by Where the maturity date on the vehicle pawn contract had not elapsed before the debtor filed for chapter 13 bankruptcy, she retained ownership of her vehicle, the vehicle became property of the estate, and the loan could be provided for in her chapter 13 plan. TitleMax of Alabama, Inc. v. Womack, — Fed. Appx. —-, 2021 WL 3856036 (11th Cir. Aug. 30, 2021) (case no. 21-11476) (unpublished).
The debtor filed her chapter 13 petition 11 days prior to the maturity date of the pawn contract on her vehicle and she proposed to pay the amount remaining on the loan through the life of the plan under section 1322(b)(2). TitleMax objected to confirmation, arguing that, under the terms of the pawn contract and state law, once the maturity date on the loan expired, the debtor’s choices were limited to redemption of the vehicle or forfeiture of title to TitleMax. The bankruptcy court overruled TitleMax’s objections, and the district court affirmed (see blog post here).
On appeal, the Eleventh Circuit examined the “interplay between the pawn contract, Alabama law, and the Bankruptcy Code.” The pawn contract gave TitleMax a security interest in the vehicle and provided that upon failure to pay back the loan by the maturity date, title would transfer to TitleMax. Alabama’s Pawnshop Act gives debtors an additional 30 days to redeem a pawned vehicle after the maturity date passes before absolute title transfers to the pawnbroker. Bankruptcy law treats the debtor’s property interests as they exist at the time of the petition.
TitleMax argued that the case was controlled by In re Northington, 876 F.3d 1302 (11th Cir. 2017), where the debtor defaulted on his pawn contract prior to his bankruptcy petition and the court found that he could not modify the creditor’s rights under the contract once the redemption period passed.
Like the courts below, the circuit court distinguished the property interest held by the debtor in Northington from that of the debtor here. In Northington, at the time the debtor filed for bankruptcy he had already missed the maturity date of the pawn contract and, by operation of state law, retained only the contingent right of redemption. It was this contingent interest that entered the bankruptcy estate. Upon his failure to redeem, title passed automatically to the pawn creditor. Here, on the other hand, the maturity date of the pawn contract had not elapsed before the petition date, and the debtor therefore retained a fixed ownership interest in her vehicle at the time she filed for bankruptcy. It was that interest that passed into the bankruptcy estate and TitleMax held only a security interest subject to modification under section 1322(b)(2).
The court affirmed.