. My practice is entirely composed of filing Chapter 7 & Chapter 13 cases for people all day...every day. I can tell you with the utmost sincerity not a single one relishes the fact that they are in my office signing a bankruptcy petition and they would have dearly loved to work out some kind of modification on their home loans (which for many is the principle factor that drove them to my office...they can't afford their mortgages). For a large number of them a modification of their mortgage with a lender that was willing to work out reasonable terms with the new realities of the marketplace as it concerns real estate would have kept them out of bankruptcy. Every day I have consultations with people who say they've tried for months on end to work something out with their mortgage company and they simply get the run around or empty promises that never come to fruition. Thirdly, I take exception to the comment she makes about the need for requiring some proof that the borrower was truthful when he applied for the mortgage.....is she serious....isn't this America? Aren't we innocent until proven guilty? Is the presumption that people lie.....especially when they were supposedly "vetted" by whoever gave them the mortgage in the first place? I think the critters are already out of the barn door on that one...too late to come back and complain that you weren't vigilant enough when you underwrote the loan...that's the lender's fault not the borrowers. I'm not saying that fraud isn't fraud and that it should be rewarded but I am saying that a presumption that borrowers acted fraudulently and they should have the burden to prove otherwise is a crock of horse manure.
For good and sound advice about bankruptcy please visit our web site at http://www.kingsburylawoffice.com/. All manner of Chapter 7 and Chapter 13 bankruptcy cases in the state of Minnesota.
Posted by Dave Kingsbury Bankruptcy Attorney at 8:50 AM No comments:
At 137,000 cases filed nationwide in May 2010 bankruptcy filings declined ever so slightly compared to 145,000 cases that were filed in April. However, the numbers have remained fairly constant. For the first 5 months of 2010 we've seen an uptick of 15% compared to the first 5 months of 2009. Works out to about 1 in 175 per capita with the highest levels of personal bankruptcy cases being concentrated in the Southeast and the Southwest of the country. Further, Chapter 7 continues to be the chapter of choice with the data showing that 74% of the cases filed were Chapter 7 cases. It appears that the legislation promulgated in late 2005 by Congress with a strident push by the financial industry that encouraged (punished?) debtors in bankruptcy to move towards Chapter 13 case filings to reorganize their debt rather than discharge it completely has been an abject failure. In my practice doing bankruptcy cases here in Minnesota I've noted the change in the real estate market as one of the major factors that has led to the decline in Chapter 13 filings. Chapter 13 was once strongly "fed" by the need to retain and preserve equity in people's homes. Now that the real estate is most often worth far less than what is owed on it there is no incentive to stand on one's head to keep it and barring other circumstances such as being too "asset heavy" for a Chapter 7 case or simply earning too much income to qualify for a Chapter 7 there is little incentive for most people to file a Chapter 13 vice a Chapter 7.
For other information regarding bankruptcy for consumers and small businesses please feel free to visit our website located at http://www.kingsburylawoffice.com/
Posted by Dave Kingsbury Bankruptcy Attorney at 10:39 AM No comments:
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Posted by Dave Kingsbury Bankruptcy Attorney at 7:48 AM No comments:
From News Services as reported in the 2/17/10 edition of the Minneapolis Star Tribune
The last quarter of 2009 saw a record percentage of homeowners 60 days or more behind on their mortgages...an astonishing 6.89% according to credit reporting agency TransUnion. That is following on the heels of 6.25% for the third quarter of 2009. The year prior--which would be the last quarter of 2008 it stood at 4.58%. With large numbers of variable rate/adjustable mortgages still set to adjust in the coming 2 years one can only assume that the numbers will be climbing higher and higher.
