Consumer bankruptcy developments

Consumer bankruptcy developments

Consumer bankruptcy developments



On October 7, 2004, the Federal Reserve Board (FRB) issued a Statistical Release (the “Release”) regarding consumer credit data, excluding home mortgage debt, through August 2004. (1) The Release shows that, as of August 31, 2004, consumers in the United States owed a staggering $740.8 billion in revolving credit obligation. (2) The FRB’s numbers, however, show that revolving credit as of August 31 actually fell 5.5% from July’s number of $744.2 billion. (3) The amount of revolving credit in the year 2000 was $665.2 billion. (4) This indicates a net increase of approximately $75.6 billion over the past four years.

Consumer nonrevolving credit is defined by the FRB as including automobile loans and all other consumer credit (again excluding home mortgage debt), whether secured or unsecured, not included in revolving credit. (5) Non-revolving credit includes credit for mobile homes, education, boats, trailers, and vacations, as well as vehicles. (6) This credit through August 31, 2004 totaled $1,297.1 billion, up from $1,027.4 billion for the calendar year 2000, an increase of $269.7 billion over a period of approximately four years. (7)

According to the FRB, consumer credit decreased at a seasonally adjusted annual rate of about 1.5% in August 2004 following what had been a 6.5% increase in July. (8) Overall, even though revolving credit fell 5.4% from July to August, non-revolving credit edged up slightly in August from $1,296.2 billion in July. (9)


The Administrative Office of the U.S. Courts monitors and compiles data on bankruptcy filings for each quarter ending in December, March, June, and September. The Administrative Office makes its quarterly and twelve-month compilations available to the public approximately two months after the close of each quarter. At the time of this writing, only statistics through the end of the second quarter of 2004 were available.

The most recent available data gathered by the Administrative Office showed a slight decline in bankruptcy filings. (10) For the first time in a while there was a decrease in the overall number of bankruptcy filings, though businesses fared better (in terms of reduced filings) than individuals. A total of 1,635,725 bankruptcies were flied in the United States during the twelve month period ending June 30, 2004. (11) Of this number, 35,739 or approximately 2.2% were business filings, while 1,599,986 or approximately 97.8% were consumer filings. (12) Further stratifying the consumer filings, 1,167,101 or approximately 71.4% were Chapter 7 cases, while 457,171 or approximately 28.0% were Chapter 13 cases, and 11,602 were Chapter 11 cases. (13)

For the year ending June 30, 2004, business filings decreased 3.9% from the twelve-month period ending June 30, 2003. (14) Although this was a modest decrease, nonbusiness filings dropped a scant 0.8% for the same period. (15) Hopefully this trend will continue its recent movement in the direction of fewer filings, but the longer historical perspective is not encouraging.


Chapter 12 of the Bankruptcy Code provides protection for “family farmers.” (16) A “family farmer” is defined under Chapter 12 as an individual, spouse, or family-owned partnership or corporation with debts of less than $1.5 million, at least eighty percent of which arise from the farming operation. (17) Moreover, the debtor must derive at least fifty percent of gross annual income from farming. (18)

Chapter 12 was originally added to the Bankruptcy Code as a result of the severe financial distress faced by the nation’s farmers during the mid-1980s. (19) At the time of enactment, Chapter 12 was not meant to be a permanent remedy and was set to expire on October 1, 1993. Since that time, however, Congress has continually extended the effective date of Chapter 12, at times retroactively. In the latest example, Chapter 12 was allowed to lapse on January 1, 2004, and from then until October 25, 2004 was unavailable to bankruptcy fliers. On October 25, 2004, President Bush signed legislation reinstating Chapter 12, retroactive to January 1, 2004. Under this legislation, Chapter 12 was extended to July 1, 2005. The retroactive provision allows some 2004 fliers who initiated their cases under other chapters to convert to Chapter 12.

On April 26, 2004, the U.S. Supreme Court forwarded proposed amendments to Bankruptcy Rules 1011, 2002, and 9014 to Congress for final acceptance. Absent affirmative action by Congress to modify or delete the changes, the amendments took effect by default on December 1, 2004. Rule 1011, which relates to responsive pleadings and motions filed in involuntary and ancillary cases, is a technical amendment that deletes an internal cross-reference to Bankruptcy Rule 1004(b). In another technical change, Rule 2002 was modified to clarify the proper method of giving notification to the Internal Revenue Service.

Bankruptcy Rule 9014 was amended to remove the Rule’s previous disclosure requirements for contested matters. The full text of the amendment (showing the changes) is as follows:


(c) APPLICATION OF PART VII RULES. Except as otherwise provided in this rule, and unless [begin strikethrough]Unless[end strikethrough] the court directs otherwise, the following rules shall apply: 7009, 7017, 7021, 7025, 7026, 7028-7037, 7041, 7042, 7052, 7054-7056, 7064, 7069, and 7071. The following subdivisions of Fed. R. Civ. P. 26, as incorporated by Rule 7026, shall not apply in a contested matter unless the court directs otherwise: 26(a)(1) (mandatory disclosure), 26(a)(2) (disclosures regarding expert testimony) and 26(a)(3) (additional pre-trial disclosure), and 26(f) (mandatory meeting before scheduling conference/discovery plan). An entity that desires to perpetuate testimony may proceed in the same manner as provided in Rule 7027 for the taking of a deposition before an adversary proceeding. The court may at any stage in a particular matter direct that one or more of the other rules in Part VII shall apply. The court shall give the parties notice of any order issued under this paragraph to afford them a reasonable opportunity to comply with the procedures prescribed by the order.


The rule is amended to provide that the mandatory disclosure requirements of Fed. R. Civ. P. 26, as incorporated by Rule 7026, do not apply in contested matters. The typically short time between the commencement and resolution of most contested matters makes the mandatory disclosure provisions of Rule 26 ineffective. Nevertheless, the court may by local rule or by order in a particular case provide that these provisions of the rule apply in a contested matter. (20)


For years, bankruptcy courts have been considering how to calculate the modified or “cram down” rate of interest under a Chapter 13 Plan. Formulas used by some courts have included a “coerced loan” rate on the theory that the secured creditor must extend credit to the debtor for the duration of the Chapter 13 Plan. Courts have also considered the secured creditor’s cost of funds or a base borrowing rate adjusted for risk of nonpayment.

In Till v. SCS Credit Corp., (21) the U.S. Supreme Court decided the issue of what is the proper method of calculating the interest rate for purposes of Chapter 13 Plan confirmation under the Bankruptcy Code standard of 11 U.S.C. [section] 1325(a)(5)(B)(ii). This section provides that a Chapter 13 Plan must provide the secured creditor with “the value, as of the effective date of the plan, of property to be distributed under the plan on account of [the secured creditor’s] claim [which] is not less than the allowed amount of such claim.” (22) To provide this value, the Chapter 13 debtor must pay interest during the Plan. The question before the Supreme Court in Till was: What is the proper “cram down” interest rate under section 1325(a)(5)(B)(ii)?

