Parker, In re

Decision Date17 March 1998
Docket NumberNo. 96-15784,96-15784
Citation139 F.3d 668
Parties39 Collier Bankr.Cas.2d 1068, 98 Cal. Daily Op. Serv. 1889, 98 Daily Journal D.A.R. 2629, 2 Cal. Bankr. Ct. Rep. 62 In re David P. PARKER, Sr., Debtor. McCLELLAN FEDERAL CREDIT UNION, Appellant, v. David P. PARKER, Sr., Appellee.
CourtU.S. Court of Appeals — Ninth Circuit

Larry J. Cox, Peter A. Buck, Jones, Kerr & Buck, Sacramento, California, for the appellant.

No appearance for the appellee.

Eric M. North, San Jose, California, for the amicus curiae.

Appeal from the United States Bankruptcy Appellate Panel of the Ninth Circuit. BAP No. EC-95-1828-RBMe.

Before: D.W. NELSON, BOOCHEVER, and TROTT, Circuit Judges.

BOOCHEVER, Circuit Judge:

A debtor in Chapter 7 bankruptcy entered into a reaffirmation of his debts with a credit union. The bankruptcy court refused to approve the reaffirmation agreement, and the credit union appealed. The bankruptcy appellate panel held that the credit union did not have standing, and dismissed the appeal. Because we conclude that the credit union has standing, we consider the substantive issue of law, briefed and argued by the parties, whether 11 U.S.C. § 521(2)(A) requires a Chapter 7 bankruptcy debtor who wishes to retain property securing a debt to reaffirm the debt or redeem the property securing the debt.


On April 28, 1995, David P. Parker, Sr., filed a Chapter 7 bankruptcy petition in the bankruptcy court for the Eastern District of California. Parker was not represented by counsel. Among other debts, he owed the McClellan Federal Credit Union (the "Credit Union") an unsecured debt of $1,986.50 on a credit card, and a secured debt of $9,977.56, with collateral of an automobile worth between $9,000 and $10,000.

Parker filed a statement of intention under 11 U.S.C. § 521, stating his desire to reaffirm his secured loan. Still unrepresented by counsel, he executed a reaffirmation agreement with the Credit Union. In the agreement, Parker reaffirmed his secured car debt in full, and reaffirmed $1,500 of the unsecured credit card debt. In consideration of his reaffirmation, the Credit Union reduced the balance of the unsecured debt from $1,986.50 to the $1,500 as reaffirmed, and reduced the monthly payment on the secured car debt from $308.73 to $280. The Credit Union also agreed that upon his discharge in the bankruptcy proceeding, Parker would be reinstated as a member in good standing at the Credit Union, and if full payment were timely made on the secured account, the Credit Union would disregard the debt in considering any future loan application. In turn, Parker agreed that his bankruptcy discharge would not affect his obligations.

Parker filed the reaffirmation agreement, and the court scheduled a hearing on the agreement under 11 U.S.C. § 524(c)(6), which provides that a reaffirmation agreement is enforceable only if:

(6)(A) in a case concerning an individual who was not represented by an attorney during the course of negotiating an agreement under this subsection, the court approves such agreement as--

(i) not imposing an undue hardship on the debtor or a dependent of the debtor; and

(ii) in the best interest of the debtor.

At the hearing, the bankruptcy court stated:

... I am not going to approve the reaffirmation agreement, particularly when it rolls in unsecured debt. Even if it does reduce your monthly payment by what appears to be some amount, but not a great amount. And my understanding of the law is, that as long as you keep paying for that automobile, you--that probably would mean that the [sic] original monthly rate you get to keep it. And so then it's your choice as to how you want to proceed.

. . . . .

I am not going to approve the reaffirmation agreement. Mr. Parker, if you want to keep your car, keep paying for it. If you want to preserve good credit with McClellan Federal Credit Union, pay them the debt that was discharged. I am just not going to make you do it.

The court granted Parker a discharge, which included his Credit Union debts.

The Credit Union appealed to the Bankruptcy Appellate Panel ("BAP"), which held that the Credit Union did not have standing to bring the appeal, and dismissed it. McClellan Fed. Credit Union v. Parker (In re Parker), 193 B.R. 525 (B.A.P. 9th Cir.1996). The Credit Union appeals.

