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AmeriCredit Financial Svcs., Inc. v. Moore: BANKRUPTCY - hanging paragraph, 910-claim, and deficiencies in ch. 13

1 The Honorable David S. Doty, United States District Judge for the District of
Minnesota, sitting by designation.
United States Court of Appeals
No. 07-1315
AmeriCredit Financial *
Services, Inc., *
Movant – Appellant, **
Appeal from the United States
v. * Bankruptcy Court for the Western
* District of Arkansas.
Larry James Moore, Tabitha *
Y. Moore, *
Debtors – Appellees, *
and Joyce Babin, *
Trustee – Appellee. *
Submitted: November 16, 2007
Filed: February 5, 2008
Before WOLLMAN and BENTON, Circuit Judges, and DOTY,1 District Judge.
BENTON, Circuit Judge.
2 The “hanging paragraph” is a term used to describe the unnumbered paragraph
in 11 U.S.C. § 1325, directly following §1325(a)(9). This paragraph was added as a
part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
On August 26, 2005, Larry J. and Tabitha Y. Moore purchased a Cadillac
financed by AmeriCredit. The Moores filed for Chapter 13 bankruptcy. They
proposed to surrender their Cadillac (a 910-car), allowing AmeriCredit a general
unsecured claim for any deficiency after its sale. The Trustee objected to
confirmation, due to the deficiency claim. The Moores amended the plan, proposing
to surrender the Cadillac in full satisfaction of the claim. AmeriCredit objected to
confirmation of the amended plan, seeking full payment of the debt. The parties
stipulated that AmeriCredit holds a properly perfected security interest in the Cadillac
in the amount of ,304.89, and that the estimated value of the car was ,350.00
retail and ,300.00 trade-in. The bankruptcy court overruled AmeriCredit’s
objection and confirmed the plan, reasoning: “If a 910-claim is fully secured under
Section 1325(a)(5)(B)(ii) and bifurcation is prohibited, as the majority of courts have
thus far held, there is no logic in saying that a 910-claim may still be bifurcated if the
debtor chooses instead to surrender the collateral pursuant to section 1325(a)(5)(C).”
AmeriCredit appeals. Having jurisdiction under 28 U.S.C. § 158(d)(2), this court
As the facts of this case are undisputed, this court reviews the bankruptcy
court’s legal conclusions de novo. See In re Zepecki, 277 F.3d 1041, 1045 (8th Cir.
The issue here, whether the “hanging paragraph”2 eliminates an under-secured
creditor’s deficiency claim when a Chapter 13 debtor proposes to surrender a 910-car,
was decided today in Capital One Auto Finance v. Osborn, ____ F.3d ___ (8th Cir.
2008), No. 07-1726, slip op. (8th Cir. Feb. 5, 2008). In Osborn, this court ruled that
the hanging paragraph makes § 506(a) inapplicable to 910-claims. Osborn, ___ F.3d
at ___, slip op. at 6. The 910-claim is still an “allowed secured claim” because it is
secured under state law. Id. at ___, slip op. at 6. As nothing in 1325(a)(5)(C) states
that a claim is considered paid in full when the debtor surrenders the vehicle, the
creditor is entitled to an unsecured deficiency claim if there is a right to a deficiency
judgment under state law. Id. at ___, slip op. at 7.
AmeriCredit contends that, since their claim is fully secured, they are entitled
to full payment of the debt. AmeriCredit is not entitled to full payment of its claim
however, because once it sells the vehicle, and applies the proceeds to the claim, the
remaining claim is not secured under state law, it is unsecured. See In re Hoffman,
359 B.R.163, 166 (Bankr. E.D. Mich. 2006) (“[O]nce the secured creditor liquidates
its collateral and applies the proceeds to the debt, any remaining debt is not secured
by any existing collateral.”). Therefore, the deficiency claim is a general unsecured
claim. See Raleigh v. Ill. Dept. of Revenue, 530 U.S. 15, 20 (2000) (“Creditors’
entitlements in bankruptcy arise in the first instance from the underlying substantive
law creating the debtor’s obligation.”); In re Wright, 492 F.3d 829, 832-33 (7th Cir.
The security agreement between AmeriCredit and the Moores gives
AmeriCredit the right to repossess and sell the vehicle in case of default. The contract
further provides that “if the money from the sale is not enough to pay all you owe, you
must pay the rest of what you owe plus interest.” Arkansas law allows AmeriCredit
a deficiency judgment. See First State Bank of Morrilton v. Hallett, 722 S.W. 2d
555, 556 (Ark. 1987); Ark. Code Ann. § 4-9-615(d)(2). Therefore, AmeriCredit is
entitled to an unsecured deficiency claim in the amount of the difference between the
debt owed at the time of filing and the amount received from liquidation (minus
reasonable sales expenses).
The judgment of the bankruptcy court is reversed, and the case is remanded for
further proceedings in accordance with this opinion.


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