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Poll Modifications Should Be Made to the Bankruptcy Code to Level the Playing Field Between Car Lenders and Other Unsecured Creditors

Alexandria, Va.— A majority of respondents in a recent ABI Quick Poll believe (50 percent “strongly” and 19 percent “somewhat”) that the full-payment rule in Sect. 1325 of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) for new car purchases should be repealed to level the playing field between car lenders and other partially and fully unsecured creditors in a chapter 13 proceeding. BAPCPA created a controversy among the circuit courts as it enabled car lender creditors in chapter 13 proceedings to have their claims treated as secured claims through the use of §1325(a)’s “hanging paragraph.” The “hanging paragraph” received its name because it was inserted into the law with no identifying section number or letter. It states that a chapter 13 debtor cannot propose a plan that separates car loans into secured and unsecured portions “if the creditor has a purchase money security interest (PMSI) securing the debt that is the subject of the claim, the debt was incurred within the 910-day preceding the date of the filing of the petition, and the collateral for that debt consists of a motor vehicle…acquired for the personal use of the debtor, or if collateral for that debt consists of any other thing of value, if the debt was incurred during the 1-year period preceding that filing.” While appeals courts have upheld car lenders’ secured claims through the use of the “hanging paragraph” of BAPCPA, unsecured lenders are critical of the provision because it puts car lenders ahead of other lenders for recoveries from a chapter 13 debtor. Conversely, 26 percent of the respondents (20 percent “strongly” and 6 percent “somewhat”) believe that the full-payment rule in §1325’s “hanging paragraph” should be kept in place. Five percent did not know or had no opinion on the Quick Poll. ABI’s Quick Poll is posted on ABI’s home page, ABI members and the public are invited to respond to a question on a timely bankruptcy or insolvency issue. Visit to access the results of previous ABI Quick Polls. ### ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes over 13,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit For additional conference information, visit