Surrender Your Car And Fully Satisfy Claim In Bankruptcy

March 20th, 2009 by Reed Allmand

In the Chapter 13 Bankruptcy case of Pruitt, Jennifer L.; In re, (Bankr. D. Conn. 2009) the bankruptcy court allowed a debtor to surrender her car to a creditor to fully satisfy a secured claim.

The details of the case:

Less than 910 days prior to filing for bank¬ruptcy, the Chapter 13 debtor purchased a 2003 Mit¬subishi Eclipse that she said was worth $10,690 when she filed for bankruptcy. TD Banknorth held a purchase money security interest in the vehicle. The creditor filed a proof of claim stating that it was owed $15,833 and valuing the car at $8,400. The debtor’s plan proposed to surrender the car in full satisfaction of the creditor’s claim. Prior to the confirmation hearing, the creditor was granted stay relief and repossessed the car. The debtor did not oppose the creditor’s action. On the same day that it filed its motion for stay relief, the creditor filed an objection to the debtor’s plan, arguing that it was entitled to assert an unsecured deficiency claim. The court over¬ruled the objection, ruling that surrender alone satisfied the creditor’s full claim.

The bankruptcy court ruled that because the vehicle was purchased within 910 days before the debtor filed for bankruptcy, that the creditor’s claim was fully satisfied by the repossession. However, all bankruptcy courts are not in agreement with this ruling, so debtors need to speak with a bankruptcy attorney to find out how the law will most likely apply to their situation. Some bankruptcy courts have ruled that a creditor can repossess the car and file a “deficiency claim” with the bankruptcy court. A deficiency claim being the money you still owe because the credit was unable to sell the car at a price that would cover your vehicle loan.