Capital One Auto Finance v. Osborn, 515 F.3d 817 (8th Cir. 2008): Surrendering Proper Interpretation of the “Hanging Paragraph” to Allow an Unsecured Deficiency Claim Following Surrender of a 910-Vehicle in Chapter 13—Further Evidence of the Need for Congressional Reform

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In Capital One Auto Finance v. Osborn, the Eighth Circuit joined the growing list of circuit courts to decide that an undersecured creditor is allowed an unsecured deficiency claim after a Chapter 13 debtor surrenders a vehicle purchased within 910 days of filing to the creditor.  Prior decisions had allowed the debtor to surrender the vehicle in full satisfaction of the debt owed.  The difference in the result comes from two different plain meaning readings of the “hanging paragraph”—a provision added to the Bankruptcy Code through the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.  This Note analyzes both positions’ reasoning and concludes that the Eighth Circuit, while coming to the likely intended result of Congress, used an incorrect interpretation of the Bankruptcy Code.  A true plain meaning reading of the “hanging paragraph” should result in surrender in full satisfaction.

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