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17. Redemption
Section 722 of the Code is amended to make clear, in accord with the case law, that redemption requires full payment of an allowed secured claim at the time of the redemption.
A new § 506(a)(2) to the Code reverses the majority interpretation that the value of collateral for purposes of redemption should be measured by what the creditor would receive upon possession. The new provision requires that the value of personal property securing a claim in the case of an individual in Chapter 7 will always be based on the cost to the debtor of replacing the property—without deduction of costs of sale or marketing—and that if the property was acquired for personal, family, or household purposes, this replacement cost will be retail price for property of similar age and condition.
ed. R. Bankr. P. 4008 does provide that a motion by the debtor for approval of a reaffirmation agreement must be filed before or at the time of a hearing under § 524(d), but approval of reaffirmation agreements is not required for represented debtors and § 524(d) hearings are optional with the court. Section 524(c)(1) requires only the agreement be “made before the granting of the discharge.”
Section 521 of the Code is amended to add a new paragraph (a)(6), requiring that an individual debtor in a Chapter 7 case “not retain” any personal property that is subject to a purchase money security interest, unless the debtor, “not later than 45 days after the first meeting of creditors,” either redeems the property or enders into a reaffirmation agreement with respect to the debt secured by the property. It is unclear whether this 45-day period should from the first date set for the meeting of creditors, the date that the meeting actually commences o, or the date that it concludes; there is no provision for judicial extension of the 45-day period. Section 521(a)(6) goes on to provide that a failure to exercise one of these two options results in termination of the automatic stay and removal of the property from the estate unless the court (1) determines on a motion filed by the trustee within the 45-day period, that the property is “of consequential value or benefit to the estate”
(2) orders appropriate adequate protection, and (3) orders the debtor to deliver the collateral to the trustee.
Section 362(b) is amended to add a new subsection (h), applicable in individual bankruptcy cases, that terminates the automatic stay with respect to, and removes form the estate, personal property that is collateral for any secured clam (not just property subject to purchase money security interests) or that is subject to an unexpired lease, in the event that the debtor fails either to file the statement of intent required by § 521 (a)(2) within 30 days of the case filing or fails “to take timely the action specified in such a statement… unless such as statement specifies the debtor’s intention to reaffirm such debt on the original contract terms and the creditor refused to agree to the reaffirmation on such terms.” Section 521(a)(2)(B) is amended to require performance of the debtor’s intention within 30 days of the first date set for the meeting of creditors unless during this 30-day periods the court extends the period for cause. Barring such an extension by the court, the 30-day period for debtor action in § 362(h) would always end prior to the 45-day period specified for similar action in new § 521(a)(6). As under § 521(h), the automatic stay would remain in effect, and the property would remain in the estate, if the court (1) determined on motion filed by the trustee within the applicable period, that the property is “of consequential value benefit to the estate” (2) ordered appropriate adequate protection, and (3) ordered the debtor to deliver the collateral to the trustee.
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