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Until recently, the circuit courts were evenly split, four-to-four, on whether the Bankruptcy Code allows Chapter 7 debtors a “fourth option” for retaining property that is collateral for a debt. The existence of the fourth option is problematic because the relevant statute, 11 U.S.C. 521(2), explicitly mentions only three options: showing that the property belongs outside the estate because it falls within a statutory exemption, reaffirming the debt for which the property is collateral by negotiating a new agreement with the creditor or redeeming the debt by making a lump-sum payment to the creditor. On June 3, the 3d U.S. Circuit Court of Appeals broke the tie by declaring that Michael and Christine Price, who wanted to retain possession of their automobiles after filing for discharge of their debts, can do so by way of the fourth option: keeping current on their automobile loan payments. In re Price, No. 03-2084. (Although there is an exemption for motor vehicles, it would not have been of much use to the Prices, since debtors may exempt only $2,400 of their interest in a single automobile.) The 3d Circuit thus joined the 2d, 4th, 9th and 10th circuits. The 1st, 5th, 7th and 11th circuits, on the other hand, take the position that the three options spelled out in � 521(2) exhaust the possibilities. No ambiguity Section 521(2) says, in part, that if the estate includes property that secures a debt, “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.” Much of the controversy centers on the phrase “if applicable.” In the view of the three-option courts, the function of the phrase is merely to signal that what follows-exemption, redemption or reaffirmation-are only relevant if the debtor intends to retain the property and should be disregarded if the property is surrendered. The four-option courts see “if applicable” as signaling that debtors who retain their property must give particular notice if they plan to make use of exemption, redemption or reaffirmation, but not if they want to retain their property through some other means, such as keeping current on their payments. Remarkably, even in the face of their deep disagreement, the circuits insist that the meaning of � 521(2) is “plain.” In Price, for instance, the 3d Circuit admitted that “section 521(2) poses tough interpretative challenges” and is “equivocal,” but nonetheless insisted that it is not “ambiguous.” That sort of verbal contortion is probably explained less by the clarity of the statutory text than by a desire not to offend the U.S. Supreme Court. The 3d Circuit notes, for instance, that in bankruptcy cases the high court has frowned on the forays into public-policy analysis and legislative history that are the usual recourse of appellate courts when a statute is ambiguous. In any event, the 3d Circuit did discuss public policy and legislative history, while insisting that they were not decisive. The court argued that its “reading comports best with the ‘fresh start’ policy of the Code.” Courts on the other side of the divide note that the code frequently restricts how clean a sweep the debtor can make to cushion the impact on debtors and other interested parties. Young’s e-mail address is [email protected].

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