In the Matter of Faith Ann Peaslee and Others
Court of Appeals of New York
913 N.E.2d 387 (2009)
Faith Ann Peaslee (plaintiff) financed a new vehicle purchase that included rolling in the negative equity (a trade-in lien exceeding the trade-in's value) from her old car, along with other charges; the trade-in lien was paid off, and her loan was assigned to GMAC, LLC (GMAC) (defendant). Two years later, Peaslee filed chapter 13, and the bankruptcy trustee proposed reducing GMAC's secured claim by excluding the negative-equity portion of the loan from purchase-money treatment. GMAC objected, arguing the whole loan was secured; the bankruptcy court agreed with the trustee that negative equity fell outside the UCC's purchase-money security interest (PMSI) definition, and on appeal the federal district court certified the state-law question to the New York Court of Appeals.
Whether, under UCC section 9-103, the negative equity on a trade-in vehicle is part of the purchase-money obligation arising from the purchase of a new car.