Chester Arthur Donald and Mary Scales Donald

§UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE:
CHESTER A. DONALD and
MARY S. DONALD,
DEBTORS
CASE NO.
06-00100-5-ATS
ORDER APPROVING REAFFIRMATION AGREEMENT
A discharge hearing pursuant to 11 U.S.C. § 524(d) was held on
April 	26, 	2006, 	for 	the 	court 	to 	consider 	whether 	to 	approve 	the
reaffirmation 	agreement 	between 	the 	chapter 	7 	debtors, 	Chester
Arthur 	Donald 	and 	Mary 	Scales 	Donald, 	and 	Coastal 	Federal
Credit 	Union 	("Coastal"). 	After 	the 	hearing, 	the 	court 	gave 	the
debtors 	and 	Coastal 	additional 	time 	to 	file 	briefs. 	The 	briefs
have been filed, and the issue is ready for determination.
The 	issue 	before 	the 	court 	is 	whether, 	under 	§
524(c)(6)(A), the reaffirmation agreement is in the "best interest"
of the debtors. 	To make that determination the court must decide
the broader issue of whether, under the Bankruptcy Code as amended
by the Bankruptcy Abuse Prevention and Consumer Protection Act of
2005 	("BAPCPA"), 	Pub. 	L. 	No. 	109-8, 	119 	Stat. 	23, 	§§ 	304, 	305,
debtors 	may 	keep 	the 	property 	that 	secures 	their 	debts, 	without
SO ORDERED.
SIGNED this 12 day of June, 2006.
________________________________________
A. Thomas Small
United States Bankruptcy Judge
____________________________________________________________
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reaffirming 	those 	debts. 	Or, 	stated 	more 	colloquially, 	has 	the
"ride-through" 	(sometimes 	called 	"pay 	and 	drive" 	or 	the 	"fourth
option") method of dealing with a secured debt in a chapter 7 case
survived 	the 	changes 	to 	the 	Bankruptcy 	Code 	made 	by 	BAPCPA?
Specifically, in this case, the question is whether the chapter 7
debtors 	can 	retain 	their 	automobile 	by 	keeping 	current 	their
installment payments, without reaffirming the debt.
If 	the 	court 	determines, 	as 	Coastal 	contends 	it 	must, 	that
debtors 	no 	longer 	have 	the 	"ride-through" 	option, 	the 	court 	must
then 	consider 	the 	ultimate 	effect 	of 	the 	court's 	decision 	to
approve 	or 	disapprove 	the 	agreement. 	The 	debtors 	offer 	the
ingenious 	argument 	that 	disapproval 	by 	the 	court 	of 	their
reaffirmation 	agreement 	is 	in 	their 	best 	interest 	because 	by
entering into a reaffirmation agreement the debtors have complied
with 	all 	reaffirmation 	requirements, 	even 	if 	the 	agreement 	is
disapproved by the court. 	According to the debtors, because they
entered into the reaffirmation agreement, they are not subject to
the consequences of failing to reaffirm the debt. 	For that reason,
they 	argue 	that 	they 	may 	retain 	their 	automobile 	by 	making 	their
payments even if the court disapproves the reaffirmation agreement,
thereby making it unenforceable.
Before 	addressing 	the 	merits 	of 	whether 	the 	"ride-through"
option 	has 	been 	terminated 	by 	BAPCPA, 	it 	would 	be 	helpful 	to
explain the procedure that brings this issue before the court. 	For
a 	reaffirmation 	agreement 	to 	be 	enforceable, 	the 	agreement 	must
satisfy 	the 	requirements 	of 	§ 	524(c). 	In 	a 	case 	in 	which 	the
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1Discharge hearings pursuant to § 524(d) are optional, unless
a debtor wants to enter into a reaffirmation agreement of the kind
specified 	in 	§ 	524(c) 	and 	the 	debtor 	"was 	not 	represented 	by 	an
attorney during the course of negotiating such agreement," in which
case they become mandatory. 	11 U.S.C. § 524(d). 	At such a hearing
the 	court 	must 	determine 	that 	the 	agreement 	complies 	with 	the
requirements 	of 	§ 	524(c)(6), 	"if 	the 	consideration 	for 	such
agreement is based in whole or in part on a consumer debt that is
not secured by real property of the debtor." 	§ 524(d)(2).
3
debtor 	is 	an 	individual 	"who 	is 	not 	represented 	by 	an 	attorney
during the course of negotiating an agreement," the court must hold
a 	discharge 	hearing 	pursuant 	to 	§ 	524(d). 	If 	the 	debt 	to 	be
reaffirmed 	is 	not 	based 	in 	whole 	or 	in 	part 	on 	a 	consumer 	debt
secured 	by 	real 	property, 	the 	court 	must 	determine 	whether 	to
approve 	the 	reaffirmation 	agreement 	under 	§ 	524(c)(6)(A) 	as 	"(I)
not imposing an undue hardship on the debtor or a dependent of the
debtor; and (ii) in the best interest of the debtor." 	11 U.S.C. §§
524(d) and 524(c)(6)(A). 1
It has been the practice of this court for more than 20 years
to 	schedule 	discharge 	hearings 	under 	§ 	524(d) 	any 	time 	a
reaffirmation agreement is filed by a debtor who is not represented
by 	counsel. 	The 	court 	also 	schedules 	discharge 	hearings 	where
debtors who are represented by counsel in their cases have not been
represented by their attorneys in connection with the negotiation
of the reaffirmation agreements.
If a debtor is represented by an attorney during the course of
negotiating 	the 	reaffirmation 	agreement, 	the 	attorney 	must,
pursuant 	to 	§ 	524(c)(3), 	file 	a 	declaration 	or 	affidavit 	which
states that
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(A) such agreement represents a fully informed and
voluntary agreement by the debtor;
(B) such agreement does not impose an undue hardship
on the debtor or a dependent of the debtor; and
(C) 	the 	attorney 	fully 	advised 	the 	debtor 	of 	the
legal effect and consequences of–
(I) an agreement of the kind specified in this
subsection; and
(ii) any default under such an agreement[.]
11 	U.S.C. 	§ 	524(c)(3). 	If 	the 	debtor 	has 	been 	represented 	by 	an
attorney 	during 	the 	course 	of 	negotiating 	the 	reaffirmation
agreement and no affidavit or declaration is filed by the attorney,
the 	agreement 	is 	not 	enforceable 	and 	no 	hearing 	is 	necessary.
Section 524(c)(3) was not changed by BAPCPA.
So 	prior 	to 	BAPCPA, 	if 	a 	reaffirmation 	agreement 	was 	filed
without an attorney's certification in a case in which the debtor
was represented by an attorney, the court assumed that the debtor
was 	not 	represented 	by 	the 	attorney 	in 	connection 	with 	the
negotiation of the reaffirmation agreement and a discharge hearing
was scheduled. 	BAPCPA, however, added § 524(k), which makes such
assumptions 	unnecessary. 	Section 	524(k)(3)(J) 	requires 	that 	the
following statements be included in the reaffirmation agreement: ".
. 	. 	3. 	If 	you 	were 	represented 	by 	an 	attorney 	during 	the
negotiation of your reaffirmation agreement, the attorney must have
signed the certification in Part C. [Part C is the Certification by
Debtor's 	Attorney]" 	and 	"4. 	If 	you 	were 	not 	represented 	by 	an
attorney 	during 	the 	negotiation 	of 	your 	reaffirmation 	agreement,
you 	must 	have 	completed 	and 	signed 	Part 	E 	[Motion 	for 	Court
Approval]." 	If 	the 	reaffirmation 	agreement 	does 	not 	contain 	the
attorney's certification, the agreement is not enforceable unless
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there is also a motion for court approval, in which case a hearing
will be scheduled.
Whether or not the debtors were represented by their attorney
"during" the negotiation of the reaffirmation agreement is relevant
to 	whether 	or 	not 	the 	court 	has 	the 	authority 	to 	approve 	or
disapprove 	the 	agreement. 	In 	this 	case 	the 	attorney's
certification 	was 	not 	filed, 	and 	there 	was 	no 	motion 	for 	court
approval. 	Furthermore, 	the 	debtors' 	brief 	includes 	a 	statement
that the debtors were represented by counsel in connection with the
"execution" of the reaffirmation agreement.