The U.S. Bankruptcy Court for the Southern District of Indiana had approved the debtors’ use of a “formula approach”: the prime rate (eight percent) plus 1.5% for the risk of default. (23) The district court reversed, holding that the appropriate rate was a “coerced-loan” rate, in this case the contract rate (twenty-one percent), because cram down rates must be set at the level the creditor could have obtained had it foreclosed on the loan, sold the collateral, and reinvested the proceeds in equivalent new loans. (24) The majority of the U.S. Court of Appeals for the Seventh Circuit held that the original contract rate was a “presumptive rate” that could be challenged with evidence that a higher or lower rate should apply, and remanded the case to the bankruptcy court to afford the parties an opportunity to rebut the presumptive twenty-one percent rate. (25)

The Supreme Court granted certiorari to resolve a conflict among the circuits. Justices Stevens, Souter, Ginsberg, and Breyer concluded that a “prime plus” formula best met the test for Chapter 13 Plan interest rates under the Bankruptcy Code. (26) Justice Thomas concurred. (27) Thus a majority of the Court rejected the coerced-loan rate, the contract-presumptive rate, and the cost-of-funds approach. A plurality of Justices adopted the “formula” approach imposed by the bankruptcy court: essentially the national prime rate, adjusted to compensate for the greater risk of nonpayment posed by Chapter 13 debtors.

The facts in Till are typical of Chapter 13 cases. The Tills purchased a used truck from Instant Auto Finance. They financed the purchase of the truck and the credit contract was sold to SCS Credit Corporation. The contract interest rate was twenty-one percent per annum. Having defaulted on their payments to SCS, the Tills sought Chapter 13 bankruptcy protection. SCS and the Tills agreed that the value of the truck was $4,000 while the amount owing to SCS was $4,898.89. Thus, under the Bankruptcy Code the secured claim of SCS was $4,000, with the remaining portion of the SCS claim treated as unsecured. (28) The bankruptcy court then considered how to determine the appropriate interest rate to ensure that the Chapter 13 Plan distributed to SCS the $4,000 amount in such a way that SCS would receive not less than the present value of its secured claim over the life of the Plan. In other words, what interest rate would appropriately compensate SCS over this period of time?

At trial, SCS presented testimony that it uniformly charged twenty-one percent interest on so called “sub-prime” loans, i.e., loans to borrowers with poor credit ratings. The Chapter 13 trustee filed comments supporting a “formula rate” as easily ascertainable, closely tied to the conditions of the financial market, and independent of the financial circumstances of any particular lender. In other words, the bankruptcy court should not have to look to the financial condition of the creditor or its cost of funds.

On appeal, the U.S. Court of Appeals for the Seventh Circuit endorsed a slightly modified version of the “coerced” or “forced loan” approach. (29) Specifically, the Seventh Circuit focused on the interest rate “that the creditor in question would obtain in making a new loan in the same industry to a debtor who is similarly situated, although not in bankruptcy,” (30) found a presumption in favor of the contract rate, and remanded the case to the bankruptcy court for further determination on this basis. (31)

As noted, the Supreme Court reversed, finding no particular justification for the coerced loan theory and that the bankruptcy court need not look to the success rates for Chapter 13 Plans (indicating that if the likelihood in default of Chapter 13 Plans is “so high as to necessitate an ‘eye-popping’ interest rate … the plan probably should not be confirmed.”). (32)

In their dissent, Justices Scalia, O’Connor, Kennedy, and Chief Justice Rehnquist found the contract rate to be the appropriate rate of interest in a Chapter 13 confirmation. (33) The dissent found that the deferred payments offered in the Chapter 13 Plan “must fully compensate [the secured creditor] for the risk that such a failure will occur,” citing statistics of indicating at least a thirty-seven percent failure rate for Chapter 13 plans. (34) The dissent also pointed to the competitiveness of the sub-prime credit market, indicating that the rates of interest negotiated by sub-prime market creditors are a “decent estimate, or at least the lower bound, for the appropriate interest rate,” thus supporting the contract interest rate as a beginning point. (35)

The result of Till seems to be that the prime rate will be the base determinate rate for Chapter 13 cases, adjusted upward to compensate for the risks associated with the particular debtor’s likelihood of default. Apparently excluded from this analysis is the risk that the Chapter 13 debtor will default under his or her plan.


The case of Lamie v. United States Trustee, (36) in addition to its bankruptcy law holding, is worthy of note as to principles of statutory construction. The U.S. Supreme Court was asked to interpret section 330(a) of the Bankruptcy Code, regulating court awards of professional fees. (37) The Supreme Court held that a court may ignore “surplusage” in a statute, thus treating the remaining text as unambiguous. (38) The Supreme Court also indicated that “Surplusage does not always produce ambiguity and our preference for avoiding surplusage constructions is not absolute.” (39) Indeed, the Court indicated that this preference “is sometimes offset by the canon that permits a court to reject words ‘as surplusage’ if ‘inadvertently inserted or if repugnant to the rest of the statute.'” (40) The Court thus found that section 330(a)(1) has a plain meaning which does not lead to absurd results so as to require a court to treat the text as if it were ambiguous. (41)

The Lamie case also has implications from a specific bankruptcy perspective. Lamie was retained by Equipment Services, Inc. to represent it in a Chapter 11 bankruptcy case. Lamie represented the debtor with approval from the bankruptcy court under section 327 of the Bankruptcy Code. (42) The U.S. Trustee filed a motion to convert the case to Chapter 7. The bankruptcy court granted this motion and appointed a Chapter 7 trustee, thus terminating the debtor’s status as a Chapter 11 “debtor-in-possession” and, consequently, Lamie’s legal representation under section 327 as a lawyer for the debtor-in-possession. (43) Nonetheless, Lamie continued to provide legal services to the debtor, appearing on behalf of the debtor in the Chapter 7 case. Subsequently, Lamie filed an application with the bankruptcy court seeking allowance of his fees under section 330(a)(1) for the time he spent working on the debtor’s behalf after the Chapter 7 conversion. The government objected to the application, arguing that section 330(a)(1) makes no provision for the estate to compensate a lawyer not to represent the debtor authorized under section 327 of the Bankruptcy Code. Although section 327 does allow a Chapter 7 trustee to engage lawyers (including debtor’s counsel), that did not occur in the Equipment Services, Inc. Chapter 7 case. The Supreme Court found that following this plain meaning and the policy of not compensating lawyers whose engagement was not approved pursuant to section 327 of the Bankruptcy Code advances the trustee’s responsibility for preserving the estate and lowering the costs of the Chapter 7 liquidation for creditors. (44) But the question then brought to light is whether and how a Chapter 7 debtor’s lawyer can be compensated for matters not foreseen when taking a pre-petition retainer. Bankruptcy Code section 503(b)(3)(D) makes the test whether a “substantial contribution” was made in a Chapter 9 or Chapter 11 case. (45) How then can the substantially contributing Chapter 7 lawyer be compensated for unforeseen matters?

