“910 Rule” Exceptions that Will Allow a “Cram Down” for a Vehicle

910-Day Rule Exceptions


The infamous hanging paragraph in §1325(a) of the Bankruptcy Code prohibits bifurcation of a creditor’s claim secured by a vehicle into a secured claim and an unsecured claim.  Specifically: “section 506 shall not apply to a claim described in that paragraph if the creditor has a purchase money security interest securing the debt that is the subject of the claim, the debt was incurred within the 910-day period preceding the date of the filing of the petition, and the collateral for that debt consists of a motor vehicle (as defined in section 30102 of title 49) acquired for the personal use of the debtor…”


Barring an exception, the debtor is stuck paying the contract balance on the loan.


The 910- Day Rule Exceptions:


  • The loan isn’t purchase money. This exception to the application of §506 was designed to protect car dealers, not necessarily everyone who makes a loan secured by a car.  Look for loans that represent refinances of a car loan or the pledge of car to secured a personal loan.


  • The vehicle is a business vehicle.  Either the nature of the vehicle or the debtor’s business should tip you to a loan that may be outside the hanging paragraph.  If it’s a delivery van, a pickup with racks, or an SUV sufficient to haul a trailer for the debtor’s business, you may have a transaction that doesn’t involve a “motor vehicle for the personal use of the debtor.”


  • The vehicle is driven by someone other than the debtor. Consider whether the vehicle is driven by a non-debtor.  The statute speaks in terms of the debtor’s personal use, so perhaps the vehicle for the teenager or college student, or even non-debtor spouse is outside the protection of the hanging paragraph.