These facts might suggest that the court has no authority to
approve 	or 	disapprove 	the 	reaffirmation 	agreement. 	Yet, 	no 	one
raised this issue, and the two parties have presumed that the court
has 	the 	authority 	to 	approve 	or 	disapprove 	the 	reaffirmation
agreement. 	The parties specifically intended this to be a test of
the new law, and the issue was presented to the court in a manner
that puts neither party at risk. 	The debtors will keep their car
whether the court decides that the "ride-through" option has been
terminated and approves the reaffirmation agreement or whether the
court rules that the "ride-through" option is still available and
the 	reaffirmation 	agreement 	is 	disapproved. 	From 	Coastal's
perspective the issue will be decided without exposing Coastal to
the risk of violating the automatic stay.
The 	court 	finds 	that 	although 	the 	debtors 	have 	been 	ably
represented 	by 	their 	attorney 	in 	connection 	with 	the 	issues
presented 	to 	the 	court 	in 	connection 	with 	their 	reaffirmation
agreement, 	the 	debtors 	were 	not 	represented 	by 	their 	attorney
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during the course of the negotiation of the reaffirmation agreement
with Coastal.
Background Facts
The facts in this case are not disputed. 	Mr. and Mrs. Donald
filed a joint petition for relief under chapter 7 of the Bankruptcy
Code on January 27, 2006. 	Coastal holds a secured claim secured by
the 	debtors' 	automobile, 	a 	1999 	Lexus 	ES-V6. 	The 	secured 	claim
arises 	from 	a 	$12,335 	advance 	made 	by 	Coastal 	to 	the 	debtors 	on
July 28, 2004, in connection with the purchase of the 1999 Lexus.
According 	to 	the 	loan 	documents, 	the 	purpose 	of 	the 	loan 	was 	to
"Purchase 	Vehicle 	Lease 	Buy 	Out." 	Although 	the 	reaffirmation
agreement 	states 	that 	the 	purchase 	price 	for 	the 	automobile 	was
$12,335, 	it 	is 	not 	clear 	from 	the 	loan 	documents 	whether 	the
advance 	was 	for 	the 	full 	purchase 	price 	of 	the 	automobile. 	The
balance outstanding at the time of the debtors' bankruptcy petition
was 	$8,502.90, 	an 	amount 	that 	was 	clearly 	less 	than 	the 	purchase
price.
The 	loan 	documents 	contain 	a 	standard 	bankruptcy 	default
provision that says "[y]ou will be in default if you . . . file for
bankruptcy, 	become 	insolvent 	. 	. 	. 	or 	if 	something 	happens 	we
believe 	may 	substantially 	reduce 	your 	ability 	to 	repay 	what 	you
owe." 	Loan 	Documents 	at 	¶ 	14. 	Coastal 	has 	stated 	that 	if 	the
debtors 	"refused 	or 	were 	not 	permitted 	by 	the 	Court 	to 	reaffirm
their obligations," it intends "to exercise its right contained in
the Contract to declare a default thereunder based on the Debtors'
filing for bankruptcy protection and move forward with repossessing
and 	selling 	the 	Vehicle 	under 	the 	relevant 	provisions 	of 	the
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Contract and applicable state law." 	Coastal Mem. of Law in Conn.
with Reaff. Agmt. at 2-3.
The 	debtors 	were 	obligated 	to 	repay 	the 	loan 	to 	Coastal 	in
monthly 	payments 	of 	$296.57, 	and 	when 	the 	debtors 	filed 	their
petition on January 27, 2006, with the exception of the January 22
payment, 	the 	monthly 	payments 	were 	current. 	The 	reaffirmation
agreement 	was 	signed 	by 	Coastal 	on 	March 	8, 	2006, 	and 	was
subsequently 	signed 	by 	the 	debtors 	on 	a 	date 	not 	included 	in 	the
agreement. 	The debtors' attorney, William E. Brewer, Jr., did not
sign 	a 	declaration 	or 	affidavit 	of 	the 	kind 	referred 	to 	in 	§
524(c)(3), and the agreement was filed with the court on April 5,
2006.
The 	reaffirmation 	agreement 	provided 	that 	the 	installment
payment 	due 	on 	January 	22, 	2006, 	and 	the 	payment 	due 	on
February 	22, 	2006, 	would 	be 	added 	to 	the 	end 	of 	the 	loan 	and 	the
loan 	term 	extended 	accordingly. 	The 	agreement 	also 	provided 	for
the 	payment 	of 	attorney's 	fees 	to 	Coastal 	in 	the 	amount 	of 	$350.
Notwithstanding 	Coastal's 	willingness 	to 	extend 	two 	monthly
payments, the debtors made the January and February payments, and
their obligation to the credit union is now current.
The debtors' Statement of Intention states that "Debtor will
retain 	collateral 	[1999 	Lexus] 	and 	continue 	to 	make 	regular
payments." 	The 	Statement 	of 	Intention 	says 	nothing 	about
reaffirming the debt. 	The debtors contend that they may keep their
automobile without having to reaffirm the debt, but because the law
is not clear on that point, they signed the reaffirmation agreement
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to 	ensure 	that 	they 	could 	retain 	the 	vehicle 	if 	their
interpretation of the law is incorrect.
The court scheduled a discharge hearing pursuant to § 524(d),
and must now decide whether the reaffirmation agreement is in the
debtors' best interest under § 524(c)(6)(A)(ii).
Issue for Consideration by the Court
Whether the reaffirmation agreement is in the best interest
of 	the 	debtors 	under 	§ 	524(c)(6)(A)(ii) 	depends 	on 	whether 	a
chapter 7 debtor may maintain personal property that is collateral
for 	a 	secured 	claim 	without 	reaffirming 	the 	debt. 	The 	primary
issue 	before 	the 	court 	is 	whether 	the 	"ride-through" 	method 	of
dealing 	with 	a 	secured 	claim 	is 	still 	available 	after 	the
Bankruptcy Code was amended by BAPCPA.
Unfortunately, 	the 	BAPCPA 	amendments 	do 	not 	provide 	a 	clear
answer. 	The amendments are confusing, overlapping, and sometimes
self-contradictory. 	They 	introduce 	new 	and 	undefined 	terms 	that
resemble, but are different from, established terms that are well
understood. 	Furthermore, 	the 	new 	provisions 	address 	some
situations that are unlikely to arise. 	Deciphering this puzzle is
like 	trying 	to 	solve 	a 	Rubik's 	Cube 	that 	arrived 	with 	a
manufacturer's defect. 	Fortunately, after many twists and turns,
a few patches of solid color emerge.
The court will begin its consideration of whether the "ride-
through" 	continues 	after 	BAPCPA 	by 	examining 	the 	"ride-through"
option under pre-BAPCPA law.
