IN RE Pratt, Pratt v. GMAC, 05-2453 (9/1/06), reverses the bankruptcy court’s decision
that GMAC did not violate “chapter 7 discharge injunction by declining to
discharge its lien on the debtors' automobile until they paid the remaining
balance due on their prepetition car loan.” This case involves a car owned by a couple that, I bankruptcy, tried to
pay off the car loan. Then, they tried
to surrender it to GMAC under 11 U.S.C. § 521(a)(2)(A). GMAC concluded it was worthless, and seems to
have not accepted it. A Chapter 7
discharge was granted. But, GMAC
retained a lien on the car, that continued to run for a few years. When it came time to junk it, GMAC refused to
lease its lien on the car! So, they went
back to the bankruptcy court, who allowed the debtors to reopen the case, who
now argued that GMAC violated a putative violation of the Chapter 7 discharge
injunction. Strangely, lower court sided
with GMAC, and held that held that because the liens were in rem, under
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The First reverses. It holds that under 11 U.S.C. § 521(a)(2), the word “surrender” means:
that the debtor agreed to make the collateral available to the secured creditor – viz., to cede his possessory rights in the collateral – within 30 days of the filing of the notice of intention to surrender possession of the collateral.
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