Posted by Dave Kingsbury Bankruptcy Attorney at 8:53 AM No comments:
Posted by Dave Kingsbury Bankruptcy Attorney at 1:42 PM No comments:
Posted by Dave Kingsbury Bankruptcy Attorney at 5:40 AM 1 comment:
Generally speaking anytime there is a cancellation of debt it is viewed by the IRS as a taxable income event and most lenders will issue the 1099. Even sometimes in bankruptcy proceedings when it is definitely not correct. I had a client walk in with one from Chase the other day and Chase darn well knows how this works...sometimes I think that creditors do it just to be jerks. At any rate...an exception these days is short sales on primary residences....that has been the rule for some time now and was recently extended until I don't know when. I'm always a little leery of the application of that exception....I have lots of clients that are pressured by realtors to do the short sales and my take on it is if a person is going to file a bankruptcy regardless then just surrender the property. There are just too many little twists, turns and exceptions in the tax code and if for any reason the exception wouldn't apply to a short sale and that sale was done prior to the bankruptcy filing then it is a priority income tax debt that is not going to be dischargeable for at least 3 years.
Back to the topic (almost...as you all aware I take a bankruptcy practitioner's slant on everything). Relative to foreclosures specifically and whether they will pursue a deficiency on a mortgage will depend on two things. The lender and how they want to proceed and also the law in the jurisdiction where the real estate is located as foreclosure is a creature of state law. In Minnesota a lender can foreclose by one of two methods. By "action" where a formal lawsuit is commenced by service of summons and complaint. Regular lawsuit and they will attempt to get an order of judgment for the deficiency to collect from the debtor. The other is by "publication" which is far and away the most common foreclosure method in this state. It is generally cheaper and is a faster for the lender to foreclosure. There are probably a half a dozen law firms in Minnesota that handle 95% of the home foreclosures...busy boys they are these days! If that method is used a deficiency is not allowed for the foreclosing lender...they get their security back and that is the extent of their recovery. Usually the chances of recovering from a homeowner if they are losing their home is quite small. Most properties these days though has second and sometimes third and fourth mortgages on them. They aren't going to step in and satisfy the first senior lender typically as the equity is just not there. Those junior lien holders will sue on the promissory notes signed by the debtors/homeowners that established the personal liability for those transactions as that is not wiped out by the foreclosure of the senior lien holders. We do a lot of bankruptcy cases to discharge that liability for those folks.
Attorney at Law-Bankruptcy Lawyer
Tel. (952) 432-4388
Fax. (952) 432-4969
Posted by Dave Kingsbury Bankruptcy Attorney at 8:16 AM 1 comment:
Chapter 7 “Can I keep my property”
Exemptions are statutory provisions (rules) found in either the United States Bankruptcy Code or the Minnesota State Statutes. They are the real "work horses" in the array of rules that govern how bankruptcy works. Exemptions are the rules that allow people filing bankruptcy to keep their property. Most cases end up being what people involved in the bankruptcy business term a "no asset" case. Which means....all the property a debtor owns is protected and they don't lose anything...but debt. In the typical case you can protect your primary residence, tools of the trade, vehicles, your household goods and furnishings, your paycheck, money on deposit in bank accounts, pensions, tax refunds you may be entitled to but may not have received yet, potential personal injury claims (all up to a particular amount) plus other kinds of property that may not be specifically covered by a particular exemption depending on what you have an ownership interest at the time you file your case and what it's worth. For those assets that don't have a specific exemption that applies to it there's what is known as a "wild card" exemption under the Federal exemptions. How exemptions work and which ones to apply are part of the "art" of practicing bankruptcy law. There is a great deal of interplay between what assets you have and what exemptions should be applied and how to reap their maximum benefit. Everyone brings a little something different to the table and there are actually a lot of variables to consider in a bankruptcy case filing. We look at income, expenses and the household income and reasonable/necessary living expenses. We also do a thorough asset analysis. We'll make sure that we protect your property to the fullest extent of the law. Sometimes we'll go through some strategies to do some pre-bankruptcy filing exemption planning too if that makes sense. Back to the ultimate questions of "Can I keep my property"? Answer....usually not an issue as most people don't lose anything in a bankruptcy filing.