Pre-BAPCPA "Ride-through"
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2The creditor coalition, which included banks, credit unions,
finance and oil companies, and retailers, sought a means by which
to determine, within a reasonable amount of time and without undue
cost, 	what 	chapter 	7 	debtors 	intended 	to 	do 	with 	the 	personal
property collateral in their possession. 	See In re Belanger, 118
B.R. 368, 370 (Bankr. E.D.N.C. 1990) (discussing the events leading
up 	to 	the 	enactment, 	in 	1984, 	of 	§ 	521(2)), 	aff'd, 	962 	F.2d 	345
(4th 	Cir. 	1992). 	The 	"Proposed 	Consumer 	Bankruptcy 	Improvements
Act 	of 	1981," 	a 	bill 	that 	preceded 	BAFJA, 	was 	the 	subject 	of
hearings 	before 	the 	Senate 	Subcommittee 	on 	Courts 	of 	the 	Senate
Committee 	on 	the 	Judiciary. 	The 	gist 	of 	the 	testimony, 	as
indicated in the available legislative history, was this:
Several 	witnesses 	appearing 	on 	behalf 	of 	the 	coalition
9
The Bankruptcy Amendments and Federal Judgeship Act of 1984,
Pub. L. No. 98-353, 98 Stat. 333 (1984) ("BAFJA"), added § 521(2)
to the Bankruptcy Code. 	Section 521(2) provided:
(2) 	if 	an 	individual 	debtor's 	schedule 	of 	assets 	and
liabilities includes consumer debts which are secured by
property of the estate–
(A) within thirty days after the date of the filing
of 	a 	petition 	under 	chapter 	7 	of 	this 	title 	or 	on 	or
before the date of the meeting of creditors, whichever is
earlier, or within such additional time as the court, for
cause, 	within 	such 	period 	fixes, 	the 	debtor 	shall 	file
with the clerk a statement of his intention with respect
to 	the 	retention 	or 	surrender 	of 	such 	property 	and, 	if
applicable, specifying that such property is claimed as
exempt, that the debtor intends to redeem such property,
or that the debtor intends to reaffirm debts secured by
such property;
(B) 	within 	forty-five 	days 	after 	the 	filing 	of 	a
notice 	of 	intent 	under 	this 	section, 	or 	within 	such
additional 	time 	as 	the 	court, 	for 	cause, 	within 	such
forty-five day period fixes, the debtor shall perform his
intention with respect to such property, as specified by
subparagraph (A) of this paragraph; and
(C) 	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.
11 U.S.C. § 521(2) (1984). 	This section was added at the behest of
a 	coalition 	of 	creditor 	groups 	to 	require 	chapter 	7 	debtors 	to
disclose 	their 	intentions 	with 	respect 	to 	personal 	property 	in
their possession securing consumer debts. 2
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and 	on 	behalf 	of 	the 	American 	Bankers 	Association
explained 	how 	secured 	creditors 	in 	consumer 	chapter 	7
cases 	often 	had 	no 	information 	concerning 	their
collateral. 	The 	automatic 	stay 	prohibits 	contact 	with
the debtor and typically the secured creditor would know
nothing about the fate of its collateral. 	The complaint
was 	that 	the 	secured 	creditor 	would 	often 	incur 	the
expense 	of 	filing 	an 	adversary 	proceeding 	to 	lift 	the
stay only to learn that the debtor all along intended to
surrender the property without a contest. 	The solution
to the problem was to require an early disclosure of the
debtor's intention with respect to the property and early
performance. 	If 	the 	creditor 	were 	to 	know 	what 	the
debtor intended to do with the collateral, it would know
how to proceed, such as by entering into a reaffirmation
agreement, 	picking 	up 	the 	collateral, 	or 	seeking 	to
modify the stay.
Belanger, 118 B.R. at 370-71 (footnotes with additional discussion
of the legislative history of § 521(2)(A) omitted), aff'd, 962 F.2d
345 (4th Cir. 1992). 	The language of § 521(2)(A) is "essentially
the same as that of section 1 of the proposed legislation," which
was made law, as § 521(2)(A), with passage of BAFJA. 	Belanger, 118
B.R. at 371 n.3, aff'd, 962 F.2d 345.
10
After 	passage 	of 	the 	BAFJA, 	courts 	differed 	on 	whether 	a
debtor who wanted to retain property was limited to the options of
redeeming or reaffirming. 	The issue came before this court in 1990
in Belanger, in which chapter 7 debtors sought to retain possession
of their mobile home. 	118 B.R. 368 (Bankr. E.D.N.C. 1990), aff'd,
962 F.2d 345 (4th Cir. 1992). 	The debtors filed the statement of
intention 	then 	required 	by 	§ 	521(2)(A), 	in 	which 	they 	indicated
that 	they 	would 	retain 	the 	collateral, 	but 	they 	did 	not 	indicate
that they intended either to redeem the collateral or to reaffirm
the debt. 	The debtors reasoned that these options did not apply to
them 	because 	they 	intended 	instead 	to 	remain 	current 	on 	their
payments and maintain the loan in its current status. 	The creditor
protested, 	arguing 	that 	the 	debtor 	had 	only 	three 	alternatives:
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reaffirm, 	redeem, 	or 	surrender 	the 	collateral. 	The 	court
disagreed.
The 	language 	of 	the 	statute 	made 	clear 	that 	a 	debtor 	was
required to state the debtor's intention with respect to surrender
or retention of property and "if applicable" to specify whether the
property was exempt, and whether the debtor intended to redeem the
property or to reaffirm the debt. 	In Belanger, those options did
not 	apply 	because 	the 	debtors 	chose 	to 	retain 	the 	property 	and
remain current on their debt. 	That option, though not identified
in the statute, was not precluded by it.
The sparse legislative history of § 521(2)(A) (see footnote 2,
supra) says that the statute was "essentially a notice requirement
to 	permit 	secured 	creditors 	to 	ascertain 	the 	debtor's 	intentions
early in the case." 	Belanger, 118 B.R. at 370 (citing H. Sommer,
The 	1984 	Changes 	in 	Consumer 	Bankruptcy Law, 	31 	Practical 	Lawyer
45, 55 (Jan. 1985)), aff'd, 962 F.2d 345. 	On appeal, the district
court agreed that "[t]he idea behind the section was not to limit
the 	debtor 	to 	the 	options 	mentioned 	in 	Section 	521(2)(A), 	nor 	to
alter his substantive rights with regard to the property." 	In re
Belanger, 	128 	B.R. 	142, 	145 	(E.D.N.C. 	1990), 	aff'd, 	962 	F.2d 	345
(4th Cir. 1992).
After 	further 	appeal, 	the 	Court 	of 	Appeals 	for 	the 	Fourth
Circuit concluded that "'[n]othing in section 521(2) requires the
debtor 	to 	choose 	redemption, 	reaffirmation 	or 	surrender 	of 	the
property 	to 	the 	exclusion 	of 	all 	other 	alternatives 	although 	no
other 	alternatives 	are 	provided 	for 	in 	the 	Code. 	That 	section
merely requires a statement of whether the debtor intends to choose
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any of those options, if applicable.'" 	Belanger, 962 F.2d at 347-
48, (quoting 3 Collier on Bankruptcy § 521.09A, at 521-46 (Lawrence
P. King ed., 15th 	ed. 	1991)) 	(emphasis 	in 	original, 	footnote
omitted).
The 	court 	construed 	"if 	applicable" 	to 	mean 	that 	"[t]he
options 	stated 	in 	the 	statute are not exclusive." 	Belanger, 	962
F.2d at 347. 	A majority of other courts to consider the issue have
reached 	the 	same 	conclusion, 	ruling 	that 	if 	a 	debtor 	remains
current 	with 	payments 	due 	on 	a 	secured 	debt, 	the 	creditor 	cannot
foreclose or repossess the collateral. 	See, e.g., In re Price v.
Delaware 	State 	Police 	Fed. 	Credit 	Union, 	370 	F.3d 	362 	(3d 	Cir.
2004); 	In 	re 	Parker, 	139 F.3d 668 (9th Cir.), 	cert. 	denied 	sub
nom, McClellan Fed. Credit Union v. Parker, 525 U.S. 1041, 119 S.
Ct. 	592 	(1998); 	In 	re 	Boodrow, 	126 	F.3d 	43 	(2d 	Cir. 	1997), 	cert.
denied, 	522 	U.S. 	1117, 	118 	S. 	Ct. 1055 (1998); 	Lowry 	Fed. 	Credit
Union v. West, 882 F.2d 1543 (10th Cir. 1989). 	These courts, like
the Belanger courts, emphasize that construing the statute to limit
debtors' 	options 	to 	only 	those 	listed 	"would 	severely 	impede 	the
debtor's fresh start." 	Belanger, 118 B.R. at 370, aff'd, 962 F.2d
345; 	see 	also, 	e.g., 	Boodrow, 	126 	F.3d 	at 	51 	(observing 	that 	the
"policy 	embodied 	in 	the 	Code 	that 	a 	debtor 	discharged 	from
bankruptcy should receive a 'fresh start' has been emphasized time
and 	again 	by 	the 	Supreme 	Court 	and 	[the 	Second 	Circuit]").