The Tenth Circuit Bankruptcy Appellate Panel (BAP) recently addressed a similar point as an issue of first impression within that circuit: Are attorneys’ fees and costs incurred pre-petition in preparation for the filing of a Chapter 13 case administrative expenses or general unsecured claims for the purposes of payment through the plan? In In re Busetta-Silvia, (46) a Chapter 13 debtor worked with her lawyer for several months preparing to file a Chapter 13 case. The work resulted in several revisions to her bankruptcy schedules. After filing the case and confirming the debtor’s plan, the lawyer sought approval of his fees and costs incurred in the total amount of $3,279.43, as an administrative expense. Included in this amount was $310.62 in unpaid pre-petition attorneys’ fees.

The bankruptcy court refused to allow the pre-petition fees to be classified as an administrative expense, and instead categorized that portion of the attorneys’ fees “as a general unsecured claim to be paid pro rata with the claims of other unsecured pre-petition creditors under the terms of Debtor’s confirmed plan.” (47) The bankruptcy court reasoned that under the Bankruptcy Code post-petition claims are to be paid on an administrative priority basis. (48) Thus, and because neither 11 U.S.C. [section] 330 nor [section] 507 expressly authorizes administrative claim priority for pre-petition attorneys’ fees, the bankruptcy court concluded that Congress intended the general pre- and post-petition distinction to apply to Bankruptcy Code sections 329(a), 330(a)(4), 503(b), 507(a)(1), and 1322(a)(2) regarding the allowance of attorneys’ fees. (49)

On appeal, the Tenth Circuit BAP disagreed, reasoning as follows: section 503(b) states that lawyer compensation and reimbursement that is awarded under section 330(a) “shall” be allowed as an administrative expense


In Kontrick v. Ryan, (52) the U.S. Supreme Court held that the bankruptcy court had subject matter jurisdiction to decide an objection to discharge included in an amended complaint filed after the applicable statute of limitations. (53) A creditor in a Chapter 7 case has sixty days after the date first set for a creditor’s meeting to file a complaint objecting to the debtor’s discharge or nondischargeability of a particular debt. (54) Ryan obtained three successive time extensions from the bankruptcy court in Kontrick’s Chapter 7 case. On January 13, 1998, Ryan filed a complaint objecting to Kontrick’s discharge, alleging that Kontrick had transferred property with the intent to defraud creditors. On May 6, 1998, with leave of court, but without seeking a court-approved time extension, Ryan amended the complaint, alleging that Kontrick fraudulently transferred money. Kontrick answered the complaint, but did not raise the untimeliness of the amended and independent allegation. In response to Ryan’s motion for summary judgment, Kontrick cross-moved to strike portions of the summary judgment but did not ask the court to strike the amended complaint’s fraudulent-transfer-of-money allegations.

On motion for reconsideration, Kontrick raised the issue of whether the bankruptcy court had jurisdiction to hear the “time-barred” allegation. The bankruptcy court held that the issue is not jurisdictional and Kontrick had waived his rights before the court reached the merits of Ryan’s objections to discharge. (55) The district court sustained the denial of discharge and the Seventh Circuit affirmed. (56) The Supreme Court held that a debtor forfeits his rights to rely on Rule 4004 of the Federal Rules of Bankruptcy Procedure (the “Rule”) if the debtor does not raise the Rule’s time limitation before the bankruptcy court reaches the merits of the creditor’s objection to discharge. (57) In so ruling, the Supreme Court held that the Rule “shall not be construed to extend or limit the jurisdiction of the courts.” (58) Likewise the filing deadlines prescribed in Bankruptcy Rules 2004 (59) and 9006(b)(3) (60) are claim processing rules that do not delineate what cases bankruptcy courts are competent to adjudicate and do not limit the court’s subject matter jurisdiction. (61)


In In re Davis, (62) the U.S. Court of Appeals for the Third Circuit considered whether an Individual Retirement Account (IRA) was a “trust” subject to restrictions on alienation created by nonbankruptcy law. (63) Robert P. Davis acquired an ERISA-qualified pension plan prior to his retirement. When he retired in January of 2002, he liquidated the pension plan and rolled over the money into an IRA. Davis then filed bankruptcy and listed his IRA as exempt under 11 U.S.C. [section] 522(d)(10). The bankruptcy court, sua sponte, raised the issue of whether the IRA should be an exempt asset under the rationale of the Third Circuit’s decision in In re Yuhas. (64) The bankruptcy court then ruled that the IRA was not property of Davis’s estate. (65) The district court affirmed, holding that the IRA was excluded from the debtor’s estate based on section 541(c)(2) of the Bankruptcy Code. (66) On appeal, the trustee argued that the IRA trust was not a trust under federal or Pennsylvania law. (67) The Third Circuit cited its prior holding in Yuhas, noting that five requirements must be met in order for an IRA to be excluded from a debtor’s bankruptcy estate under [section] 541(c)(2): 1) the IRA must constitute a “trust represent the debtor’s “beneficial interest” in that trust the IRA must be qualified under 26 U.S.C. [section] 408 must be a “restriction on the transfer” of the funds in the IRA and 5) the restriction must be enforceable under “applicable nonbankruptcy law.” (68)

The Third Circuit noted that not all IRAs constitute trusts. (69) The definition of a trust is an issue to be determined under state law. (70) The Third Circuit remanded the case to the bankruptcy court for further development of the evidence. (71)

Although not a consumer case, the U.S. Court of Appeals for the First Circuit, in In re NTA, LLC, (72) affirmed a novel method for the alienation of property. As part of a pre-bankruptcy workout and in order to avoid foreclosure, NTA and related debtors placed assets in an escrow account under Illinois law, retaining only the contingent right to buy back those assets as spelled out in an Escrow Agreement. The First Circuit held that a standstill agreement (which created or accompanied the Escrow Agreement) left the debtor “with only a limited right to the Membership Interests, best described as a contingent right to reclaim the Interests by meeting certain financing requirements.” (73) Effectively, under the standstill agreement, NTA had only the right to “buy back” the Membership Interest from a holding company set up pursuant to the standstill agreement. The First Circuit held that the bankruptcy estate cannot hold a greater interest in property than the debtor held prior to bankruptcy, in this case the conditional right to buy back the Membership Interest. (74)