Posted by Dave Kingsbury Bankruptcy Attorney at 7:52 PM No comments:
Dismissals or denials of discharge in Chapter 7 cases for bad faith reasons are fairly rare so when there is a case where they come up they are fairly interesting as they turn on the particular facts of the case. Here's one below that makes good reading. It is a recent case from the Eastern District in the State of Washington.
Debtors' bought a $20,000 motorcycle less than 3 months before filing a Chapter 7 case. The court determined that it was obviously not a practical means of year-round transportation in the climate in which they lived and that conduct warranted dismissal of their Chapter 7 case as abusive under the "bad faith" dismissal provision. The motorcycle, which represented the debtors' third vehicle for their family of two, occurred at a time when, while the debtor-husband had just obtained a significantly higher paying job, the debtors' mortgage was in default, and they had already consulted an attorney about the possibility of filing for bankruptcy. The court found that while the purchase may have been prompted by the euphoria surrounding the debtor-husband's acquisition of the new job, and while the debtors may have no intention of harming their creditors, such intent was not a prerequisite to finding the necessary bad faith and dismissed the case.
A little common sense here would have seem to have been in order. Why on earth they thought they could get away with this is beyond me. If you want the benefit of discharging your debt you have to keep in mind that there are other parties involved...namely the creditors who have also have rights in bankruptcy proceedings limited though they may be. Here the conduct was so aggregious that the court threw them out of the case and denied them their discharge.
Posted by Dave Kingsbury Bankruptcy Attorney at 9:24 AM No comments:
Friends....here is a recently published decision in the 4th Circuit Court of Appeals (Here in Minnesota we are in the 8th Circuit)regarding the failure to reaffirm the debt on an automobile. While this case is not authority in the 8th Circuit it may well be utilized for persuasive argument by attorneys representing lenders in similar matters litigated in this jurisdiction.
In Re: DAVID DOUGLAS JONES, ü
SERVICES AMERICAS, LLC,
ý No. 08-2177 Plaintiff-Appellee,
DAVID DOUGLAS JONES; KIRSTEN M.
Defendants-Appellants. þ
Joseph R. Goodwin, Chief District Judge.
(2:07-cv-00709; 2:06-bk-20296; 2:06-ap-02151)
Before NIEMEYER and SHEDD, Circuit Judges,
and Mark S. DAVIS, United States District Judge for the
Affirmed by published opinion. Judge Shedd wrote the opinion,
in which Judge Niemeyer and Judge Davis joined.
ARGUED: Andrew Steven Nason, PEPPER & NASON,
Charleston, West Virginia, for Appellants. Stephen P. Hale,
HALE, DEWEY & KNIGHT, PLLC, Memphis, Tennessee,
for Appellee. ON BRIEF: Jacob C. Zweig, HALE, DEWEY
& KNIGHT, PLLC, Memphis, Tennessee, for Appellee.
David Douglas Jones and Kirsten M. Jones appeal an order
of the district court which held that DaimlerChrysler Financial
Services Americas, LLC, had the right to repossess their vehicle
pursuant to 11 U.S.C. §§ 362(h) and 521(a)(2), and West
Virginia Code § 46A-2-106. For the following reasons, we
The Joneses purchased a vehicle under a Retail Installment
Contract with DaimlerChrysler that granted DaimlerChrysler
a security interest in the vehicle to secure payment; the security
interest was later perfected. The contract contains a clause
which provides that the Joneses will be in default if they file
a bankruptcy petition or if one is filed against them. Subsequently,
David Jones filed a petition for relief under Chapter
7 of the Bankruptcy Code. Kirsten M. Jones did not file for
bankruptcy but brought this adversary proceeding as the coowner
In filing for bankruptcy, Mr. Jones filed a statement of
intention with respect to the contract for purchase of the
Joneses’ vehicle that indicated that he would "Continue Payments"
on the vehicle but did not state whether he intended
2 In Re: JONES
to redeem the vehicle or reaffirm the debt as required by 11
U.S.C. §§ 362(h) and 521(a)(2).1 He also failed to redeem the
vehicle or enter into a reaffirmation agreement with Daimler-
Chrysler within 45 days of the first meeting of creditors held
on June 16, 2006. See 11 U.S.C. § 521(a)(6). Mr. Jones made
a payment on August 28, 2006, through DaimlerChrysler’s
automated telephone payment system. This was the only payment
made after the § 521(a)(6) 45-day period to either
redeem or reaffirm expired on July 31, 2006.