Providing a fresh start for honest debtors is one of the "primary
purposes" 	of 	the 	bankruptcy 	law, 	so 	a 	limiting 	interpretation 	at
odds with that purpose "should not be adopted unless it is clearly
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required by the statute." 	Belanger, 	118 	B.R. 	at 	370, 	aff'd, 	962
F.2d 345.
The 	courts 	that 	disagree 	hold 	generally 	that 	the 	statute
offers three options only, to the exclusion of others. 	See In re
Burr, 160 F.3d 843 (1st Cir. 1998); In re Taylor, 3 F.3d 1512 (11th
Cir. 1993); Matter of Edwards, 901 F.2d 1383 (7th Cir. 1990); see
also In re Bell, 700 F.2d 1053 (6th Cir. 1983). 	The Belanger court
discussed both Edwards and the case on which it relied, In re Bell,
which 	held 	that 	"a 	clause 	in 	the 	loan 	papers 	making 	a 	debtor 	in
default 	upon 	filing 	for 	bankruptcy 	becomes 	effective 	when 	the
trustee 	abandons 	the collateral." 	Belanger, 	962 	F.2d 	at 	347
(construing 	Bell, 	700 	F.2d 	at 	1056). 	At 	that 	point, 	the 	Sixth
Circuit 	explained, 	the 	debtor 	was 	required 	either 	to 	repay 	the
entire 	indebtedness 	or 	to 	reaffirm; 	otherwise 	the 	creditor 	could
repossess the collateral.
The Belanger court considered these arguments but disagreed.
It 	pointed 	out 	that 	this 	reasoning 	fundamentally 	conflicts 	with
Fourth Circuit precedent, established in Riggs Nat'l Bank v. Perry,
to 	the 	effect 	that 	"a 	default-on-filing 	clause 	in 	an 	installment
loan contract was unenforceable as a matter of law." 	Belanger, 962
F.2d at 348 (construing 	Riggs 	Nat'l 	Bank 	v. 	Perry, 	729 	F.2d 	982,
984-85 (4th Cir. 1984)).
Pre-BAPCPA subsection 521(2)(B) provided that "within forty-
five 	days 	after 	the 	filing 	of 	a 	notice 	of 	intent 	under 	this
section, 	or 	within 	such 	additional 	time 	as 	the 	court, 	for 	cause,
within such forty-five day period fixes, the debtor shall perform
his 	intention 	with 	respect 	to 	such 	property, 	as 	specified 	by
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subparagraph 	(A) 	of 	this 	paragraph 	. 	. 	. 	." 	Pre-BAPCPA, 	this
deadline 	was 	enforced 	by 	the 	trustee 	pursuant 	to 	11 	U.S.C. 	§
704(3), 	which 	provided 	that 	the 	trustee 	shall 	"ensure 	that 	the
debtor 	shall 	perform 	his 	intention 	as 	specified 	in 	section
521(2)(B) 	of 	this 	title." 	11 	U.S.C. 	§ 	704(3) 	(1984). 	This
deadline, like the rest of § 521(2), was considered procedural as
opposed to substantive, so a debtor's failure to meet the deadline
did 	not 	"reduce 	the 	debtor's 	substantive 	rights." 	The 	"only
consequence of the failure to perform" was, "in some cases, relief
from the automatic stay with respect to the property." 	4 Collier
on 	Bankruptcy 	¶ 	521.10[3], 	at 	521-51 	(Alan 	N. 	Resnick 	& 	Henry 	J.
Sommer eds., 15th ed. rev. 2006) (citing cases).
Finally, § 521(2)(C) stated that the provisions of subsections
(A) 	and 	(B) 	did 	not 	"alter 	the 	debtor's 	or 	the 	trustee's 	rights
with 	regard 	to 	such 	property 	under 	this 	title." 	11 	U.S.C. 	§
521(2)(C) 	(1984). 	The 	Belanger 	court 	acknowledged 	Collier's
criticism of the Edwards opinion in particular for "failing to give
effect 	to 	§ 	521(2)(C) 	and 	legislative 	history 	that 	disclosed
Congress 	rejected 	a 	proposal 	to 	lift 	the 	automatic 	stay 	if 	the
debtor did not timely redeem or reaffirm." 	Belanger, 962 F.2d at
347 	(citing 	3 	Collier 	on 	Bankruptcy 	§ 	521.09A, 	at 	521-49
(Lawrence 	P. 	King 	ed., 	15th 	ed. 	1991) 	(construing 	H.R. 	4786, 	97
Cong., 1st Sess. § 7 (1981))).
In sum, § 521(2)(A) was enacted in 1984 to provide notice to
creditors of what a chapter 7 debtor with a secured consumer debt
intended to do with the collateral. 	It did not affect the debtor's
substantive rights. 	Belanger, 962 F.2d at 347 (citing 3 Collier on
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Bankruptcy 	§ 	521.09A, 	at 	521-49 	(Lawrence 	P. 	King 	ed., 	15th 	ed.
1991)). 	It was, instead, "a procedural provision requiring notice
in 	order 	to 	inform 	the 	lien 	creditor 	promptly 	of 	the 	debtor's
intention." 	Belanger, 962 F.2d at 347. 	Belanger also reiterated
that 	bankruptcy 	default, 	or 	"ipso 	facto," 	clauses 	are 	not
enforceable 	in 	the 	Fourth 	Circuit. 	Belanger, 	962 	F.2d 	at 	348
(citing Riggs Nat'l Bank of Washington, D.C. v. Perry, 729 F.2d 982
(4th Cir. 1984)).
BAPCPA Amendments
Numerous 	2005 	amendments 	to 	the 	Bankruptcy 	Code 	have 	a
potential impact on the "ride-through" option. 	There are several
changes 	to 	§ 	521, 	specifically 	§§ 	521(a)(2)(A), 	(B) 	and 	(C), 	§
521(a)(6) and § 521(d). 	The addition of § 362(h) and changes to §§
524(c), (k), (l) and (m) are relevant as well.
Post-BAPCPA § 521(a)(2)(A)
Section 521(2) was amended by BAPCPA to read as follows:
(a) The debtor shall--
. . . .
(2) 	if 	an 	individual 	debtor's 	schedule 	of 	assets 	and
liabilities includes debts which are secured by property
of the estate–
(A) within thirty days after the date of the filing
of 	a 	petition 	under 	chapter 	7 	of 	this 	title 	or 	on
or 	before 	the 	date 	of 	the 	meeting 	of 	creditors,
whichever 	is 	earlier, 	or 	within 	such 	additional
time 	as 	the 	court, 	for 	cause, 	within 	such 	period
fixes, 	the 	debtor 	shall 	file 	with 	the 	clerk 	a
statement 	of 	his 	intention 	with 	respect 	to 	the
retention 	or 	surrender 	of 	such 	property 	and, 	if
applicable, 	specifying 	that 	such 	property 	is
claimed 	as 	exempt, 	that 	the 	debtor 	intends 	to
redeem such property, or that the debtor intends to
reaffirm debts secured by such property;
(B) 	within 	30 	days 	after 	the 	first 	date 	set 	for
the 	meeting 	of 	creditors 	under 	section 	341(a) 	or
within 	such 	additional 	time 	as 	the 	court, 	for
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cause, within such 30-day period fixes, the debtor
shall 	perform 	his 	intention 	with 	respect 	to 	such
property, as specified by subparagraph (A) of this
paragraph; and
(C) 	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) (2005).
With 	the 	passage 	of 	BAPCPA, 	§ 	521(2)(A) 	was redesignated §
521(a)(2)(A), 	and 	the 	reference 	to 	"consumer" 	debts 	was 	deleted.
