Summary:
Judge Laura Beyer’s decision in In re Holland drives home a now-settled point in North Carolina bankruptcy practice: if a debtor does not intend to keep collateral and make payments, then the debtor does not get to deduct those payments on the Chapter 7 means test.
The Hollands were above-median debtors with multiple secured debts and stated their intention to surrender a 2023 Kia K5. They hadn’t made payments on the Kia in months, it had already been repossessed, and stay relief had been granted. Yet they still deducted the $590 Kia payment on the means test.
The Bankruptcy Administrator objected. Once that deduction disappeared, the Hollands had sufficient disposable income to trigger the presumption of abuse under § 707(b). Judge Beyer agreed and ordered dismissal unless the debtors converted to Chapter 13.
A Unified North Carolina Rule: Sterrenberg (EDNC), Hamilton (MDNC), and Holland (WDNC):
This isn’t just a Western District trend — it now reflects all three North Carolina bankruptcy districts.
In re Sterrenberg (Eastern District of North Carolina)
Judge Randy D. Doub
Judge Doub held that a debtor who intends to surrender collateral cannot deduct secured payments tied to that collateral on the means test. A deduction cannot be based on payments the debtor already knows will not be made.
https://case-law.vlex.com/vid/in-re-sterrenberg-no-895409367
In re Hamilton (Middle District of North Carolina)
Judge Catherine Aron
Judge Aron reached the same result: allowing secured-payment deductions on property the debtor plans to surrender distorts the means test and conflicts with the forward-looking approach of Lanning and Ransom.
https://case-law.vlex.com/vid/in-re-hamilton-no-891123578
In re Holland (Western District of North Carolina)
Judge Laura T. Beyer
Judge Beyer follows the same reasoning, expressly adopting the forward-looking interpretation and disallowing deductions tied to surrendered collateral.
Across EDNC, MDNC, and WDNC, the message is consistent:
If you aren’t going to keep it and pay for it, you don’t get to deduct it.
Commentary:
Why Debtors Should Not Rush to Surrender or Reaffirm
This case also highlights an important strategic lesson for consumer debtors:
⭐ It is often in the debtor’s best interest not to surrender vehicles or other secured property until after discharge, and not to sign reaffirmation agreements.
Why:
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declaring surrender during the case can remove a means-test deduction
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losing that deduction can turn a Chapter 7 into a 707(b) “abuse” case
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debtors get pushed into Chapter 13 unnecessarily
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reaffirmations recreate personal liability on depreciating assets
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most lenders will accept payments without reaffirmation
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surrendering after discharge does not change the means test at all
Put differently:
✔️ Keep the car if possible during the case
✔️ Do not reaffirm unless there is a compelling reason
✔️ Decide about surrender after discharge once your financial circumstances have stabilized
Holland shows how quickly a routine Chapter 7 can unravel once a debtor checks the “surrender” box too early. Sterrenberg and Hamilton show that this outcome isn’t a fluke — it’s doctrine.
In bankruptcy, sometimes the smartest move is not bold action.
It’s patient inaction.
To read a copy of the transcript, please see:
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