DaimlerChrysler thereafter moved to confirm termination
of the automatic stay2 so that it could enforce its security
interest by repossessing the vehicle pursuant to the defaultupon-
bankruptcy clause, also called an "ipso facto" clause.
See In re Husain, 364 B.R. 211, 217 n.7 (Bankr. E.D. Va.
2007). After a hearing, the bankruptcy court entered an agreed
order confirming that the automatic stay was terminated.
Thereafter, without providing written notice of default and
right to cure, DaimlerChrysler repossessed the vehicle pursuant
to the ipso facto clause. The Joneses then commenced this
As part of the adversary proceeding, the bankruptcy court
enjoined the sale of the vehicle and required its return. The
bankruptcy court held that DaimlerChrysler did not have the
1These sections require a debtor intending to retain the collateral to file
a statement of intention which states the intent to either reaffirm the debt
in a reaffirmation agreement or redeem the property. Then, a creditor and
a debtor enter into a reaffirmation agreement prior to discharge, and the
consideration for the agreement is the debt which is dischargeable under
the Bankruptcy Code; the agreement must be filed with the court. 11
U.S.C. § 524(c). Alternatively, a debtor may redeem property from a
secured lien by paying the lienholder the full amount of the lien. 11 U.S.C.
§ 722. An individual debtor has 45 days after the first meeting of creditors
to either reaffirm or redeem. § 521(a)(6).
2When a bankruptcy petition is filed, it operates as an automatic stay of
"any act to obtain possession of property of the estate." 11 U.S.C.
§ 362(a)(3).
In Re: JONES 3
right under the Bankruptcy Code to repossess the Joneses’
vehicle even though Mr. Jones failed to indicate either his
intent to redeem the vehicle or reaffirm the debt on his statement
of intention. The bankruptcy court relied on the "ridethrough"
option recognized in Home Owners Funding Corp.
of Am. v. Belanger (In Re Belanger), 962 F.2d 345, 347-49
(4th Cir. 1992). The ride-through option permitted Chapter 7
debtors who were current on their installment payments to
continue making payments and retain collateral after discharge
without redeeming the collateral or reaffirming the
debt. Id. at 347. The bankruptcy court also held that West Virginia
Code § 46A-2-106 required DaimlerChrysler to first
give the Joneses notice of the right to cure default before
On appeal, the district court reversed both rulings and held
that DaimlerChrysler had the right to repossess the vehicle. In
re Jones, 397 B.R. 775 (Bankr. S.D. W. Va. 2008). Specifically,
the court held that the Bankruptcy Abuse Prevention
and Consumer Protection Act of 2005 (BAPCPA), Pub. L.
No. 109-8, 119 Stat. 23, eliminated the ride-through option
recognized in In Re Belanger. In re Jones, 397 B.R. at 787.
The district court also held that § 46A-2-106 is inapplicable
here. Id. at 794-95. The Joneses now appeal the order of the
district court, challenging both of these rulings. For the following
reasons, we reject their contentions and affirm.
When reviewing a decision by a district court in its capacity
as a bankruptcy appellate court, we examine factual findings
of the bankruptcy court for clear error and review legal conclusions
de novo. See IRS v. White (In re White), 487 F.3d
199, 204 (4th Cir. 2007). Because the facts here are not in dispute,
we review the district court’s decision de novo.