The 	legislative 	history 	to 	that 	amendment 	states 	only 	that 	the
section 	was 	amended 	by 	section 	305 	of 	BAPCPA 	"to 	make 	the
requirement 	to 	file 	a 	statement 	of 	intention 	applicable 	to 	all
secured 	debts, 	not 	just 	secured 	consumer 	debts." 	E-2 	Collier 	on
Bankruptcy 	at 	App. 	Pt. 	10-336 	(Alan 	N. 	Resnick 	& 	Henry 	J. 	Sommer
eds., 	15th 	ed. 	rev. 	2006). 	Section 	521(2)(A) 	otherwise 	remains
unchanged, and the amendment by itself does not affect the "ride-
through" option. 	4 	Collier on Bankruptcy ¶ 521.10[2], at 521-49
to 	-50 	(Alan 	N. 	Resnick 	& 	Henry 	J. 	Sommer 	eds., 	15th 	ed. 	rev.
2006).
Post-BAPCPA § 521(a)(2)(B)
Section 	521(2)(B) 	was 	redesignated 	§ 	521(a)(2)(B), 	and 	the
time for the debtor to perform the debtor's intention was changed
from 45 days after filing of the notice of intent to 30 days after
the 	first 	date 	set 	for 	the 	meeting 	of 	creditors. 	Section
521(a)(2)(B) 	requires 	the 	debtor 	to 	perform 	the 	intention 	as
specified in subsection (A) within 30 days after the first date set
for the meeting of creditors, unless the court for cause and within
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that 	30-day 	period, 	allows 	additional 	time. 	The 	change 	to
§ 521(2)(B) does not affect the "ride-through" option.
Post-BAPCPA § 521(a)(2)(C)
Section 	521(2)(C) 	was 	redesignated 	§ 	521(a)(2)(C) 	and 	the
section was amended to provide 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)." 	The 	addition 	of 	the 	exception
provided in § 362(h) is significant, but § 362(h) does not on its
own eliminate the "ride-through" option.
Post-BAPCPA § 362(h)
Section 362(h) was added by BAPCPA and provides that:
(h)(1) 	In 	a 	case 	in 	which 	the 	debtor 	is 	an 	individual,
the 	stay 	provided 	by 	subsection 	(a) 	is 	terminated 	with
respect 	to 	personal 	property 	of 	the 	estate 	or 	of 	the
debtor securing in whole or in part a claim, or subject
to an unexpired lease, 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
(B) 	to 	take 	timely 	the 	action 	specified 	in 	such
statement, 	as 	it 	may 	be 	amended 	before 	expiration
of 	the 	period 	for 	taking 	action, 	unless 	such
statement 	specifies 	the 	debtor's 	intention 	to
reaffirm 	such 	debt 	on 	the 	original 	contract 	terms
and 	the 	creditor 	refuses 	to 	agree 	to 	the
reaffirmation on such terms.
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3Collier suggests that the options listed in § 362(h)(1)(A) are
joined 	with 	the 	word 	"or," 	and 	that 	since 	under 	the 	applicable
rules 	of 	construction, 	"or" 	is 	not 	exclusive, 	the 	listed 	options
are not exclusive. 	11 U.S.C. § 102(5); 3 Collier on Bankruptcy ¶
362.10A, 	at 	362-119 	to 	-120 	(Alan 	N. 	Resnick 	& 	Henry 	J. 	Sommer
eds., 15th ed. rev. 2006) (referring to 11 U.S.C. § 102(5)). 	The
problem 	with 	that 	analysis 	is 	that 	although 	the 	word 	"or" 	is
construed to be, pursuant to § 102(5), non-exclusive, § 362(h) uses
the construction "either . . . or" which would be construed to set
forth choices that are exclusive.
18
(2) Paragraph (1) does not apply if the court determines,
on the motion of the trustee filed before the expiration
of 	the 	applicable 	time 	set 	by 	section 	521(a)(2), 	after
notice and a hearing, that such personal property is of
consequential value or benefit to the estate, and orders
appropriate 	adequate 	protection 	of 	the 	creditor's
interest, and orders the debtor to deliver any collateral
in the debtor's possession to the trustee. 	If the court
does 	not 	so 	determine, 	the 	stay 	provided 	by 	subsection
(a) shall terminate upon the conclusion of the hearing on
the motion.
11 U.S.C. § 362(h) (2005) (emphasis added).
According to Collier on Bankruptcy, the "apparent purpose" of
§ 362(h) is to "encourage debtor compliance with section 521," and
the statutes should be construed together in order to give effect
to 	both. 	3 	Collier 	on 	Bankruptcy 	¶ 	362.10A, 	at 	362-120 	(Alan 	N.
Resnick 	& 	Henry 	J. 	Sommer 	eds., 	15th 	ed. 	rev. 	2006). 	It 	may 	be
argued 	that 	since 	the 	"ride-through" 	option 	was 	not 	specifically
eliminated 	by 	changes 	to 	§ 	521(2)(A), 	a 	debtor 	should 	be 	able 	to
state 	an 	intention 	to 	retain 	property 	without 	redemption 	or
reaffirmation and without having the stay terminated by § 362(h).
The 	problem 	with 	that 	argument, 	however, 	is 	that 	it 	would 	be
contrary to the plain meaning of § 362(h), which provides that the
automatic stay shall terminate if the debtor is retaining property
unless 	the 	debtor 	states 	the 	intention 	to 	either 	redeem 	the
property or to reaffirm the debt. 3
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4Section 704(3) still refers to § 521(2)(B), even though that
section no longer exists, having been redesignated by BAPCPA as §
521(a)(2)(B). 	Commentary in 	Collier 	on 	Bankruptcy 	raises 	the
question 	of 	whether 	courts 	will 	interpret 	§ 	704(a)(3) 	to 	have 	no
applicability, 	or 	will 	construe 	the 	reference 	to 	§ 	521(2)(B) 	to
refer to new § 521(a)(2)(B). 	4 Collier on Bankruptcy ¶ 521.10[4],
at 	521-52 	(Alan 	N. 	Resnick 	& 	Henry 	J. 	Sommer 	eds., 	15th 	ed. 	rev.
2006).
19
The consequences of not complying with § 362(h)(1)(A) are that
the 	stay 	will 	terminate 	with 	respect 	to 	personal 	property 	of 	the
estate or the debtor and that the personal property shall no longer
be 	property 	of 	the 	estate. 	Section 	362(h) 	therefore 	expands 	the
consequences 	of 	a 	debtor's 	failure 	to 	comply 	with 	§ 	521(a)(2)(A)
and § 521(a)(2)(B). 	As noted earlier, prior to passage of BAPCPA,
the trustee, pursuant to § 704(3), was to "ensure that the debtor
shall 	perform 	his 	intention 	as 	specified 	in 	section 	521(2)(B) 	of
this 	title." 	Section 	704(3) 	is 	now 	designated 	704(a)(3), 	but
otherwise that subsection is unchanged. 4 No enumerated powers are
given to the trustee to "ensure" performance, but with the addition
of 	§ 	362(h) 	the 	stay 	will 	be 	terminated 	if 	the 	debtor 	does 	not
perform.
Termination 	of 	the 	stay, 	however, 	does 	not 	mean 	that 	the
"ride-through" 	option 	is 	eliminated. 	The 	Fourth 	Circuit 	Court 	of
Appeals has held that "a default-on-filing clause in an installment
loan contract was unenforceable as a matter of law." 	Belanger, 962
F.2d 	at 	348 	(construing 	Riggs Nat'l Bank v. Perry , 	729 	F.2d 	982,
984-85 (4th Cir. 1984)), and nothing in § 362(h) changes that.
