In re Hill, No. 06-50972 (Bankr. E.D. Tenn. 7/6/2007)

Marcia Parsons

This chapter 13 case is before the court on the objection to confirmation filed by DaimlerChrysler Financial Services Americas, LLC ("DaimlerChrysler"). Because this court reaffirms its decision in In re Gentry, No. 06-50204, 2006 WL 3392947 (Bankr. E.D. Tenn. Nov. 22, 2006), that § 1325(a) of the Bankruptcy Code permits a debtor to surrender a "910 motor vehicle" in full satisfaction of the debt, DaimlerChrysler's objection will be overruled. This is a core proceeding. See 28 U.S.C. 157(b)(2)(L).

The debtor, Kenneth Rector Hill, filed for bankruptcy relief under chapter 13 on October 20, 2006. In his Third Amended Plan filed March 1, 2007, the Debtor proposes surrender of a 2004 Dodge pickup to DaimlerChrysler "in full payment of debt and in full satisfaction and accord." The Debtor's plan was met with an objection from DaimlerChrysler, who asserted that the Debtor's proposed treatment of its claim was prohibited by the unnumbered paragraph which follows § 1325(a)(9) of the Bankruptcy Code. After a hearing on the objection, at which counsel for the parties announced to the court that there were no facts in dispute, this court entered an order on April 19, 2007, setting deadlines for the parties to file briefs on the legal issues and a joint statement as to the legal issue(s) to be decided by the court and stipulations of fact.

In the Amended Joint Stipulations of Facts and Issues filed April 26, 2007, the parties stipulated that DaimlerChrysler is a creditor of the Debtor by virtue of a retail installment contract dated August 28, 2004, with respect to a 2004 Dodge Dakota; DaimlerChrysler holds a validly perfected, first priority security interest in the motor vehicle; the Debtor purchased the vehicle for his personal use; the vehicle was acquired within the 910-day period preceding the Debtor's bankruptcy filing on October 20, 2006; and the amount due and owing DaimlerChrysler by the Debtor is $10,817.28. As phrased by the parties, the issue presented by DaimlerChrysler's objection to the Debtor's proposed plan is:

Whether 11 U.S.C. § 1325(a)(5), as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act ("BAPCPA") of 2005, effective on October 17, 2005, allows the Debtor[] to surrender DaimlerChrysler's collateral as fully secured and disallows any portion of Creditor's claim as unsecured, and in full satisfaction of the Creditor's claim.

As discussed in this court's memorandum opinion entered on November 22, 2006, in the Gentry case, a copy of which is attached and incorporated, § 1325(a) of the Bankruptcy Code was amended by BAPCPA, with the most conspicuous change being the addition at the end of the subsection of an unnumbered paragraph that provides:

For purposes of paragraph (5), section 506 shall not apply to a claim described in that paragraph if the creditor has a purchase money security interest securing the debt that is the subject of the claim, the debt was incurred within the 910-day preceding the date of the filing of the petition, and the collateral for that debt consists of a motor vehicle (as defined in section 30102 of title 49) acquired for the personal use of the debtor, or if collateral for that debt consists of any other thing of value, if the debt was incurred during the 1-year period preceding that filing.

See 11 U.S.C. § 1325(a).

In Gentry, this court adopted Bankruptcy Judge Richard Stair's decision in In re Ezell, 338 B.R. 330 (Bankr. E.D.Tenn. 2006), wherein the court concluded that § 1325(a)'s "hanging" paragraph, along with BAPCPA's other statutory changes, results in the elimination of a deficiency claim when a debtor proposes, under § 1325(a)(5)(C), to surrender collateral falling within the stated parameters of the hanging paragraph, i.e., a "910 claim." This court noted in Gentry that the majority of courts considering the issue since Ezell have adopted or agreed with its analysis.

