Consumer Finance

Texas District Court Rules on “Negative Equity” Bankruptcy Issue Currently Before the Ninth Circuit

April 15, 2009

In In re: Saunders, Judge Rodriguez ruled in favor of an auto finance company’s claim regarding negative equity financed into an automobile purchase transaction, holding that

The Court thus concludes that the hanging paragraph applies to FMC’s claim regardless of whether the charge for negative equity constitutes a purchase-money obligation. Nevertheless, the FMC’s purchase-money security interest encompasses the amount financed for the Debtors’ negative equity in the trade-in vehicle. Under either analysis, the hanging paragraph applies to the entirety of FMC’s claim.

See the decision here This issue currently is before the Court of Appeals for the Ninth Circuit in In re: Penrod.

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Consumer Finance

Texas District Court Rules on “Negative Equity” Bankruptcy Issue Currently Before the Ninth Circuit

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