IN THE UNITED STATES BANKRUPTCY COURT FOR THE …

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

IN RE:

PATRICK ANDERSON and SANDRA BANKOWSKI-ANDERSON,

Debtors.

) Chapter 7 ) ) Case No. 06-10297 (MFW) ) ) ) )

MEMORANDUM OPINION1 Before the Court is the Emergency Petition for Rule to Show Cause for Violation of Bankruptcy Discharge Injunction (the "Show Cause Petition") filed by Patrick and Sandra Anderson (the "Debtors"). The Sussex County Federal Credit Union (the "Creditor") opposes the relief requested by the Debtors. For the reasons stated below, the Court will grant the Debtors' request in part and deny it in part.

I. BACKGROUND

The Debtors filed a joint voluntary petition under chapter 7

on March 31, 2006. After an extension of time was requested and

granted, the Debtors filed their Schedules and Statement of

Financial Affairs on April 28, 2006. In their Statement of

Intention filed with the Schedules, the Debtors stated their

intention to reaffirm six secured debts, including four due to

1 This Opinion constitutes the findings of fact and conclusions of law of the Court pursuant to Federal Rule of Bankruptcy Procedure 7052, which is made applicable to contested matters by Rule 9014 of the Federal Rules of Bankruptcy Procedure.

the Creditor, one of which is secured by the Debtors' 2004 Ford Explorer (the "Vehicle"). Notwithstanding that Statement, the Debtors have filed no reaffirmation agreements.

The meeting of creditors was held pursuant to section 341 on May 9, 2006, after which the chapter 7 trustee filed a report of no distribution. The Debtors' discharge was entered on July 6, 2006, and the case was closed on July 11, 2006.

On July 12, 2006, the Creditor repossessed the Vehicle. In a letter dated that same date, the Creditor advised the Debtors of the repossession and stated, inter alia, that "[t]his is not an attempt to collect a debt" but "[y]ou will be liable for any deficiency." (Ex. A to Show Cause Petition.)

The Debtors filed a Motion to reopen their case, which was granted, to permit them to file the Show Cause Petition. A hearing on the Debtors' Show Cause Petition was held on July 26, 2006. At the conclusion of the hearing, the Debtors asked for authority to brief the issue of whether the "pass through" option enunciated by the Third Circuit in In re Price, 370 F.3d 362 (3d Cir. 2004), had remained viable after enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"). On August 3, 2006, the Debtors filed a post-hearing letter brief addressing that and additional issues. The Creditor filed a responsive letter brief on August 11, 2006. The matter is ripe for decision.

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II. JURISDICTION The Court has jurisdiction over this matter pursuant to 28

U.S.C. ?? 1334 & 157(b)(2)(A), (B), (E) & (O).

III. DISCUSSION A discharge in bankruptcy "operates as an injunction against

the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any [discharged] debt as a personal liability of the debtor." 11 U.S.C. ? 524(a)(2).

The Debtors argue that the Creditor violated the discharge injunction both by repossessing the vehicle and by sending the letter indicating that they would be held personally liable for any deficiency.

A. Repossession of the Vehicle It is well-settled that "a bankruptcy discharge extinguishes only one mode of enforcing a claim -- namely, an action against the debtor in personam -- while leaving intact another -- namely, an action against the debtor in rem." Johnson v. Home State Bank, 501 U.S. 78, 84 (1991). "Thus, liens on property remain enforceable after discharge unless avoidable under the Bankruptcy Code." Holloway v. John Hancock Mut. Life Ins. Co. (In re Holloway), 81 F.3d 1062, 1063 n.1 (11th Cir. 1996).

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Self-help repossession of property is an in rem action that would not appear to implicate the discharge injunction. The Debtors insist, however, that the Creditor's repossession of the Vehicle was wrongful under both the Bankruptcy Code and Delaware state law. The Debtors appear to argue that wrongful repossession is akin to an in personam action that implicates the protections of the discharge injunction. The Court need not decide whether this is the case, however, because it concludes that the repossession was not wrongful.

1. The "Fourth Option" Post-BAPCPA The Debtors assert that because they have stayed current with their payments, the Vehicle loan "passed through" the bankruptcy case unaffected. They rely on the Third Circuit decision in Price, in which the Court held that the enumeration of three options for treatment of secured property under former section 521(2) - i.e., surrender, redemption or reaffirmation did not preclude the debtor from exercising a "fourth option" ? i.e., retaining the property while remaining current on payments. 370 F.3d at 372. The Creditor argues that several changes to the Bankruptcy Code wrought by BAPCPA render the decision in Price no longer correct. The Court agrees.

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a. Section 521(a)(2)(A) The Third Circuit in Price found nothing in the Bankruptcy Code that precluded the "fourth option." It emphasized the following language of section 521: "the debtor shall file with the clerk a statement of his intention with respect to retention or surrender of such property and, if applicable, specifying [sic] 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." 11 U.S.C. ? 521(a)(2)(A) (as amended, emphasis added).2 The Debtors note that this language has not been changed by any of the amendments contained in BAPCPA and, therefore, argue that the "pass through" option remains available. See, e.g., In re Donald, 343 B.R. 524, 532 (Bankr. E.D.N.C. 2006).

b. Section 521(a)(6) The Creditor argues that, while amendments to section 521(a)(2)(A) may not have eliminated the fourth option, the addition of section 521(a)(6) has. That section provides: [I]n a case under chapter 7 of this title in which the debtor is an individual, [the debtor shall] not retain possession of personal property as to which a creditor has an allowed claim for the purchase price secured in whole or in part by an interest in such personal property unless the debtor, not later than 45 days after the first meeting of creditors under section

2 Under BAPCPA, section 521(2)(A) was renumbered 521(a)(2)(A), but the relevant language addressed by the Price Court was not changed.

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