We initially consider whether the district court erred in
holding that BAPCPA eliminated the ride-through option rec-
4 In Re: JONES
ognized in In Re Belanger, 962 F.2d at 347-49. In re Belanger
analyzed the language of former § 521(2)(A), which required
a debtor to file a statement of intention which, "if applicable,"
indicated the debtor’s intent to either redeem the collateral or
reaffirm the debt secured by the collateral. We interpreted the
language "if applicable" to mean that the options of redeeming
or reaffirming were not exclusive and, therefore, the property
could ride through the bankruptcy unaffected if the
debtor chose to retain the property and continue making payments.
962 F.2d at 347.
Although the text of the former § 521(2)(A) remains
largely the same under BAPCPA, former § 521(2)(C) has
been amended as follows: "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)(emphasis added). Section 362(h), which was
added to Title 11 by BAPCPA, provides in relevant part,
[T]he stay provided by subsection (a) is terminated
with respect to personal property of the estate . . .
and such personal property shall no longer be property
of the estate if the debtor fails within the applicable
time set by section 521(a)(2) —
(A) to file timely any statement of intention
required under section 521(a)(2) with respect to such
personal property or to indicate in such statement
that the debtor will either surrender such personal
property or retain it and, if retaining such personal
property, either redeem such personal property pursuant
to section 722, enter into an agreement of the
kind specified in section 524(c) applicable to the
debt secured by such personal property, or assume
such unexpired lease pursuant to section 365(p) if
the trustee does not do so, as applicable; and
In Re: JONES 5
(B) to take timely the action specified in such
statement . . . .
11 U.S.C. § 362(h)(1) (emphasis added). Sections
521(a)(2)(C) and 362(h) significantly alter the pre-BAPCPA
analysis by explicitly requiring a debtor to indicate on the
statement of intention an intent to either (1) redeem the property
or (2) reaffirm the debt, in order to retain the property.
If the debtor fails to so indicate, the stay terminates with
respect to the property, and the property will no longer be part
of the estate. See, e.g., In re Craker, 337 B.R. 549, 550-51
(Bankr. M.D.N.C. 2006).
Section 521(a)(6), added by BAPCPA, also evidences that
the ride-through option has been eliminated. That section provides
that a debtor may not retain possession of personal
property which is subject to a secured claim unless the debtor
either reaffirms the debt or redeems the property, according
to the debtor’s statement of intention required by §§ 521(a)(2)
and 362(h), within 45 days of the first meeting of creditors.
This section further provides that if the debtor fails to so act
within the 45-day period, the stay is terminated, the property
is no longer considered part of the estate, and "the creditor
may take whatever action as to such property as is permitted
by applicable nonbankruptcy law." § 521(a).
Therefore, BAPCPA amended Title 11 to eliminate the
ride-through option that we recognized in In re Belanger, at
least as applied to these facts.3 Although our holding is at
odds with In re Belanger, that decision has been superseded
by BAPCPA. See Santos v. United States, 461 F.3d 886, 891
3Because Mr. Jones did not take any action to reaffirm or redeem, we
have no occasion to address the "back door ride-through" option that some
courts have recognized where the debtor has substantially complied with
§§ 521(a)(2) and 362(h) but has been frustrated in his effort to fully comply.
See, e.g., In re Chim, 381 B.R. 191, 198 (Bankr. D. Md. 2008); In re
Husain, 364 B.R. 211, 218-19 (Bankr. E.D. Va. 2007).
6 In Re: JONES
(7th Cir. 2006) (holding that supervening developments, such
as a statutory overruling, justify deviation from prior decisions
of the same court).