Post-BAPCPA § 521(a)(6)
Unlike 	the 	BAPCPA 	amendments 	to 	§ 	521(a)(2) 	and 	§ 	362(h),
which do not by themselves eliminate the "ride-through" option, the
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5The requirement that the debtor either enter into an agreement
with 	the 	creditor 	pursuant 	to 	§ 	524(c) 	or 	redeem 	the 	property
within 	45 	days 	after 	the 	first 	meeting 	of 	creditors 	is 	different
than 	the 	requirement 	in 	§ 	521(a)(2) 	and 	§ 	362(h) 	that 	the 	debtor
both 	file 	the 	statement 	of 	intention 	and 	perform 	the 	intention
within 30 days of filing the petition and of the first date set for
the 	meeting 	of 	creditors, 	respectively. 	Although 	different, 	the
deadlines are not necessarily inconsistent. 	Section 521(a)(6) has
20
amendment 	to 	§ 	521(a)(6) 	made 	by 	BAPCPA 	does. 	In 	most 	chapter 	7
cases, 	§ 	521(a)(6) 	will 	have 	very 	little 	application. 	Section
521(a)(6) provides that a debtor shall–
(6) 	in a case under chapter 7 of this title in which the
debtor 	is 	an 	individual, 	not 	retain 	possession 	of
personal property as to which a creditor has an allowed
claim for the purchase price secured in whole or in part
by 	an 	interest 	in 	such 	personal 	property 	unless 	the
debtor, not later than 45 days after the first meeting of
creditors under section 341(a), either--
(A) 	enters 	into 	an 	agreement 	with 	the 	creditor
pursuant 	to 	section 	524(c) 	with 	respect 	to 	the
claim secured by such property; or
(B) 	redeems 	such 	property 	from 	the 	security
interest pursuant to section 722.
If 	the 	debtor 	fails 	to 	so 	act 	within 	the 	45-day 	period
referred 	to 	in 	paragraph 	(6), 	the 	stay 	under 	section
362(a) 	is 	terminated 	with 	respect 	to 	the 	personal
property 	of 	the 	estate 	or 	of 	the 	debtor 	which 	is
affected, 	such 	property 	shall 	no 	longer 	be 	property 	of
the estate, and the creditor may take whatever action as
to 	such 	property 	as 	is 	permitted 	by 	applicable
nonbankruptcy 	law, 	unless 	the 	court 	determines 	on 	the
motion of the trustee filed before the expiration of such
45-day period, and after notice and a hearing, that such
property 	is 	of 	consequential 	value 	or 	benefit 	to 	the
estate, 	orders 	appropriate 	adequate 	protection 	of 	the
creditor's interest, and orders the debtor to deliver any
collateral in the debtor's possession to the trustee . .
. .
11 U.S.C. § 521(a)(6) (2005).
In 	essence, 	§ 	521(a)(6) 	requires 	an 	individual 	debtor 	in 	a
chapter 7 case who is retaining personal property either to redeem
the 	property 	or 	to 	reaffirm 	the 	debt 	within 	45 	days 	"after 	the
first meeting of creditors" 5 with respect to property as to which
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a 	much 	more 	limited 	application 	than 	§ 	521(a)(2), 	and 	if 	§
521(a)(6) is applicable and if there is a conflict between the two
time limits, the 45-day time limit of § 521(a)(6) should control.
6The debtor may "not 	retain possession" of personal property
that comes within the statute. 	The "not retain" concept is new to
the 	Bankruptcy 	Code, 	and 	is 	neither 	explained 	nor 	implemented 	by
the 	statute. 	The 	statute 	does 	not 	specify 	to 	whom 	possession 	of
the property should be given, although the secured creditor or the
trustee 	are 	the 	most 	likely 	candidates. 	There 	also 	is 	no
enforcement provision in the statute to take effect if the debtor
retains possession without redeeming or reaffirming the debt.
21
a creditor "has an allowed claim for the purchase price." 	If the
debtor 	fails 	to 	timely 	redeem 	the 	property 	or 	reaffirm 	the 	debt,
the debtor shall "not retain possession" 6 of the personal property,
the 	automatic 	stay 	is 	terminated 	with 	respect 	to 	property 	of 	the
estate or of the debtor, the property shall no longer be property
of 	the 	estate, 	and 	the 	creditor 	may 	take 	whatever 	action 	is
permitted by applicable nonbankruptcy law.
For the redemption/reaffirmation requirement of § 521(a)(6) to
come 	into 	play, 	the 	creditor 	must 	have 	"an 	allowed 	claim 	for 	the
purchase price." 	There are a number of reasons why this provision
will rarely be applicable in chapter 7 cases.
First, the creditor must have "an allowed claim." 	"Generally,
in order for a claim to be allowed, it must be filed in accordance
with section 501." 	4 Collier on Bankruptcy ¶ 521.10[4], at 521-55
(Alan N. Resnick & Henry J. Sommer eds., 15th ed. rev. 2006). 	In
a 	recent 	case 	the 	bankruptcy 	court 	for 	the 	District 	of 	Kansas
observed that the construction of "allowed claim" in § 521(a)(6) is
problematic, 	so 	much 	so 	that 	the 	word 	"allowed" 	should 	be
disregarded to give effect to Congressional intent. 	In re Rowe, --
B.R. 	--, 	2006 	WL 	1446181 	at 	* 	6-7 	(Bankr. 	D. 	Kan. 	2006). 	This
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7As the court in Rowe observed, a claim can be allowed in one
of 	three 	ways: 	"first, 	a 	proof 	of 	claim 	is 	filed 	or 	deemed 	filed
and no party objects; second, a claim is allowed by the court after
an objection is filed; and third, a claim is estimated by the Court
under the provisions of section 502(c)." 	Rowe, -- B.R. --, 2006 WL
1336181 	at 	*6 	(citing 	4 	Collier 	on 	Bankruptcy 	¶ 	502.01 	(Alan 	N.
Resnick & Henry J. Sommer eds., 15th ed. rev. 2006)).
22
court 	respectfully 	disagrees 	that 	the 	word 	"allowed" 	should 	be
ignored. 	The 	term 	"allowed 	claim," 	although 	not 	defined 	in 	the
Bankruptcy Code, is generally recognized, frequently used, and well
understood. 	See 	Jacksonville 	Airport, 	Inc. 	v. 	Michkeldel, 	Inc.,
434 F.3d 729, 731 (4th Cir. 2006) (a creditor in a chapter 11 case
may not vote on the debtor's plan of reorganization unless it has
an 	"allowed" 	claim). 	Typically, 	for 	a 	claim 	to 	be 	an 	allowed
claim, 	a 	proof 	of 	claim 	must 	be 	filed. 7 In 	no-asset 	chapter 	7
cases, 	creditors 	do 	not 	file 	proofs 	of 	claim 	and 	do 	not 	have
"allowed" 	claims. 	Creditors 	with 	secured 	claims, 	prior 	to 	the
addition 	of 	§ 	524(a)(6), 	have 	had 	no 	reason 	to 	file 	proofs 	of
claim. 	Filing 	a 	proof 	of 	claim 	is 	a 	reasonable 	prerequisite 	to
receiving the relief afforded by § 521(a)(6). 	If a debtor who is
current in the debtor's payments to the creditor is not permitted
to 	retain 	the 	debtor's 	personal 	property--for 	example, 	an
automobile or mobile home--because of an ipso facto clause, it is
not too much to require that the secured creditor file a proof of
claim. 	At a minimum, the proof of claim would establish the amount
of the claim and would provide the documentation that supports the
creditor's invocation of an ipso facto clause. 	Without a proof of
claim, a debtor who is current with payments to the creditor stands
to 	lose 	valuable 	and 	necessary 	property 	without 	anything 	being
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8 This definition does not appear in the most recent editions
of 	Black's 	Law 	Dictionary. 	However, 	Black's 	underwent 	a 	major
overhaul beginning with its seventh edition, published in 1999, and
completed 	with 	the 	eighth 	edition, 	published 	in 	2004. 	Among 	the
goals 	of 	the 	overhaul 	were 	to 	"avoid[] 	duplicative 	definitions."
"Preface 	to 	the 	Seventh 	Edition," 	Black's 	Law Dictionary 	at 	xii
(8th 	ed. 	rev. 	2004). 	Though 	the 	eighth 	edition 	omits 	the
definition of "purchase price," the definition of "price" is "[t]he
amount 	of 	money 	or 	other 	consideration 	asked 	for 	or 	given 	in
exchange for something else; the cost at which something is bought
or sold." 	Because the definition of "price" is so similar to the
definition of "purchase price" in prior editions, it is likely that
"purchase price" was omitted in the newer revisions simply because
the editors deemed it duplicative.
23
filed with the bankruptcy court. 	In the case under consideration
here, no claim was filed by the credit union.