DaimlerChrysler's objection in the instant case is an invitation to the court to revisit its Gentry decision adopting Ezell. A review of the decisions rendered by other courts in the preceding seven months since Gentry indicate that the majority continue to agree with Ezell, although a split of authority on the issue continues to exist. See In re Osborn, 363 B.R. 72 (8th Cir. BAP 2007); In re Price, ___ B.R. ___, 2007 WL 1087036 (Bankr. M.D. Pa. Mar. 5, 2007); In re Pinti, 363 B.R. 369 (Bankr. S.D.N.Y. 2007); In re Durham, 361 B.R. 206 (Bankr. D. Utah 2006); In re Quick, 360 B.R. 722 (Bankr. N.D. Okla. 2007); In re Moon, 359 B.R. 329 (Bankr. N.D. Ala. 2007); In re Feddersen, 355 B.R. 738 (Bankr. S.D. Ill. 2006); In re Turkowitch, 355 B.R. 120 (Bankr. E.D. Wis. 2006); In re Kenney, No. 06-71975-A, 2007 WL 1412921 (Bankr. E.D. Va. May 10, 2007); In re Roth, No. 06-11330, 2007 WL 1385383 (Bankr. N.D. Ind. May 4, 2007); In re Bivins, No. 06-51778, 2007 WL 624385 (Bankr. M.D. Ga. Feb. 23, 2007); In re Maggett, No. BK06-80573, 2006 WL 3478991 (Bankr. D. Neb. Oct. 19, 2006) (all permitting surrender in full satisfaction); but see In re Wright, ___ F.3d. ___, 2007 WL 1892502 (7th Cir. July 3, 2007); In re Blanco, 363 B.R. 896 (Bankr. N.D. Ill. 2007); In re Clark, 363 B.R. 492 (Bankr. N.D. Miss. 2007); In re Morales, 359 B.R. 211 (Bankr. N.D. Ill. 2007); In re Hoffman, 359 B.R. 163 (Bankr. E.D. Mich. 2006); In re Dominguez, No. 06-31167-RCM, 2007 WL 1394158 (Bankr. W.D. Tex. May 11, 2007) (all holding that deficiency claim can not be eliminated). This court finds nothing in these decisions or in the brief filed by DaimlerChrysler that convinces this court that either Gentry or Ezell was erroneously decided.

Accordingly, as concluded in both cases, this court reaffirms that a chapter 13 debtor may surrender collateral of a creditor holding a 910 claim in full satisfaction of the debt. The parties herein have stipulated that the Debtor's obligation to DaimlerChrysler was incurred within the 910-day period preceding the Debtor's bankruptcy filing and that the collateral is a motor vehicle, acquired for the personal use of the Debtor. Although the parties agree that DaimlerChrysler holds a "validly perfected, first priority security interest" in the vehicle, they have not stipulated that DaimlerChrysler has a "purchase money security interest securing the debt," as required by the language of § 1325(a)'s hanging paragraph. Nonetheless, counsel for the parties indicated at the hearing in this matter that DaimlerChrysler holds a 910 claim, and their briefs are predicated on this assertion. As such, this court will assume for purposes of this opinion that DaimlerChrysler does in fact hold a 910 claim, and on this basis, the court will overrule DaimlerChrysler's objection to confirmation of the Debtor's proposed plan.

On a final note, this court observes that the parties have not stipulated the value of the 2004 Dodge Dakota, nor have they stipulated that the value is less than the amount owed by the Debtor, such that surrender of the vehicle will result in a deficiency balance after a foreclosure sale. To the contrary, DaimlerChrysler asserts in its proof of claim filed on October 27, 2006, that the value of its collateral is $10,817.28, the same amount owed on the debt. Assuming this is the case, this fact presents an alternative basis for overruling DaimlerChrysler's objection to the Debtor's plan. Even under pre-BAPCPA, there was no impediment to surrender in full satisfaction of a claim if the collateral was worth at least as much as owed on the debt such that surrender would not produce a deficiency. See In re Roth, 2007 WL 1385383, *3 ("Prior to BAPCPA, it was entirely proper to surrender a creditor's collateral in full satisfaction of its claim where the court determined that the value of the property being surrendered at least equaled the debt.") (citing 2 Keith M. Lundin, Chapter 13 Bankruptcy § 102.1, pp. 102-11—102-12 (3rd ed. 2006).

Based on all of the foregoing, this court will enter an order overruling DaimlerChrysler's objection to the Debtor's proposed plan.