When Mr. Jones failed to timely redeem the vehicle or reaffirm
the contract, the automatic stay was terminated and the
vehicle was no longer part of the bankruptcy estate. The
Joneses were not entitled to retain the vehicle pursuant to the
Bankruptcy Code, and DaimlerChrysler was free to take
whatever action was permitted under West Virginia law and
We next turn to the question of whether DaimlerChrysler
had authority to repossess the vehicle pursuant to the contract’s
ipso facto clause without giving the Joneses prior
notice of a right to cure the default under state law. The general
rule is that an ipso facto clause in an installment loan contract
is unenforceable as a matter of law. See Riggs Nat. Bank
of Washington, D.C. v. Perry, 729 F.2d 982, 984-85 (4th Cir.
1984) (explaining that these clauses deprive a debtor of the
advantages of bankruptcy proceedings by causing him to
default immediately upon his filing a bankruptcy petition).
However, BAPCPA created an exception to this general prohibition
by adding § 521(d), which permits creditors to
enforce ipso facto clauses in consumer loan agreements
secured by personal property if the debtor fails to comply with
the provisions of §§ 521(a)(6) or 362(h). See In re Donald,
343 B.R. 524, 538-39 (Bankr. E.D.N.C. 2006). Specifically,
§ 521(d) provides that upon the debtor’s failure to comply
nothing in this title shall prevent or limit the operation
of a provision in the underlying lease or agreement
that has the effect of placing the debtor in
default under such lease or agreement by reason of
the occurrence, pendency, or existence of a proceed-
In Re: JONES 7
ing under this title or the insolvency of the debtor.
Nothing in this subsection shall be deemed to justify
limiting such a provision in any other circumstance.
Therefore, the filing of the bankruptcy petition constituted
default, and Mr. Jones’s failure to redeem the vehicle or reaffirm
the debt permitted DaimlerChrysler to take action under
its contract and § 521(d) as permitted by West Virginia law.
The Joneses argue that DaimlerChrysler waived any default
under the ipso facto clause based on the single payment made
through DaimlerChrysler’s automated telephone payment system
after the § 521(a)(6) 45-day period expired. However, at
the time that this payment was made, the bankruptcy court
had not yet issued its order confirming the termination of the
automatic stay. We find that the acceptance of a single automated
payment made prior to the bankruptcy court’s order did
not clearly waive default and did not estop DaimlerChrysler
from repossessing the vehicle. Potesta v. U.S. Fidelity &
Guar. Co., 504 S.E.2d 135, 142 (W. Va. 1998) ("[W]here the
alleged waiver is implied, there must be clear and convincing
evidence of the party’s intent to relinquish the known right.").
Finally, the Joneses challenge DaimlerChrysler’s right to
repossess the vehicle under state law based on DaimlerChrysler’s
failure to give notice pursuant to West Virginia Code
§ 46A-102-106. That section is entitled "Notice of Consumer’s
Right to Cure Default; Cure; Acceleration." (Emphasis
added). As the title of that section indicates, the section
directs when a creditor must give a debtor notice of the right
to cure default. The section’s operative language states:
[A] creditor may not . . . commence any action or
demand or take possession of collateral on account
of default until ten days after notice has been given
8 In Re: JONES
to the consumer of his or her right to cure such
§ 46A-102-106. That section also specifies that the notice
must clearly state the debtor’s "right to cure such default" and
requires certification by the creditor that this notice of right to
cure was provided in a specified manner. § 46A-2-106.
The requirement under § 46A-2-106 to inform a debtor of
his right to cure default is necessarily based on the premise
that the default can be cured.4 Here, however, both parties
agree that the event that triggered default, the filing of a bankruptcy
petition, cannot be cured. Therefore, we affirm the district
court’s holding that DaimlerChrysler was not required to
give the Joneses notice of default and right to cure before
4We are not required to apply statutory language when such an application
"‘results in an outcome that can truly be characterized as absurd’".
See Hillman v. IRS, 250 F.3d 228, 233 (4th Cir. 2001) (quoting Sigmon
Coal Co. v. Apfel, 226 F.3d 291, 304 (4th Cir. 2000). To require notice of
right to cure when there is no ability to cure would be an absurd result.
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