Under Illinois law, the conveyance of property into an escrow creates a trust. (75) Under the Bankruptcy Code, NTA’s bankruptcy estate could only hold the same interest that NTA held at the time of the bankruptcy filing. (76) At the time of NTA’s bankruptcy filing, the standstill agreement and Escrow Agreement provided that the Membership Interest would be released to the holding company in a matter of hours, after a two day waiting period that had to lapse before the Membership Interest was distributed to the holding company. The bankruptcy filing did not stay or prevent this release and distribution or the operation of the standstill agreement and Escrow Agreement by making the Membership Interest or any part thereof property of the bankruptcy estate. (77)

Another recent decision of the U.S. Supreme Court may have owners who work in their businesses sighing with relief. In Yates v. Hendon, (78) the debtor was a doctor and the sole shareholder and president of the professional corporation for which he practiced medicine. The professional corporation sponsored an ERISA-qualified profit sharing plan, which included a statutorily required antialienation provision (the “plan”). In December 1989, the debtor borrowed $20,000 from the plan. Ignoring his obligations under the loan, the debtor never made any of the monthly loan payments. But in November 1996, the debtor paid the loan in full, including accrued interest, with a single payment of approximately $50,000. The money for the repayment came from the sale of his house. Within a matter of weeks creditors initiated an involuntary Chapter 7 bankruptcy case against the debtor. The debtor’s Chapter 7 trustee sought to avoid the loan repayment as a preference under 11 U.S.C. [section] 547(b). The debtor argued that the anti-alienation provision of the plan safeguarded the repayment because it was excepted from being estate property by virtue of 11 U.S.C. [section] 541(c)(2). Siding with the trustee, the bankruptcy court held that the debtor did not qualify as a protected “participant” under the plan, and avoided the transfer. (79) On appeal, the Sixth Circuit agreed. (80)

On review, the U.S. Supreme Court phrased the issue in Yates as whether “the working owner of a business (here, the sole shareholder and president of a professional corporation) [can] qualify as a ‘participant’ in a pension plan covered by the Employee Retirement Income Security Act of 1974 …” (81) Reversing the Sixth Circuit, the Supreme Court answered yes, holding that if an ERISA plan covers one or more employees other than the owner and his or her spouse, then the working owner may participate on equal terms with the other plan participants. (82) The Yates Court, however, remanded the case for further proceedings regarding the applicability of the bankruptcy avoidance powers under the Court’s holding, especially in view of the debtor’s failure to make any of the required monthly payments under the loan. (83)


Last year’s Survey (84) reviewed the case of In re Kalter, (85) which held that under Alabama law, title passed to the secured creditor upon repossession of a vehicle, and therefore the repossessed vehicle was not property of the debtor’s subsequent bankruptcy estate. (86) We characterized this result as inconsistent with Article 9 of the Uniform Commercial Code (U.C.C.). (87) But Kalter was decided under the applicable certificate of title law, which arguably determines whether title has passed. In In re Rozier, (88) Motors Acceptance Corporation unsuccessfully tested the Kalter analysis under a different certificate of title law.

In Rozier, the Eleventh Circuit certified to the Georgia Supreme Court the question of whether, under Georgia law, ownership of collateral passes from a debtor to the secured creditor upon repossession. (89) The Georgia Supreme Court noted that Article 9 of the U.C.C. makes clear that repossession alone does not to extinguish a debtor’s right to redeem the repossessed collateral. (90) After repossession, the secured creditor must go through specified steps under Article 9 Part 6 in order to extinguish the debtor’s Article 9 rights. (91) Specifically, the Georgia Supreme Court noted that U.C.C. section 9-610(c) provides that a secured party may purchase the collateral and U.C.C. sections 9-620 through 9-622 allow the secured creditor to accept the collateral in full or partial satisfaction of the debt with the debtor’s consent. (92) The Georgia Supreme Court concluded that to hold that title passes upon repossession would render these statutes meaningless and that it is required to give a sensible and intelligent effect to all provisions of the U.C.C., refraining “from any interpretation which renders any part of the statute meaningless.” (93)

Finally, the Georgia Supreme Court attempted to extend deference to the Eleventh Circuit Kalter decision, pointing out that Kalter and its companion case, Charles R. Hall Motors v. Lewis, (94) interpreted the Florida and Alabama motor vehicle statutes respectively. (95) The Georgia Supreme Court also noted that the relevant provisions of U.C.C. Article 9 have been revised since the Kalter and Lewis decisions, thus intimating that under old Article 9, title may have passed upon repossession. (96) Your authors disagree. In In re Rozier, the Eleventh Circuit then adopted the Georgia Supreme Court’s position on the certified question, ruling that Motors Acceptance Corporation had to turn over the repossessed vehicle to the Chapter 13 debtor, on grounds the debtor retained legal title and the Article 9 right of redemption. (97)

It is our role in this Survey to report on rather than to fully analyze the issues in recent case law, but it is appropriate to note that cases like Kalter and Rozier leave open some fundamental, unaddressed issues relating to property of the estate under Bankruptcy Code sections 541 and 542 and their relation to state law. The Georgia Supreme Court’s holding in Rozier is correct that the debtor’s Article 9 rights can only be extinguished under Article 9 Part 6. But that is not necessarily the issue under Bankruptcy Code sections 541 and 542. The bankruptcy issues include whether the debtor has title and an unqualified right to possession, and those are not entirely Article 9 issues. Kalter is correct that title is a matter for the state certificate of title law. Sections 541 and 542 depend on state law to determine title, and arguably for a vehicle that means the applicable certificate of title law. Yet the rights being enforced by the secured creditor were created under Article 9. Thus, the Bankruptcy Code references state law, and there may be a conflict between the applicable state laws. Moreover, it is not entirely a state law issue, as the trustee’s position depends also on the effect of sections 541 and 542. Among other things, the Eleventh Circuit decision in Rozier does not fully consider how the debtor, who essentially had only a right to redeem under Article 9, can pass more than that to the bankruptcy estate under section 541. (98) It seems that there is more for the courts to say on these issues.


Under section 544 of the Bankruptcy Code, the trustee has the powers of a hypothetical lien creditor. (99) Specifically, section 544(a)(2) provides that the trustee has, upon the commencement of the case, the rights and powers of “a creditor that extends credit to the debtor at the time of the commencement of the case, and obtains, at such time with respect to such credit, an execution against the debtor that is returned unsatisfied at such time, whether or not such a creditor exists….” (100) In Schlossberg v. Barney, (101) the U.S. Court of Appeals for the Fourth Circuit considered whether the trustee can step into the shoes of the Internal Revenue Service ORS), thus obtaining powers beyond those that are typically conferred on trustees in terms of reaching otherwise exempt property. The debtor owned a single family home with her spouse as a tenant by the entirety Essentially this tenancy by the entirety created a joint tenancy with a right of survivorship. The Bankruptcy Code allows an individual debtor to exempt an interest the debtor owns by the entirety. (102) IRS rules, however, allow the IRS to attach such property to collect a tax debt. (103)

