Option to Ride Through Bankruptcy Eliminated?

Option to Ride Through Bankruptcy Eliminated? """Ride Through Option Eliminated""Prior to 2005, a bankruptcy debtor with a vehicle loan had four (4) options regarding the vehicle: (1) surrender the vehicle to the lender; (2) redeem the vehicle (pay the lender the fair market value of the vehicle); (3) reaffirm the debt (debtor and lender create new terms by which the debtor would be bound after the conclusion of the bankruptcy case); and (4) the """"ride through"""" or """"pay and drive"""" option, in which the debtor continues to make payments to the lenderThe most obvious advantage of the ride through option is that, if permitted, should a debtor cease making payments on a vehicle loan, the lender could repossess the vehicle without obtaining a """"deficiency judgment."""" When a vehicle is sold for less than what the debtor owes, a deficiency judgment is generally permitted.The primary issue with automobiles is that they are so indispensable to so many people, particularly in the Bay Area. When individuals file for bankruptcy, there is also the concern that they will be unable to afford a vehicle. Alternately, if they are given credit to buy a car, the terms are typically unreasonable.Prior to 2005, the Ninth Circuit (California bankruptcy courts are part of this federal appellate court system) permitted this ride through option, despite the fact that other circuits held that it violated the Bankruptcy Code. A Delaware bankruptcy court recently ruled that 2005 amendments to the Bankruptcy Code specifically abolished the option for bankruptcy debtors to ride through. The court ruled that """"creditors holding security interests must file a notice of intent to surrender the collateral, redeem it, reaffirm the debt, or, in the case of leased property, assume an unexpired lease"""". According to them, a debtor cannot merely assert that loan or lease payments will continue. In addition, debtors are required to affirm their intentions with the vehicle. If not, the court can lift the automatic restraining order that precludes the repossession of the vehicle.This decision lacks legal standing in California bankruptcy courts. In In re Dumont (a 2009 decision), the Ninth Circuit held that Congress intended to eliminate or at least restrict the ride through option with the 2005 legislation. Under this statement, there may be instances in which the ride through is permissible.""

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