• A Contemporary Approach to Ride-Through, Ipso Facto Clauses, and the Nondefaulting Debtor

    Lawrence Ponoroff
    MSU Law Faculty Repository
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    SOONER OR LATER, EVERYTHING OLD IS NEW AGAIN** Prior to enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, one of the most vexing and controversial questions in the consumer bankruptcy arena was whether a debtor who was current on her payments to a secured lender could retain the collateral both during and after the bankruptcy case by continuing to make the scheduled payments on the loan and otherwise avoid any act or omission that might pose a threat to the value or security of the collateral. No fewer than nine of the eleven circuit courts of appeals addressed this question and split as evenly as nine courts possibly could (5-4). The practice is known as “ride-through” and the 2005 Act, itself a screed against perceived debtor abuse of the bankruptcy law, set out to resolve the matter by eliminating the practice. However, as was true in connection with many other areas that the legislation addressed, Congress made a hash of it. The result has been nearly 15 years of continued litigation and even more confusion, unpredictably, and inconsistency than pervaded prior to the 2005 Act as courts have struggled to make sense of the poorly and illogically drafted amendments. The current situation compromises the integrity of the system and exposes debtors and creditors alike to costly uncertainty. Recognizing that the law governing individual bankruptcy needs to be tailored to have predictable and sensible consequences, this Article, after considering the myriad permutations that ride-through cases have taken since 2005, maps out a solution that it is contended takes into account of the legitimate interests of creditors as well as debtors. It also measures the consonance of the proposed approach for court-protected ride-through within the framework of the larger normative goals of the consumer bankruptcy system.
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    2 years ago
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