In Schlossberg, the trustee argued that he was allowed to stand in the shoes of the IRS as a creditor for the purpose of reaching entireties property despite the exemption created in the Bankruptcy Code at section 522(b)(2). The Fourth Circuit held that the trustee’s powers as a hypothetical lien creditor do not allow it to step into the shoes of the IRS. (104) Literally interpreting section 544(a)(2) of the Bankruptcy Code, the Fourth Circuit found that the IRS was not a “creditor that extends credit” as required by the statute. (105) The court went on to analyze why the Internal Revenue Code does not contemplate an extension of credit or an entrustment with respect to tax liabilities, citing United States v. McDermott. (106) In Haas v. Internal Revenue Service, (107) the U.S. Court of Appeals for the Eleventh Circuit similarly found the IRS to be only an involuntary creditor, not having made a decision to extend credit, nor is an offer of a credit extension ever made to a taxpayer under the Internal Revenue Code. (108)


Section 523 of the Bankruptcy Code indicates debts which are nondischargeable. (109) Student loans are treated as nondischargeable if they are insured or guarantied by a governmental unit, funded in whole or in part by a governmental unit or nonprofit institution, or arise from an obligation to repay funds received as an educational benefit, scholarship, or stipend. (110) Student loans are excepted from this nondischargeability rule (and thus are dischargeable) if repayment “will impose an undue hardship on the debtor and the debtor’s dependents.” (111)

In In re Miller, (112) the U.S. Court of Appeals for the Sixth Circuit found that the bankruptcy court’s equitable powers under section 105(a) of the Bankruptcy Code (113) do not allow a court to discharge a portion of the debtor’s student loans, where the court had not found “undue hardship” under section 523(a)(8). (114) Specifically, the Sixth Circuit referred to the Supreme Court, quoting “whatever equitable powers remain in the bankruptcy courts must and can only be exercised within the confines of the Bankruptcy Code.” (115) Accordingly, a bankruptcy court cannot resort to equity when such an imposition would evade the plain language of the Bankruptcy Code. (116)


Another basis for nondischargeability is Bankruptcy Code section 523(a)(6), which provides that a debt for willful and malicious injury by the debtor to another entity or the property of another entity is nondischargeable. (117) In In re Rutledge, (118) the U.S. Court of Appeals for the Fourth Circuit found that malicious prosecution in a divorce case resulting in an attorneys’ fees award by the divorce court was nondischargeable. (119) The Fourth Circuit applied Virginia law on collateral estoppel and relied entirely on the record of the divorce court. (120) The court found that Mr. Rutledge successfully demonstrated that (i) the parties to the two proceedings were the same


For some years now, the U.S. Courts of Appeal have been divided as to whether there exists a fourth debtor option in addition to those listed at Bankruptcy Code section 521. (122) The fourth option is popularly called “ride through,” and is not specified in the statute. Section 521(2) requires the debtor to file a statement of intention with the bankruptcy court. (123) Section 521(2)(A) specifically requires each consumer debtor with debts secured by property of the estate, within thirty days from the filing of the petition or before the date of the meeting of creditors, whichever is earlier, to file with the clerk a statement of the debtor’s 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….” (124), Section 521(2)(B) requires the debtor to perform the stated intentions within forty-five days after filing the statement of intention. (125) Based in part on the words “if applicable,” there has been a split in the circuits as to whether the debtor may exercise a fourth option not stated in the statute

If the debtor can elect to ride through, the secured creditor is essentially proceeding in rem with respect to the collateral after the debtor has received a discharge. (126) The debtor is no longer liable for the debt, but the debt still exists and the debtor must continue to pay the scheduled contract payments in order to retain the collateral, regardless of the collateral’s value. Thus, by riding-through, the debtor may have to pay more than the value of the collateral (e.g., a vehicle) in order to retain it. On the other hand, the debtor is retaining the collateral without having to redeem it or reaffirm the debt, and after discharge can walk away from the collateral at will without personal liability. The creditor may proceed only against the collateral and must take care not to engage in actions which would violate the permanent injunction of section 524(a)(2). (127) Thus, routine credit servicing scenarios such as sending the debtor a payment notice, e.g., to help the debtor track when to make payments and how many payments are left, are fraught with danger for secured creditors in a ride through situation. (128) There are also risks for debtors, who may lose the collateral because they forget to make a payment in the absence of such notice.

In Price v. Delaware State Police Federal Credit Union (In re Price), (129) the U.S. Court of Appeals for the Third Circuit joined the Ninth Circuit, (130) the Second Circuit, (131) the Fourth Circuit, (132) and the Tenth Circuit (133) in finding that the ride-through option exists under section 521 of the Bankruptcy Code. To the contrary, the Sixth Circuit, (134) the First Circuit, (135) the Fifth Circuit, (136) the Eleventh Circuit, (137) and the Seventh Circuit (138) have found that the plain language of section 521 allows only the three stated options for retaining property: redemption, reaffirmation, and exemption.


Debtors may convert a Chapter 7 case to a case under Chapter 11, 12, or 13 “at any time,” if the case had not been previously converted under section 1112, 1208, or 1307. (139) The courts are split as to what other requirements must be met. In In re Copper, (140) the bankruptcy court entered a memorandum order that denied the debtor’s discharge under 11 U.S.C. [section] 727(a)(4)(A) for bad pre- and post-petition behavior. (141) The order also denied the debtor’s request to convert his Chapter 7 case into Chapter 13, based on the same bad behavior. (142) Only the denial of the request for conversion was appealed. (143) The Sixth Circuit BAP said the issue was whether the plain language of 11 U.S.C. [section] 706(a) provides a debtor with a one-time absolute right to convert a case filed under Chapter 7 of the Bankruptcy Code to one under Chapter 13. (144) After citing authority from both sides of the issue, the Copper court aligned with what may be a slight majority of cases holding that the right to convert is not absolute, and that in extreme circumstances conversion can be denied. (145)

The Copper holding was echoed in In re Marrama. (146) In Marrama, the First Circuit BAP expounded as to what types of “extreme circumstances” will be sufficient to prevent conversion. The First Circuit BAP stated that the proper factors to consider include whether (i) the debtor has been forthcoming

The opposing view is illustrated by the case In re Croston. (149) In Croston, the Chapter 7 trustee objected to the debtors’ motion to convert to Chapter 13. The bankruptcy court denied the motion based on the debtors’ “bad faith,” as well as the court’s doubts that the debtors could propose a confirmable Chapter 13 plan. (150) The debtors appealed to the Ninth Circuit BAP.