Nevertheless, 	even 	if 	a 	creditor 	does 	file 	a 	proof 	of 	claim
and 	the 	claim 	is 	deemed 	allowed, 	the 	claim 	must 	be 	"for 	the
purchase 	price" 	of 	the 	personal 	property 	at 	issue. 	The 	term
"purchase price" is defined in Black's Law Dictionary (6th ed. rev.
1990) 	as 	being 	the 	"[p]rice 	agreed 	upon 	as 	a 	consideration 	for
which 	property 	is 	sold 	and 	purchased." 8 A 	plain 	meaning
construction of the term "claim for the purchase price" indicates
a claim for the full purchase price. 	A claim for the full purchase
price is not the same as a claim for a "purchase-money obligation"
or a claim secured by a "purchase-money security interest." 	It is
also 	not 	the 	same 	as 	a 	claim 	for 	"any 	portion 	of 	the 	purchase
price" or a claim "attributable in whole or in part to the purchase
price." 	Had Congress meant any of these other types of claims, it
would 	have 	identified 	them 	as 	it 	has 	in 	other 	sections 	of 	the
Bankruptcy Code.
"Purchase-money 	obligation" 	and 	"purchase-money 	security
interest" are terms that are familiar to consumer commerce and are
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used 	in 	the 	Uniform 	Commercial 	Code 	and 	in 	the 	Truth 	in 	Lending
Act. 	“Purchase 	money 	obligation” 	and 	“purchase 	money 	security
interest” mean an obligation or security interest involving all or
a part of the purchase price. 	See Uniform Commercial Code § 9-103
defining "purchase-money obligation," "purchase-money collateral"
and "purchase-money security interest".
The 	term 	"nonpurchase 	money 	security 	interest" 	is 	used 	in 	§
522(f)(1)(B), 	and 	the 	term 	"purchase 	money 	security 	interest" 	is
used in § 524(k)(3)(G) and § 1325(a) (the "hanging paragraph"), two
sections 	added 	by 	BAPCPA. 	Section 	1326(a)(4), 	added 	by 	BAPCPA,
refers to a secured claim "attributable in whole or in part to the
purchase price of such property." 	Clearly, if Congress intended in
§ 521(a)(6) for a "claim for the purchase price" to mean something
less than the full purchase price, it would have said so as it did
in § 522(f)(1)(B), § 524(k)(3)(G), § 1325(a)(4) and § 1326(a)(4).
In 	§ 	521(a)(6) 	itself, 	there 	is 	a 	reference 	to 	the 	claim 	being
secured 	"in 	whole 	or 	in 	part 	by 	an 	interest 	in 	such 	personal
property." 	If Congress had meant that the claim could be for less
than the full purchase price, it could have used the same "in whole
or 	in 	part" 	language 	to 	the 	describe 	the 	debt 	that 	it 	used 	to
describe the collateral.
"The Court of Appeals for the Fourth Circuit recently observed
that 	the 	use 	of 	a 	particular 	phrase 	in 	one 	statute 	but 	not 	in
another 	'merely 	highlights 	the 	fact 	that 	Congress 	knew 	how 	to
include such a limitation when it wanted to.'" 	In re Paschal, 337
B.R. 	274, 	279 	(Bankr. 	E.D.N.C. 	2006) 	(quoting 	In 	re 	Coleman, 	426
F.3d 719, 725 (4th Cir. 2005)). 	The 	Coleman court, and this court
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9The 	legislative 	history 	of 	§ 	521(a) 	explains 	that 	it 	was
amended 	to 	provide 	that 	the 	chapter 	7 	debtor 	may 	not 	retain
possession of personal property "securing, in whole or in part, a
purchase money security interest unless the debtor, within 45 days
after the first meeting of creditors, enters into a reaffirmation
agreement with the creditor or redeems the property." 	E-2 Collier
on Bankruptcy App. Pt. 10(b) at App. Pt. 10-335 (Alan N. Resnick &
Henry 	J. 	Sommer 	eds., 	15th 	ed. 	rev. 	2006) 	(emphasis 	added).
Obviously, 	that 	is 	not 	what 	the 	statute 	says, 	and 	the 	plain 	and
specific 	language 	of 	the 	statute 	must 	control. 	The 	need 	to
distinguish between the legislative history and the actual language
of 	the 	statute 	is 	bolstered 	by 	another 	inconsistency 	within 	the
same 	section: 	The 	legislative 	history 	states 	that 	the 	automatic
stay 	is 	terminated 	with 	respect 	to 	the 	personal 	property 	of 	the
individual 	debtor 	"in 	a 	chapter 	7, 	11, 	or 	13 	case" 	if 	the 	debtor
fails to file the statement of intention required by § 521(a)(2) or
to indicate, in the statement, the treatment of the property. 	E-2
Collier 	on 	Bankruptcy 	at 	App. 	Pt. 	10-335. 	Section 	521(a)(2)(A)
clearly 	requires 	only 	individual 	chapter 	7 	debtors 	to 	file 	a
statement of intention, and is contrary to the legislative history.
25
in 	Paschal, 	"also 	quoted 	the 	Supreme 	Court’s 	clear 	directive 	on
this 	topic: 	'Where 	Congress 	includes 	particular 	language 	in 	one
section 	of 	a 	statute 	but 	omits 	it 	in 	another, 	it 	is 	generally
presumed 	that 	Congress 	acts 	intentionally 	and 	purposely 	in 	the
disparate 	inclusion 	or 	exclusion.'" 	Paschal, 	337 	B.R. 	at 	279
(quoting Coleman, 426 F.3d at 725-6 (quoting Keene Corp. v. United
States, 508 U.S. 200, 208, 113 S. Ct. 2035, 2040, 124 L. Ed. 2d 118
(1993) 	(internal 	quotation 	marks 	and 	alterations 	omitted))).9
Creditors 	will 	rarely 	have 	an 	allowed 	claim 	for 	the 	full
purchase 	price 	of 	personal 	property, 	either 	because 	consumer
purchases 	typically 	involve 	a 	down 	payment 	or 	because 	where 	the
full 	purchase 	price 	was 	financed, 	installment 	payments 	will 	have
been 	made 	prior 	to 	bankruptcy. 	In 	the 	case 	before 	this 	court,
Coastal may or may not have financed the full purchase price of the
debtors' 	automobile, 	but 	because 	the 	debtors 	have 	paid 	down 	the
original 	debt, 	the 	credit 	union 	does 	not 	hold 	a 	claim 	for 	the
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"purchase 	price." 	Furthermore, 	no 	proof 	of 	claim 	was 	filed 	and
Coastal 	does 	not 	have 	an 	"allowed 	claim" 	in 	any 	amount.
Consequently, 	the 	redemption/reaffirmation 	requirement 	of 	§
521(a)(6) is not applicable in this case.
Post-BAPCPA § 521(d)
Prior 	to 	the 	enactment 	of 	BAPCPA, 	the 	Fourth 	Circuit 	in
Belanger, relying on precedent established in Riggs Nat'l Bank v.
Perry, held that "a default-on-filing clause in an installment loan
contract was unenforceable as a matter of law." 	Belanger, 962 F.2d
at 348 (construing Riggs Nat'l Bank v. Perry, 729 F.2d 982, 984-85
(4th Cir. 1984)). 	Section 521(d), added by BAPCPA, significantly
changes that ruling.
Section 521(d) provides:
If the debtor fails timely to take the action specified
in 	subsection 	(a)(6) 	of 	this 	section, 	or 	in 	paragraphs
(1) and (2) of section 362(h), with respect to property
which a lessor or bailor owns and has leased, rented, or
bailed 	to 	the 	debtor 	or 	as 	to 	which 	a 	creditor 	holds 	a
security 	interest 	not 	otherwise 	voidable 	under 	section
522(f), 544, 545, 547, 548, or 549, 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 	proceeding 	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.
11 	U.S.C. 	§ 	521(d) 	(2005). 	Section 	521(d) 	thus 	alters 	the
Bankruptcy Code’s limitation regarding a bankruptcy default clause
if a debtor fails to take the action specified in § 521(a)(6) or in
§ 362(h).
