In re Dumont

581 F.3d 1104

In the Matter of Antoinette DUMONT, Debtor Antoinette Dumont, Appellant, v. Ford Motor Credit Company, Appellee.

No. 08-60002.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 5, 2009.

Filed September 15, 2009.

Michael G. Doan, Doan Law Firm, Carlsbad, CA, argued the cause for appellant-debtor and filed briefs.

Randall P. Mrocynski, Cooksey Toolen Gage Duffy & Woog, Costa Mesa, CA, argued the cause for the appellee and submitted a brief.

Tara Twomey, National Association of Consumer Bankruptcy Attorneys, San Jose, CA, submitted a brief on behalf of amicus curiae National Association of Consumer Bankruptcy Attorneys. With her on the brief was Cynthia Feathers.

Appeal from the Ninth Circuit Bankruptcy Appellate Panel, Baum, Montali, and Dunn, Bankruptcy Judges. BAP No. SC-07-1155-BaMoD.

Before ALFRED T. GOODWIN, DIARMUID F. O'SCANNLAIN, and SUSAN P. GRABER, Circuit Judges.

Opinion by Judge O'SCANNLAIN; Dissent by Judge GRABER.

O'SCANNLAIN, Circuit Judge:

We must decide whether the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 allows a consumer in bankruptcy to retain personal property subject to a security interest by continuing to make payments under his contract.

I

Antoinette Dumont purchased a car in 2003 from Ford Motor Credit Company ("Ford"). The loan agreement contained a clause stating that Dumont would be in default if she was involved in a bankruptcy proceeding, also known as an "ipso facto" clause.¹ Dumont filed for Chapter 7 bankruptcy protection in 2006, subsequent to the effective date of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"), Pub.L. No. 109-8, 119 Stat. 23. The vehicle was listed on the bankruptcy petition as having a value of $5,800. At the time, she owed $8,288 on it and was making payments of $335.78 per month. In her Bankruptcy Statement of Intentions, Dumont stated that she would retain the car and continue to make monthly payments.

Ford's attorney e-mailed Dumont's attorney, asking that Dumont reaffirm the debt. Her attorney declined the offer. It is not clear from the record what the terms of the proposed reaffirmation were.

Ford filed a proof of claim, to which there was no objection; thus Ford's claim was allowed. See 11 U.S.C. § 502(a). Dumont received a discharge on August 15, 2006. After the discharge, she continued making payments on the car loan. Without advance notice, Ford repossessed her car on November 14, 2006.

Dumont successfully moved to reopen her bankruptcy case and claimed that Ford had violated the discharge injunction by repossessing her car. The bankruptcy court denied the motion to find Ford in violation of the discharge injunction, and the Bankruptcy Appellate Panel (BAP) unanimously affirmed.

II

A

When a debtor files for Chapter 7 bankruptcy, she is required to state her intentions with regard to any property² which is subject to a security interest. 11 U.S.C. § 521(a)(2). Prior to BAPCPA, our circuit law allowed the debtor to choose among four options. First, she could merely surrender the collateral. Second, she could redeem such collateral—that is, pay the creditor its present fair market value. See id. § 722. The debtor could also reaffirm the debt on terms she and the creditor agreed on. Reaffirmation allowed the debtor to keep her collateral, but re-exposed her to personal liability should she fail to make payments as promised. See id. § 524(c) (setting conditions for reaffirmations and exempting them from the discharge injunction). The final option—recognized in only some circuits—was the so-called "ride-through" or "pay and drive." Under this plan, the debtor continued to make payments as if the bankruptcy had never occurred. The creditor was forbidden by the automatic stay (and later, by the discharge injunction) from repossessing the collateral unless the buyer defaulted. If the buyer stopped making payments or otherwise defaulted, then the creditor could reclaim its collateral but could not pursue a deficiency judgment against the debtor.

Unsurprisingly, the ride-through system proved popular for debtors. Debtors usually need a car³ to travel to and from work, school, medical appointments, and other important activities. Having just filed for bankruptcy, they understandably expect to experience difficulty securing financing for another vehicle. Accordingly, they were often willing to continue payments on loans that were "underwater" (i.e., loans for which the amount due exceeded the value of the collateral).

