616 B.R. 420
Bankr. M.D. Ala.2020Background
- Debtor Levia Womack executed a pawn/title-loan on March 1, 2019: she pledged the certificate of title to a 2014 Ford Fusion to TitleMax for $3,792.40 (maturity date March 31, 2019).
- Debtor retained possession of the vehicle and filed a Chapter 13 petition on March 20, 2019 (before the pawn contract matured).
- Under the Alabama Pawnshop Act (APA), a pledgor retains legal title until default (forfeiture occurs 30 days after maturity); TitleMax held a pawnshop lien and also perfected a UCC security interest by recording its lien on the certificate of title.
- Debtor’s Chapter 13 plan proposed to repay TitleMax over the life of the plan; TitleMax objected, arguing the car would forfeit after the redemption period (as extended by 11 U.S.C. § 108(b)) and thus its interest could not be modified.
- The bankruptcy court held that because the petition was filed before maturity, Debtor’s legal-title and possessory rights entered the estate and TitleMax’s interest was a modifiable secured claim under 11 U.S.C. § 1322(b)(2).
Issues
| Issue | TitleMax's Argument | Debtor's Argument | Held |
|---|---|---|---|
| Whether Debtor’s interest in the vehicle was property of the estate at filing | The vehicle (or the effective right) only briefly entered the estate and then dropped out after the extended redemption period | Debtor held legal title and possession at filing, so ownership (not just redemption rights) entered the estate | The court held Debtor retained legal title and possession at filing; those ownership rights entered the estate |
| Whether TitleMax’s interest is a modifiable secured claim under § 1322(b)(2) | Pawn transactions result in automatic forfeiture on expiration and thus are not subject to plan modification | The pawn contract created a UCC security interest (perfected on the title) that is a secured claim and may be modified | The court held TitleMax held a perfected UCC secured claim that is modifiable under § 1322(b)(2) |
| Whether § 108(b) / In re Northington controls to extinguish estate rights after extension | Reliance on In re Northington: § 108(b) extended redemption and when that period expired the vehicle dropped out of the estate | § 108(b) extends redemption rights but does not negate the debtor’s statutory right to modify a secured interest under § 1322(b)(2); the contract had not matured at filing so § 108(b) did not apply | The court distinguished Northington on its facts (there, contract had matured). § 108(b) did not extinguish Debtor’s title-based estate rights here |
Key Cases Cited
- Butner v. United States, 440 U.S. 48 (1979) (state law defines property interests that become estate property)
- In re Bracewell, 454 F.3d 1234 (11th Cir. 2006) (petition date determines estate property)
- In re Northington, 876 F.3d 1302 (11th Cir. 2017) (pawned vehicle dropped out of estate after extended redemption period where contract had already matured at filing)
- In re Burnsed, 224 B.R. 496 (Bankr. M.D. Fla. 1998) (title-pawn created a security interest that was modifiable under § 1322(b)(2))
- In re Jones, 544 B.R. 692 (Bankr. M.D. Ala. 2016) (certificate-of-title can be pledged goods under the APA; debtor retains title until default)