08-28338 In re: Crawford

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Bankruptcy
Negative equity

Negative equity in an automobile is antecedent debt not included in the definition of "purchase money security interest."

"This Court finds Judge Brown's explanation in Munzberg especially compelling: 'Comment 2 to UCC § 9-107 (the precursor to UCC § 9-103) explicitly provided that a purchase money security interest could not secure a pre-existing claim or antecedent debt. See In re Billings, 838 F.2d 405, 407 (10th Cir. 1988); Dominion Bank of Cumberlands, NA v. Nuckolls, 780 F.2d 408, 413 (4th Cir. 1985); In re Matthews, 724 F.2d 798, 800-01 (9th Cir. 1984); In re Penny, 15 B.R. 124, 127 (Bankr. E.D. Va. 1981). The current Official Comment 5 to 9A V.S.A. § 9-103 states that § 9-103(b), which describes when a security interest in goods and software is a PMSI, is limited to goods and software, but "[o]therwise, no change in meaning from former section 9-107 is intended." As a consequence,it appears that the definition of PMSI under former UCC § 9-107 has essentially not changed, and that Comment 2 to former § 9-107 is currently applicable, although that Comment was not retained in the Official Comments to the Revised Article 9. See Lavigne, 2007 Bankr. LEXIS 4187, 2007 WL 3469454 at * 6 (citing cases under former § 9-107 Comment 2 as still applicable to show that antecedent debt could not be PMSI).' Munzberg, 388 B.R. at 539-40. Section 9-103 of Revised Article 9 as enacted in Wisconsin, including the Official Comments, is identical to that enacted in Vermont. Accordingly, the analysis would be the same: a purchase money security interest cannot secure an antecedent debt; negative equity is an antecedent debt; therefore a purchase money security interest cannot include negative equity. See also Americredit Fin. Servs., Inc. v. Penrod (In re Penrod), 392 B.R. 835, 849 (B.A.P. 9th Cir. 2008) (negative equity is antecedent debt)."

08-28338 In re: Crawford

E.D.Wis., Kelley, Bankr. J.

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