The Ninth Circuit BAP framed the issue on appeal as “whether a court can deny a [section] 706(a) conversion motion for reasons not stated in [section] 706.” (151) On reviewing the matter, the Ninth Circuit BAP concluded that the bankruptcy court erred when it denied the conversion motion for subjective reasons when the debtors met the objective criteria for conversion found in section 706(a). (152) The Ninth Circuit BAP went on to state that debtors possess an absolute one-time right to convert and that, although subjective factors may constitute grounds to reconvert a case back to Chapter 7, such factors do not support denial of an initial motion seeking conversion. (153)


By now, the battle between secured creditors and Chapter 13 debtors concerning the debtor’s ability to modify a Chapter 13 Plan to surrender collateral in satisfaction of debt is well known to most practitioners. Commentators differ regarding whether this type of modification is permitted under the Bankruptcy Code. (154) Further, the courts continue to be split as to whether the Bankruptcy Code permits this such action. Recent case law shows that this split continues.

In In re Mason, (155) the debtor confirmed a Chapter 13 Plan that provided a secured creditor (secured by the debtor’s automobile) the benefit of an allowed secured claim and monthly payments. The Chapter 13 Plan also provided that the secured creditor would retain its lien on the collateral until its allowed secured claim had been paid. Post-confirmation, the debtor sought to surrender the vehicle in full satisfaction of the debt.

The secured creditor objected, advancing the usual argument that although 11 U.S.C. [section] 1329(a) permits modification of a confirmed plan as to the amount and timing of payments, it does not permit modification with respect to claims that have already been allowed. According to the secured creditor’s view of section 1329(a), its allowed claim must remain a secured claim to the extent provided by the Chapter 13 Plan, regardless of whether the debtor surrenders its collateral post-confirmation. The debtor countered by asserting that whether or not section 1329(a) allowed him to modify his Chapter 13 Plan to surrender the vehicle, other Bankruptcy Code sections did. For example, the debtor argued, section 502(j) provides that an allowed claim may be reconsidered for cause, and that a reconsidered claim may be allowed or disallowed according to the equities of the case. Moreover, section 506(a) provides that an allowed claim is only a “secured claim to the extent of the value of such creditor’s interest in the estate’s interest in” the collateral securing the claim. (156) Thus, the debtor argued that sections 502(j) and 506(a) taken together compel the conclusion that a secured creditor’s remaining claim after surrender becomes an unsecured claim by operation of law because at that point there is no longer any estate property securing it.

Adopting what has been called a “sizable minority” view, (157) and siding with the debtor, the bankruptcy court in Mason held that the debtor was entitled to modify his Chapter 13 Plan in order to surrender the vehicle and reclassify any remaining deficiency as unsecured, absent any allegation that he had failed to maintain the collateral or had otherwise engaged in inequitable conduct. (158) The Mason court reasoned that when section 1329(a) is viewed, not in isolation but as a part of the entire Bankruptcy Code, it is clear that debtors may unilaterally surrender collateral leaving a once secured creditor with only an unsecured claim for any deficiency. (159)


The Bankruptcy Code allows Chapter 7 cases to be dismissed for “substantial abuse.” (160) The Bankruptcy Code does not, however, define the term “substantial abuse,” leaving courts the burden of developing the relevant standards on their own. In In re Manske, (161) the debtors held well paying jobs, earning a combined annual gross income of approximately $95,000. The debtors held approximately $350,000 in combined retirement benefits. The debtors quit their employment, and relocated to another state (allegedly to care for the debtor-wife’s ailing mother) just prior to filing a Chapter 7 bankruptcy case. After relocating, but before obtaining further employment, the debtors filed their joint Chapter 7 bankruptcy petition disclosing approximately $73,000 in credit card debt. Shortly thereafter the debtors obtained very low paying jobs. The U.S. Trustee filed a motion to dismiss the debtor’s case for substantial abuse.

The bankruptcy court noted that although there are many different factors that may be considered, the principal factor used in determining substantial abuse is the ability of the debtor to repay the debts for which discharge is sought. (162) The “ability to pay,” explained the court, for purposes of section 707(b) means the debtors’ ability to fund a Chapter 13 Plan from disposable income. (163) Although the debtors’ current combined wages were insufficient to enable them to fund a Chapter 13 Plan from their disposable income, the bankruptcy court dismissed the debtors’ Chapter 7 case for substantial abuse. (164) The bankruptcy court stated that although facts were present that could warrant a discharge for the debtors, the court simply could not get past the fact that the debtors spent years living beyond their means and then voluntarily left their high paying jobs. (165)


Like specialists in any other area of law, bankruptcy practitioners may become comfortable with the issues they encounter on a daily basis but be unaware of potential consequences lurking in other areas of law where they seldom have reason to venture. For example, bankruptcy lawyers may be able to recite verbatim each of the statutes denying discharge and dischargeability. Many, however, may be unaware that the same conduct that calls for a denial of a discharge also may qualify the debtor for time in a federal penitentiary.

The panoply of bankruptcy crimes is defined in 18 U.S.C. [subsection] 152 to 157. These provisions were enacted to preserve honest administration in bankruptcy cases and to ensure the greatest possible distributions to creditors. Statutes such as section 152 attempt “to cover all the possible methods by which a bankrupt or any other person may attempt to defeat the Bankruptcy Act through an effort to keep assets from being equitably distributed among creditors.” (166) Moreover, 18 U.S.C. [section] 152 “was enacted to serve important interests of government, not merely to protect individuals who might be harmed by the prohibited conduct.” (167) Thus, bankruptcy lawyers may need to periodically review 18 U.S.C. [subsection] 152 to 157. Such examinations may especially be appropriate in light of an October 28, 2004 press release by the Department of Justice. (168) This press release highlights’ the Department’s project to ferret out bankruptcy crimes through investigation and criminal indictment, dubbed Operation “Silver Screen.” (169)

Criminal issues were addressed at the U.S. Court of Appeals level this year in United States v. Wagner, (170) where the Sixth Circuit was called on to determine the contours of a criminal concealment. In Wagner, the debtor real estate developer filed a pro se Chapter 11 bankruptcy petition in order to forestall approximately seventy-four foreclosure actions. Because the debtor repeatedly refused to cooperate with the U.S. Trustee, the U.S. Trustee filed a motion to convert the case to Chapter 7. Thereafter, without obtaining authorization for a loan from the Small Business Administration (SBA) or approval from the U.S. Trustee’s office, the debtor filed two post-petition mortgages against approximately ninety-five of his properties. The debtor attached a loan note to the mortgage, which indicated that the SBA had granted the debtor a $10.75 million loan, which was not true.

On the morning of the hearing to determine the U.S. Trustee’s conversion motion, the debtor filed a pro se plan of reorganization. The debtor attached the false note and mortgage to the plan, as well as other false documents. Based on the debtor’s actions, the court converted the case to Chapter 7. After conversion, the debtor obstructed the Chapter 7 Trustee’s attempts to collect rents that were property of the estate. Moreover, the debtor changed the locks on several of the homes, which prevented the Trustee’s agents from showing the homes for sale. Upon indictment, a jury found the debtor guilty of fraudulently concealing property from a bankruptcy trustee in violation of 18 U.S.C. [section] 152(1) and for filing a false document in a bankruptcy proceeding in violation of 18 U.S.C. [section] 157(2). (171) The debtor was sentenced to a six month incarceration.

