Washington Law Review


Julio M. Zapata


Federal appellate courts are divided on whether a debtor who files a Chapter 7 bankruptcy petition and is current on the underlying contractual obligation secured by collateral is able to retain the collateral without redeeming it or reaffirming the debt under section 521(2) of the Bankruptcy Code. The Fourth and Tenth Circuits hold that the Code's options are not exclusive. Thus, the debtor may retain the collateral and continue under the terms of the contract as long as the payments are current In contrast, the Seventh and Eleventh Circuits hold that a debtor's only options are those listed in section 521(2): surrender, redeem, or reaffirm. After examining the history and impact of redemption and reaffirmation, and the circuit court decisions, this Comment argues that the options listed in section 521(2) are not exclusive and urges the adoption of the Fourth and Tenth Circuits' reasoning. Adopting the non-exclusive approach does not alter the substantive rights of the debtor, supports the proposition that section 521(2) is primarily a notice requirement, and promotes the Bankruptcy Code's underlying policy of providing a fresh start to the debtor.

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