In re Wright
United States Court of Appeals for the Seventh Circuit
492 F.3d 829 (2007)
Craig Wright and LaChone Giles-Wright (defendants) filed chapter 13, owing more on a purchase-money vehicle loan than the car was worth; their loan contract entitled the lender (plaintiff), on default, to repossess and sell the car and hold the Wrights liable for any deficiency. Because of the loan's timing, it fell under the so-called 'hanging paragraph' attached to section 1325(a)(5). The Wrights proposed a repayment plan surrendering the car under section 1325(a)(5)(C), treating that surrender as fully satisfying their entire obligation to the lender with no payment toward any remaining deficiency. The bankruptcy court denied confirmation, holding the Wrights still owed some portion of the deficiency, and they appealed.
Whether, where the hanging paragraph attached to section 1325(a)(5) applies and the underlying loan entitles the creditor to a deficiency judgment, a debtor's surrender of the vehicle to the secured creditor fully satisfies both the secured and unsecured portions of the creditor's claim.