I. Standing

This court reviews the legal conclusions of the BAP de novo. Alsberg v. Robertson (In re Alsberg ), 68 F.3d 312, 314 (9th Cir.1995), cert. denied, 517 U.S. 1168, 116 S.Ct. 1568, 134 L.Ed.2d 667 (1996). To have standing to appeal a decision of the bankruptcy court, an appellant must show that it is a "person aggrieved" who was "directly and adversely affected pecuniarily by an order of the bankruptcy court.... [The] order [must] diminish [the appellant's] property, increase [its] burdens, or detrimentally affect [its] rights." Fondiller v. Robertson (In re Fondiller ), 707 F.2d 441, 442-43 (9th Cir.1983); see Everex Sys., Inc. v. Cadtrak Corp. (In re CFLC, Inc.), 89 F.3d 673, 675 (9th Cir.1996). Whether an appellant is a person aggrieved is a question of fact, which this court reviews for clear error. If, however, the district court did not make a factual finding on the issue, and the relevant facts and evidence are before this court, we may determine the issue ourselves. See Fidelity Bank v. M.M. Group, Inc., 77 F.3d 880, 882 (6th Cir.1996); Depoister v. Mary M. Holloway Found., 36 F.3d 582, 585 (7th Cir.1994) (where district court did not make factual finding, court of appeals may review evidence to recognize standing).

Section 521 of the Bankruptcy Code describes the individual debtor's duties in a bankruptcy case:

(2) if an individual debtor's schedule of assets and liabilities includes consumer debts which are secured by property of the estate--

(A) within thirty days after the date of the filing of a petition under Chapter 7 of this title ... the debtor shall file with the clerk a statement of his intention with respect to the retention or surrender of such property and, if applicable, specifying that such property is claimed as exempt, that the debtor intends to redeem such property, or that the debtor intends to reaffirm debts secured by such property;

(B) within forty-five days after the filing of a notice of intent under this section ... the debtor shall perform his intention with respect to such property, as specified by subparagraph (A) of this paragraph....

11 U.S.C. § 521(2). Parker elected to reaffirm his debts.

The Credit Union stood to profit from the reaffirmation agreement. By entering into the agreement, the Credit Union sought to recover the full balance of Parker's car loan should he fail to make future payments. Without the agreement, the Credit Union's only recourse in the event of missed payments was the repossession of the vehicle. At the time the agreement was executed, the vehicle was worth between $9,000 and $10,000, and the outstanding loan was $9,977.56, only $22.56 short of the highest estimated value of the car. The car was thus very likely worth less than the loan balance, and such a disparity would increase in the event that Parker failed to make payments in the future and the Credit Union repossessed the vehicle. In addition, the Credit Union would have benefitted from the agreement's provision that Parker would pay most of his unsecured debt, which was otherwise dischargeable.

Because the bankruptcy court refused to approve the agreement, Parker was able to keep the car and continue to make payments, while the Credit Union could not hold him liable for the full amount of the debt. This essentially "forc[es] a quasi-reaffirmation upon the creditor," Capital Communications Fed. Credit Union v. Boodrow (In re Boodrow ), 126 F.3d 43, 47 (2d Cir.1997) (quotations omitted), cert. denied, --- U.S. ----, 118 S.Ct. 1055, 140 L.Ed.2d 118 (1998), while the debtor need not reaffirm his obligation. Without the agreement, the Credit Union also could not hold Parker liable for any of his unsecured debt. As a result, the Credit Union's rights were "detrimentally" affected when the bankruptcy court refused to approve the agreement. See id. (court's refusal to approve affirmation agreement constitutes harm to creditor); In re CFLC, 89 F.3d at 675-76 (finding injury for standing to appeal when bankruptcy court denied assignment of a particular contract to purchaser of firm's assets, when purchase contract included right to assignment). 1

We conclude that the Credit Union was an "aggrieved person" and had standing to appeal the bankruptcy court's refusal to approve the reaffirmation agreement.

II. Alternatives for debtors under 11 U.S.C. § 521(2)

Because we conclude that the Credit Union has standing, we review the bankruptcy court's refusal to approve the reaffirmation agreement. We are in as good a position as the BAP to review the bankruptcy court's decision, and so we review the decision independently. Mitsui Mfrs. Bank v. Unicom Computer Corp. (In re Unicom Computer Corp.), 13 F.3d 321, 323 (9th Cir.1994).

We now consider the legal issue whether the bankruptcy court erred in its conclusion regarding Parker's alternatives under § 521(2). The bankruptcy court held that even without a reaffirmation agreement, the law allowed Parker to keep the car and continue to make his monthly payments. The court reasoned that the reaffirmation agreement therefore was not in Parker's best interest under § 524(c)(6). On appeal, the Credit Union argues that because Parker could not simply keep his car and continue payment without a reaffirmation agreement such as the one the bankruptcy court refused to approve, the court erred in denying approval. We review the bankruptcy court's interpretation of the statute de novo. Grey v. Federated Group, Inc. (In re Federated Group, Inc.), 107 F.3d 730, 732 (9th Cir.1997). In this case, if the court's interpretation of the statute was correct, it clearly...

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