Monday, March 01, 2010
Ind. Decisions - 7th Circuit decides bankruptcy case today
In re Howard is a 12-page opinion. Judge Posner writes:
This direct appeal from the bankruptcy court, pursuant to 28 U.S.C. § 158(d)(2)(A), requires us to consider an issue that is new in this court. It is whether the bankruptcy court’s “cramdown” power in a Chapter 13 bankruptcy (the counterpart, for an individual, to corporate reorganization in bankruptcy— Chapter 11) extends to an automobile dealer’s, or other creditor’s, taking a security interest in a customer’s “negative equity” in his traded-in vehicle. (Often as in this case the financing of the purchase of a car is done by a finance company rather than by the dealer who sells the car. So when we refer to the “creditor,” it is to the finance company rather than to the dealer.)
The issue presented by the appeal requires some explaining, beginning with “cramdown,” which means forcing a secured creditor to take cash in lieu of his collateral. * * *
We therefore join the other courts in ruling that negative equity can be part of a purchase money security interest and if thus secured is not subject to the cramdown power of the bankruptcy judge in a Chapter 13 bankruptcy. The decision of the bankruptcy court denying cramdown of a Chapter 13 plan that excludes negative equity from a purchase money security interest is therefore AFFIRMED.
Posted by Marcia Oddi on March 1, 2010 12:04 PM
Posted to Ind. (7th Cir.) Decisions