On appeal to the Sixth Circuit, the debtor principally argued that simply obstructing the trustee’s access to real property, and thus potentially hindering the sale of that property, does not constitute “concealment” under 18 U.S.C. [section] 152(1). The Sixth Circuit disagreed, and held that changing the locks on the doors of houses that the trustee sought to sell did indeed constitute “concealment” of assets under 18 U.S.C. [section] 152(1). (172) The Wagner court reasoned that the policy behind section 152, which is to prevent and punish efforts by a bankrupt to avoid the distribution of any part of a liable bankrupt estate, militated toward a broad interpretation of the concept of concealment. (173)

(1.) Federal Reserve Statistical Release, Consumer Credit: August 2004 (Oct. 7, 2004), available at

(2.) Id.

(3.) Id.

(4.) Id.

(5.) Id.

(6.) Id.

(7.) Id.

(8.) Id.

(9.) Id.

(10.) Administrative Office of the U.S. Courts, News Release: Number of Bankruptcy Cases Filed in Federal Courts Down Less Than One Percent (Aug. 27, 2004), available at Press_Releases/june04bk.pdf.

(11.) Id.

(12.) Id.

(13.) Id.

(14.) Id.

(15.) Id.

(16.) 11 U.S.C. [subsection] 1201-1231 (2000).

(17.) 11 U.S.C. [section] 101(18).

(18.) Id.

(19.) H.R. REP. No. 99-764, at 5249 (1986).

(20.) Report of the Advisory Committee on Bankruptcy Rules (May 10, 2002), available at http://

(21.) 124 s. ct. 1951 (2004).

(22.) 11 u.s.c. [section] 1325(a)(5)(B)(ii).

(23.) Till, 124 S. Ct. at 1957.

(24.) Id.

(25.) Id. Prior to Till, this appeared to be the majority view. See, e.g., WILLIAM D. WARREN & DANIEL J. BUSSELL, BANKRUPTCY 569-70 (6th ed. 2002)

(26.) Till, 124 S. Ct. at 1961-62.

(27.) Id. at 1965.

(28.) 11 U.S.C. [section] 506(a) (2000). It should be noted that section 506(a) bifurcates the claim, but not the debt or the lien. The debt and the lien that secures it are separate from the claim, flow through bankruptcy, and are not bifurcated by section 506(a), the discharge at 11 U.S.C. [section] 727, or the discharge injunction at 11 U.S.C. [section] 524, unless otherwise modified under a specific lien-modification provision in the Bankruptcy Code. See, e.g., Dewsnup v. Timm, 502 U.S. 410 (1992)

(29.) In re Till, 301 F.3d 583, 591-92 (7th Cir. 2002)

(30.) See Till, 124 S. Ct. at 1957 (quoting Till, 301 F.3d at 591).

(31.) Till, 301 F.3d at 592-93.

(32.) Till, 124 S. Ct. at 1962 (citing Till, 301 F.3d at 593).

(33.) Id. at 1968.

(34.) Id. at 1968-69.

(35.) Id. at 1970

(36.) 540 U.S. 526 (2004).

(37.) Id. at 529

(38.) Lamie, 540 U.S. at 536 (citing Chickasaw Nation v. United States, 534 U.S. 84, 94 (2001)).

(39.) Id.

(40.) Id. (quoting Chickasaw Nation, 534 U.S. at 94).

(41.) Id.

(42.) See 11 U.S.C. [section] 327 (2000).

(43.) Lamie, 540 U.S. at 532.

(44.) Id. at 537.

(45.) 11 U.S.C. [section] 503(b)(3)(D).

(46.) 314 B.R. 218 (B.A.P. 10th Cir. 2004).

(47.) Id. at 221.

(48.) Id. at 223.

(49.) Id. at 223 n.22.

(50.) Id. at 222-23.

(51.) Id. at 224.

(52.) 540 U.S. 443 (2004).

(53.) Id. at 448.

(54.) FED. R. BANKR. P. 4004(a), (c).

(55.) Kontrick, 540 U.S. at 451.

(56.) Id.

(57.) Id. at 459-60.

(58.) Id. at 453 (citing FED. R. BANKR. P. 9030).

(59.) FED. R. BANKR. P. 2004.

(60.) FED. R. BANKR. P. 9006(b)(3).

(61.) Kontrick, 540 U.S. at 454.

(62.) No. 03-2263, 2004 WL 1873999 (3d Cir. Aug. 23, 2004).

(63.) Id. at *1.

(64.) 104 F.3d 612 (3d Cir. 1997).

(65.) Davis, 2004 WL 1873999, at *1.

(66.) Id.

(67.) Davis, 2004 WL 1873999, at *2.

(68.) Id. at *3 (citing Yuhas, 104 F.3d at 614).

(69.) Id. at *4.

(70.) Id.

(71.) Id. at *6.

(72.) 380 F.3d 523 (1st Cir. 2004).

(73.) Id. at 528.

(74.) Id. at 529. This conclusion also may have implications in the context of repossessed collateral. See, e.g., infra note 84 and accompanying text.

(75.) NTA, 380 F.3d at 530 (citing FDIC v. Knostman, 966 F.2d 1133, 1140 (7th Cir. 1992)).

(76.) Id. (citing N.S. Garrott & Sons v Union Planters Nat’l Bank of Memphis (In re N.S. Garrott & Sons), 772 F.2d 462,466 (8th Cir. 1985)).

(77.) Id. at 531.

(78.) 124 S. Ct. 1330 (2004).

(79.) Id. at 1337-38.

(80.) Id at 1338.

(81.) Id. at 1335.

(82.) Id.

(83.) Id. at 1345.

(84.) Ernest B. Williams IV & Alvin C. Harrell, Consumer Bankruptcy Developments, 59 BUS. LAW. 1321, 1326-27 (2004).

(85.) 292 F.3d 1350 (11th Cir. 2002).

(86.) Id. at 1360.

(87.) Williams & Harrell, supra note 84, at 1327.

(88.) 376 F.3d 1323 (11th Cir. 2004).

(89.) Id. at 1324.

(90.) Motors Acceptance Corp. v. Rozier, 597 S.E.2d 367, 368 (Ga. 2004).

(91.) Id.

(92.) Id.

(93.) Id. In response it might be noted that limiting the property of the estate to those property rights held by the debtor at the time the petition was filed, including the rights of the debtor specified in Article 9 Part 6, is hardly the same as rendering those rights meaningless. Perhaps the better question is whether the Bankruptcy Code expands those rights. The Rozier analysis arguably gives the estate an unqualified possessory right that goes beyond the debtor’s Article 9 Part 6 right of redemption, violating the Bankruptcy Code section 541 maxim that the bankruptcy estate has no greater interest in property than the debtor held prior to bankruptcy For example, compare Rozier with the analysis in In re NTA, LLC, 380 F.3d 523 (1st Cir. 2004), discussed supra notes 72-77 and accompanying text.

