In Re Warren L. Taylor, Jr., Cathy L. Taylor, Debtors. Warren L. Taylor, Jr., Cathy L. Taylor v. Age Federal Credit UnionIn Re Warren L. Taylor, Jr., Cathy L. Taylor, Debtors. Warren L. Taylor, Jr., Cathy L. Taylor v. Age Federal Credit Union
Creditor Albany Government Employees Federal Credit Union (“AGE”) appeals the district court’s reversal of the bankruptcy court’s order which held that a Chapter 7 bankruptcy debtor who has outstanding consumer debt may not retain the property securing the creditor’s claim without redeeming the property or reaffirming the debt on the property under
I. STATEMENT OF THE FACTS AND PROCEDURAL HISTORY
The parties stipulated to the relevant facts in the bankruptcy and district courts. On February 20, 1991, the debtors, Warren L. Taylor, Jr. and Cathy L. Taylor (the “Tay-lors”), filed a petition pursuant to 11 U.S.C. Chapter 7. AGE holds a first lien on the Taylors’ vehicles, a 1991 Chevrolet S-10 pickup truck and a 1985 Chevrolet Caprice Clas
The Taylors filed a statement of intention with respect to the property as required by
AGE filed a motion to compel the Taylors to comply with
The bankruptcy court entered an order compelling the Taylors to enter into a reaffirmation agreement or redeem the property.
II. ANALYSIS
“Although this ease has been reviewed on appeal by the district court, we review the bankruptcy court’s findings as if this were an appeal from a trial in the district court.” In
re St. Laurent,
The debtors contend that
The question presented here is whether
AGE cites
Edwards,
[T]he 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 the debt secured by such property.
(emphasis added).
In support of its decision that
[R]eaffii’mation is supposed to involve a fully voluntary negotiation on both sides. Permitting a debtor to retain property while keeping up installment payments without a reaffirmation of personal liability allows a debtor to force a new arrangement on а creditor. This negates the voluntarism contemplated by the statute. No debtor would reaffirm personal liability unless required to do so.... When a debtor is relieved of personal liability on loans secured by collateral, the debtor has little or no incentive to insure or maintain the property in which a creditor retains a security interest.
Edwards,
Although the Tenth Circuit in
Lowry
reached a contrary result, the court noted that the language of
To escape the mandatory language of the section, debtors argue the “if applicable” phrase gives a debtor some form of option. We are unpersuaded by that argumеnt because it is inconsistent with the plain meaning of the statute. The words “if appropriate” [sic] are gratuitous and do not affect the mandatory duties prescribed by the statute. The plain English of the section requires every debtor in possession of collateral to make an election whether to retain or relinquish that property. If the debtor decides to retain, the debtor is required to elect whether to redeem or reaffirm. The section also requires the choice be effected within 45 days no matter whether the decision is to retain or relinquish. No other meaning can be gained from the precise terms of the statute, and nothing suggests the debtor can simply elect to retain the property and ignore the other duties required by§ 521(2) .
Id.
at 1545, n. 2. The court continued to address thе enforcement of
Several bankruptcy courts agree with the Seventh Circuit’s analysis and have held that
The Taylors urge us to adopt the Fourth Circuit’s holding in
In re Belanger,
The plain language of
We find the reasoning articulated by Judge Drake in Horne to be persuasive. Judge Drake stated:
This court thinks that the better view, and one that is consistent with the wording of the statute, is that Debtors, if thеy intend on retaining the property, must choose one of the alternatives set forth in§ 521(2)(A) .... If Debtors intend on remaining current in their obligations under the contract, they may negotiate a reaffirmation agreement with the creditor. Allowing retention of the property without reaffirmation or redemption would be tantamount to forcing the creditor into a de facto reaffirmation agreement with no recourse against the debtor_ Furthermore, the debtors would have no incentive to keep the property in good condition or to continue making payments if the value of the collateral declined below the amount of the debt or was destroyed. Such an arrangement is contrary to the language of the Code.
We recognize Congress intended the bankruptcy laws to provide a debtor a “fresh start” by allowing a debtor to discharge all dischargeable debts while retaining assets that are exempt.
See
III. CONCLUSION
Because we hold the plain language of
REVERSED and REMANDED.
Notes
.
The Debtor shall—
(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 dеbts 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;
. Reaffirmation contemplates a voluntary agreement between a creditor and the dеbtor whereby a debt which is otherwise dischargeable with respect to the personal liability of the debtor, is renegotiated or reaffirmed by both parties.
. The Sixth Circuit decided Bell the year before Congress passed the 1984 Amendments to the Bankruptcy Code.