Some creditors embraced ride-through, even allowing the debtor to keep making payments in circuits which did not recognize the option. See, e.g., Jean Braucher, Rash and Ride-Through Redux, 13 AM. BANKR. INST. L. REV. 457, 474-81 (2005). On the other hand, creditors might believe that the buyer was unlikely to follow through with the plan or that the collateral might decrease in value faster than payments were coming in. See Till v. SCS Credit Corp., 541 U.S. 465, 479, 124 S.Ct. 1951, 158 L.Ed.2d 787 (2004) (plurality opinion) (acknowledging the increased risk of non-payment by bankrupt debtors in the Chapter 13 "cramdown" context); id. at 502, 124 S.Ct. 1951 (Scalia, J., dissenting) (noting the risk due to depreciation).⁴

B

Prior to BAPCPA, we had held that ride-through was available to debtors. McClellan Fed. Credit Union v. Parker (In re Parker), 139 F.3d 668 (9th Cir. 1998). The Second, Third, Fourth, and Tenth Circuits held likewise.⁵ Other circuits rejected ride-through.⁶

In Parker, we relied on the clear language of the statute,⁷ holding that the debtor was required only to file a statement of intention under then-current section 521(2)(A). We read the statute to require the debtor to declare an intent to redeem, reaffirm, or surrender only "`if applicable,' — that is, if the debtor plan[ned] to choose any of the three options listed . . . in the statute." Parker, 139 F.3d at 673 (quoting then-current 11 U.S.C. § 521(2)(A)). "The debtor's other options remain[ed] available, as unambiguously stated in [then-current] § 521(2)(C): `[N]othing in subparagraph[ ](A) . . . shall alter the debtor's or the trustee's rights with regard to such property under this title.'" Id. (final two alterations in original).⁸

C

BAPCPA wrought several changes in the Code which may be applicable to ride-through. First, it amended section 521(2), which is now section 521(a)(2). Most relevant for our purposes, the savings clause in subparagraph (C) now reads: "[N]othing 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, except as provided in section 362(h)." (emphasis added). 11 U.S.C. § 362(h), added by BAPCPA, states that the automatic stay is terminated and the "property shall no longer be property of the estate if the debtor fails"

(A) to file timely any statement of intention required . . . or to indicate in such statement that the debtor will either surrender such personal property or retain it and, if retaining such personal property, either redeem [,reaffirm,] or assume such unexpired lease pursuant to section 365(p)⁹ if the trustee does not do so, as applicable; and

(B) to take timely the action specified in such statement, . . . unless such statement specifies the debtor's intention to reaffirm such debt on the original contract terms and the creditor refuses to agree. . . .

A new section 521(a)(6) was added as well.¹⁰

A new section 521(d) provides that

[i]f the debtor fails timely to take the action specified in [§ 521(a)(6) or § 362(h)(A) or (B)], with respect to property . . . as to which a creditor holds a security interest not otherwise voidable . . ., nothing in this title shall prevent or limit the operation of a provision in the underlying lease or agreement that has the effect of placing the debtor in default under such lease or agreement by reason of the occurrence, pendency, or existence of a proceeding under this title or the insolvency of the debtor. Nothing in this subsection shall be deemed to justify limiting such a provision in any other circumstance.

D

BAPCPA has been criticized for its lack of clarity.¹¹ We agree that BAPCPA is hardly the very model of a well-drafted statute. However, it is our task to interpret the laws as passed by Congress without attempting to force them to cohere more than their words allow. See Miller v. Daimlerchrysler Fin. Servs. Ams., LLC (In re Miller), 570 F.3d 633, 639 (5th Cir.2009) ("[P]erceived poor drafting [in BAPCPA] should not be regarded as a license to invalidate plain-text readings in the name of fixing a statute that some believe is broken.").

In doing so, we are guided by traditional canons of statutory interpretation. We first note the principle "that a statute ought, upon the whole, to be so construed that, if it can be prevented, no clause, sentence, or word shall be superfluous, void, or insignificant." TRW Inc. v. Andrews, 534 U.S. 19, 31, 122 S.Ct. 441, 151 L.Ed.2d 339 (2001) (internal quotation marks omitted). Courts should decline to render any "express exception . . . insignificant, if not wholly superfluous." Id. (internal quotation marks omitted). However, according to the plain meaning rule, "where the language of an enactment is clear [or, in modern parlance, plain], and construction according to its terms does not lead to absurd or impracticable consequences, the words employed are to be taken as the final expression of the meaning intended." United States v. Mo. Pac. R.R. Co., 278 U.S. 269, 278, 49 S.Ct. 133, 73 L.Ed. 322 (1929). The scope and applicability of the absurdity exception to the plain meaning rule is a subject of vigorous debate.¹²

We further note that, in general, legislative history is not an able guide here. See, e.g., Parker, 139 F.3d at 673 (noting that, in the ride-through context, "[t]he legislative history is of little assistance"); Donald, 343 B.R. at...