(94.) Charles R. Hall Motors v. Lewis, 137 E3d 1280 (11th Cir. 1998).

(95.) Rozier, 597 S.E.2d at 368-69.

(96.) Id. at 369.

(97.) In re Rozier, 376 F.3d 1323, 1324 (11th Cir. 2004) (emphasis added). It should be noted that this was not an exercise of the Article 9 right of redemption, which would have required payment to the secured party.

(98.) Cf. NTA, 380 F.3d at 529, discussed supra notes 72-77

(99.) 11 U.S.C. [section] 544.

(100.) Id. [section] 544(a)(2).

(101.) 380 F.3d 174 (4th Cir. 2004).

(102.) 11 U.S.C. [section] 522(b)(2).

(103.) 26 U.S.C. [section] 6321.

(104.) Schlossberg, 380 F.3d at 181-82.

(105.) Id. at 181.

(106.) 507 U.S. 447 (1993).

(107.) 31 F.3d 1081 (11th Cir. 1994).

(108.) Id. at 1088.

(109.) 11 U.S.C. [section] 523 (2000).

(110.) Id. [section] 523(a)(8).

(111.) Id.

(112.) 377 F.3d 616 (6th Cir. 2004).

(113.) 11 U.S.C.[section] 105(a).

(114.) Miller, 377 F.3d at 621.

(115.) Id. (citing Norwest Bank Worthington v. Ahlers, 485 U.S. 197 (1988)).

(116.) Id.

(117.) 11 U.S.C. [section] 523(a)(6).

(118.) 105 Fed. Appx. 455 (4th Cir. 2004).

(119.) Id at 457-58.

(120.) Id.

(121.) Id. at 457 (citing TransDulles Ctr. v. Sharma, 472 S.E.2d 274, 275 (Va. 1996)).

(122.) 11 U.S.C. [section] 521(2)

(123.) 11 U.S.C. [section] 521(2).

(124.) Id. [section] 521(2)(A) (emphasis added).

(125.) Id. [section] 521(2)(B).

(126.) Id. [section] 524.

(127.) Id. [section] 524(a)(2).

(128.) See, e.g., Lawrence A. Young & Anh H. Regent, “Toto, … We’re Not in Kansas Anymore”–After a Bankruptcy Discharge, What Can a Secured Creditor Do?, 53 CONSUMER FIN. L.Q. PEP. 123, 124 (1999).

(129.) 370 F.3d 362 (3d Cir. 2004).

(130.) McClellan Fed. Credit Union v. Parker (In re Parker), 139 F.3d 668, 673 (9th Cir. 1998).

(131.) Capital Cmty. Fed. Credit Union v. Boodrow (In re Boodrow), 126 F.3d 43, 53 (2d Cir. 1997).

(132.) Homeowners Funding Corp. of Am. v. Belanger (In re Belanger), 962 F.2d 345, 348 (4th Cir. 1992).

(133.) Lowery Fed. Credit Union v. West, 882 F.2d 1543, 1546 (10th Cir. 1989).

(134.) Gen. Motors Acceptance Corp. v. Bell (In re Bell), 700 F.2d 1053 (6th Cir. 1983).

(135.) Bank of Boston v. Burr (In re Burr), 160 F.3d 843, 847 (1st Cir. 1998).

(136.) Johnson v. Sun Fin. Co. (In re Johnson), 89 F.3d 249, 252 (5th Cir. 1996).

(137.) Taylor v. AGE Fed. Credit Union (In re Taylor), 3 F.3d 1512, 1516 (11th Cir. 1993).

(138.) In re Edwards, 901 F.2d 1383, 1387 (7th Cir. 1990).

(139.) 11 U.S.C. [section] 706(a) (2000).

(140.) 314 B.R. 628 (B.A.P 6th Cir. 2004).

(141.) Id. at 630.

(142.) Id.

(143.) Id.

(144.) Id. at 636.

(145.) Id. at 636-37.

(146.) 313 B.R. 525 (B.A.P. 1st Cir. 2004).

(147.) Id. at 531-32.

(148.) Id. at 532.

(149.) 313 B.R. 447 (B.A.P. 9th Cir. 2004).

(150.) Id. at 450.

(151.) Id. at 449.

(152.) Id. at 456.

(153.) Id.

(154.) Compare KEITH M. LUNDIN, CHAPTER 13 BANKRUPTCY [section] 6.49, at 6-126 (1993) and 8 COLLIER ON BANKRUPTCY [paragraph] 1329.02, at 1329-4 (Lawrence P. King ed., 15th ed. rev. 2004) (suggesting such modification is permissible), with WILLIAM L. NORTON, JR., 5 NORTON BANKRUPTCY LAW AND PRACTICE [section] 124:3, at 124-39 (2d ed. 1997) (arguing it is not).

(155.) 315 B.R. 759 (Bankr. N.D. Cal. 2004).

(156.) 11 U.S.C. [section] 506(a) (2000).

(157.) Chrysler Fin. Corp. v. Nolan (In re Nolan), 232 F.3d 528, 531 (6th Cir. 2000).

(158.) Mason, 315 B.R. at 762-63.

(159.) Id. at 764.

(160.) 11 U.S.C. [section] 707(b)

(161.) 315 B.R. 838 (Bankr. E.D. Wis. 2004).

(162.) Id. at 841 (citing In re Herbst, 95 B.R. 98, 101 (Bankr. WD. Wis. 1988)).

(163.) Id.

(164.) Id. at 841, 844.

(165.) Id. at 842.

(166.) Stegeman v. United States, 425 F.2d 984, 986 (9th Cir. 1970), cert. denied, 400 U.S. 837 (1970) (citation omitted

(167.) Id.

(168.) U.S. Department of Justice, ‘Operation Silver Screen’ Targets Bankruptcy Fraud Throughout the United States (Oct. 28, 2004), available at final_10-28-04.htm.

(169.) Id.

(170.) 382 F.3d 598 (6th Cir. 2004).

(171.) Id. at 606.

(172.) Id. at 607.

(173.) Id. at 608.

Jeffrey E. Tate, Ernest B. Williams, and Alvin C. Harrell *

* Jeffrey E. Tate practices with Day, Edwards, Propester & Christensen, P.C. with offices in Oklahoma City and Tulsa, Oklahoma. Ernest B. Williams IV is the managing shareholder of Williams & Prochaska, P.C. with offices in Nashville and Memphis, Tennessee. Alvin C. Harrell is the Robert S. Kerr, Sr. Distinguished Professor of Law at Oklahoma City University School of Law and Editor of this Survey.