Section 521(a)(6), as discussed above, does adversely affect
the "ride-through" option, but that section has extremely limited
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applicability and will rarely trigger the limitations of § 521(d).
Section 	362(h), 	however, 	will 	have 	more 	applicability. 	As
previously discussed, the subsections of § 521(a)(2) referred to in
§ 362(h) do not require a debtor to redeem property or reaffirm a
debt, 	and 	failure 	to 	redeem 	property 	or 	reaffirm 	a 	debt 	under 	§
521(a)(2) 	will not implicate the limitations of § 521(d). 	Section
362(h), 	however, 	does 	require 	redemption 	or 	reaffirmation. 	The
failure 	of 	a 	debtor 	to 	redeem 	the 	property 	or 	reaffirm 	the 	debt
triggers the provisions of § 521(d).
If 	the 	restrictions 	in 	§ 	521(d) 	regarding 	the 	Bankruptcy
Code's 	limits 	on 	ipso 	facto 	clauses 	become 	operative, 	it 	is 	not
clear 	from 	the 	language 	of 	§ 	521(d) 	what 	types 	of 	ipso 	facto
clauses will be affected. 	The ipso facto provisions referred to in
§ 521(d) are those that have the "effect of placing the debtor in
default . . . by reason of the occurrence, pendency, or existence
of a proceeding under this title or the insolvency of the debtor."
In basic bankruptcy terminology, a bankruptcy proceeding is not the
same as a bankruptcy case. 	A proceeding is something that occurs
within 	an 	already 	existing 	bankruptcy 	case. 	Most 	bankruptcy
default 	clauses, 	such 	as 	the 	one 	in 	this 	case, 	refer 	to 	the
commencement 	or 	filing 	of 	a 	bankruptcy 	case, 	and 	it 	would 	be
unusual 	for 	a 	loan 	document 	to 	provide 	a 	default 	based 	on 	"the
existence of a proceeding" within a bankruptcy case. 	Many default
clauses 	do 	use 	the 	term 	“bankruptcy 	proceeding,” 	but 	presumably
creditors 	intend 	the 	term 	"bankruptcy 	proceeding" 	to 	mean 	a
bankruptcy case. 	Why Congress did not refer to ipso facto clauses
in 	§ 	521(d) 	in 	the 	same 	manner 	as 	it 	did 	in 	§§ 	365(e)(1) 	and
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541(c)(1) is a mystery. 	Nevertheless, the language of § 521(d) is
broad enough to encompass the filing of a bankruptcy case and would
apply to the ipso facto clause in Coastal's loan documents.
The significance of § 521(d)'s treatment of ipso facto clauses
is 	simply 	that 	when 	a 	debtor 	fails 	to 	timely 	take 	the 	actions
required 	by 	§§ 	521(a)(6), 	or 	362(h)(1) 	or 	(2), 	the 	new 	statutory
language 	eliminates 	limitations 	previously 	imposed 	by 	the
Bankruptcy 	Code 	on 	the 	operation 	of 	ipso 	facto 	clauses. 	Section
521(d) 	does 	not 	create 	a 	new 	statutory 	remedy 	to 	be 	used 	by
creditors, 	and 	does 	not 	write 	ipso 	facto 	clauses 	into 	contracts
where 	none 	exist. 	Rather, 	it 	enables 	creditors 	to 	proceed 	under
contractual 	default 	clauses 	without 	limitations 	imposed 	by 	the
Bankruptcy Code. 	See In re Rowe, -- B.R. –, 2006 WL 1446181 at *8
(Bankr. 	D. 	Kan. 	2006) 	(emphasizing 	that 	§ 	521(d) 	"does 	not 	make
such 'ipso facto' clauses sufficient to define a default in accord
with 	nonbankruptcy 	law"). 	Creditors 	still 	must 	ensure 	that 	the
contract, and their efforts to enforce the terms in it, do not run
afoul of any applicable state laws. 	See Rowe, -- B.R. at --, 2006
WL 	1446181 	at 	*9 	(observing 	that 	"the 	conditions 	to 	declare 	a
default and obtain possession of the collateral will not be present
under Kansas law when the debtor remains current on the obligation
and there is no other basis for finding significant impairment," as
required by the Kansas Uniform Consumer Credit Code).
Post-BAPCPA § 524(k)
BAPCPA made a number of changes to § 524, including enhancing
the disclosures that must be contained in reaffirmation agreements.
One 	of 	the 	required 	disclosures 	contained 	in 	§ 	524(k) 	seems 	to
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expressly 	recognize 	the 	continued 	vitality 	of 	the 	"ride-
through" 	option. 	In 	particular, 	the 	disclosure 	required 	in 	§
524(k)(3)(J)(i)(7.) advises the debtor that "[e]ven if you do not
reaffirm 	and 	your 	personal 	liability 	on 	the 	debt 	is 	discharged,
because of the lien your creditor may still have the right to take
the security property if you do not pay the debt or default on it."
(emphasis 	added). 	The 	implication 	is 	that 	even 	if 	the 	debtor
discharges the debt, the property may be retained by the debtor so
long 	as 	the 	debtor 	continues 	to 	make 	the 	agreed-upon 	payments.
Presumably, the disclosures are intended to advise debtors of the
correct 	state 	of 	the 	law, 	but 	here 	the 	disclosure 	appears 	to 	be
incorrect, or at the very least, misleading.
Elimination of the "Ride-Through" Option
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, --
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10In the introductory comments to the House Report, it states
generally 	that 	protections 	for 	secured 	creditors 	are 	provided 	in
the 	bill's 	termination 	of 	the 	automatic 	stay 	"with 	respect 	to
personal 	property 	if 	the 	debtor 	does 	not 	timely 	reaffirm 	the
underlying 	obligation 	or 	redeem 	the 	property." 	E-2 	Collier 	on
Bankruptcy App. Pt. 10-268 (Alan N. Resnick & Henry J. Sommer eds.,
15th 	ed. 	rev. 	2006) 	(quoting 	Report 	of 	the 	Committee 	on 	the
Judiciary, House of Representatives, to Accompany S. 257, H.R. Rep.
No. 	109-31, Pt. 1, 109 	th 	Cong., 	1st 	Sess. 	(2005)). 	See 	also,
Richardo 	I. 	Kilpatrick, 	Selected 	Creditor 	Issues 	Under 	the
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, 79
Am. 	Bankr. 	L.J. 	817, 	825, 	827 	(2005) 	(stating 	that 	"the 	fourth
option or 'ride through' has been abolished through the amendments
to 	§ 	521," 	and 	that 	section 	521(d) 	was 	"amended 	to 	overrule 	the
decisions of the courts allowing debtors to 'pay and drive'").
30
B.R. 	–, 	2006 	WL 	1446181 	(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 § 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
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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
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11The 	same 	result 	could 	obtain 	where 	a 	debtor's 	good 	faith
reaffirmation agreement is unenforceable because the attorney who
represented 	the 	debtor 	during 	the 	negotiation 	of 	the 	agreement
declined 	to 	sign 	the 	affidavit 	or 	declaration 	required 	by 	§
524(c)(3). 	An 	attorney 	who 	represents 	a 	debtor 	during 	the
negotiation 	of 	a 	reaffirmation 	agreement 	has 	an 	obligation 	to
determine that the agreement "does not impose an undue hardship on
the 	debtor 	or 	a 	dependent 	of 	the 	debtor." 	11 	U.S.C. 	§
524(c)(3)(B). 	Such 	an 	obligation 	may 	place 	attorneys 	in 	the
awkward position of having to make a determination that is contrary
to the wishes of their clients.
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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 car). 	(Bankr.
N.D. 	Ca. 	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
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become[] better able to afford paying secured debts, and this gain
in 	creditworthiness 	may 	more 	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.
For 	the 	reasons 	stated, 	the 	reaffirmation 	agreement 	between
the chapter 7 debtors and Coastal Federal Credit Union is APPROVED.
SO ORDERED.
END OF DOCUMENT
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