On appeal from an August 13, 2008, memorandum decision and order of the United States Bankruptcy Court for the Southern District of New York (Morris, J.), petitioner-appellant argues that despite the 2005 amendments to 11 U.S.C. § 1325(a)(5), it is entitled to an unsecured claim with regard to a deficiency it incurred upon the surrender and sale of a 2006 Chevrolet Impala in which it held a purchase-money security interest. We conclude that the deficiency claim derives from the contract between the parties and background state law and that, in the absence of a Bankruptcy Code provision expressly disallowing it, such an unsecured claim may be maintained.
The opinion of the court was delivered by: Livingston, Circuit Judge
Before: LEVAL, PARKER, and LIVINGSTON, Circuit Judges.
Petitioner-appellant AmeriCredit Financial Services, Inc. ("AmeriCredit") appeals from a memorandum decision and order entered on August 13, 2008, in the United States Bankruptcy Court for the Southern District of New York (Morris, J.), expunging AmeriCredit's unsecured claim in the Chapter 13 proceeding of respondents-appellees Jesse and Sonja Tompkins ("the Tompkinses") and overruling its objection to the confirmation of the plan. For the reasons that follow, we vacate the judgment of the bankruptcy court and remand for further proceedings consistent with this opinion.
On August 25, 2006, the Tompkinses signed a contract with Long Beach Acceptance Corporation ("Long Beach") to finance a 2006 Chevrolet Impala, granting Long Beach a purchase-money security interest in the vehicle. Long Beach properly recorded the lien. AmeriCredit is Long Beach's successor in interest.
The Tompkinses failed to make their payments to AmeriCredit for the months of December 2007 and January 2008. On February 11, 2008, they filed a voluntary Chapter 13 bankruptcy petition in the United States Bankruptcy Court for the Southern District of New York. Shortly thereafter, AmeriCredit filed a proof of claim for $21,729.92 and the Tompkinses surrendered their automobile to AmeriCredit. The Tompkinses' first amended plan, filed February 26, 2008, provided as follows with regard to payments to be made to the holders of allowed secured claims: "Current secured payments [are] to be made by the debtor(s) directly to claimant except the claim of AMERICREDIT, as the debtor has surrendered the 2006 Chevrolet Impala, in full satisfaction of the debt pursuant to 11 U.S.C. §506 and 11 U.S.C. §1325." AmeriCredit filed a motion for relief from the automatic stay so that it could sell the Impala, but it also filed an objection to confirmation of the plan on the ground that the Tompkinses could not surrender the vehicle as full satisfaction of the claim.
Upon obtaining relief from the automatic stay, AmeriCredit sold the vehicle and, after receiving less than the full $21,729.92 it claimed, it filed an amended claim as a general unsecured creditor for the deficiency: $15,373.92. The debtors objected. On August 13, 2008, the bankruptcy court sustained the objection, expunged the unsecured claim, and overruled AmeriCredit's objection to the plan confirmation, relying on its reasoning in an earlier case, In re Pinti, 363 B.R. 369 (Bankr. S.D.N.Y. 2007), to find that the Bankruptcy Code prevented AmeriCredit from maintaining its unsecured claim. The amended plan was confirmed on August 21. AmeriCredit appealed to the district court, which then certified a direct appeal to this Court. The debtors converted their case from Chapter 13 to Chapter 7 on May 6, 2009, during the pendency of this appeal.
As an initial matter, we examine our subject matter jurisdiction over this appeal; if we conclude that a case is moot, we lack jurisdiction to hear it. Dean v. Blumenthal, 577 F.3d 60, 64 (2d Cir. 2009). "A case is moot . . . when 'the parties lack a legally cognizable interest in the outcome.'" Fox v. Bd. of Trustees, 42 F.3d 135, 140 (2d Cir. 1994) (quoting County of L.A. v. Davis, 440 U.S. 625, 631 (1979)). In a bankruptcy case, mootness may be based as well on "jurisdictional and equitable considerations stemming from the impracticability of fashioning fair and effective judicial relief." In re Sasso, 409 B.R. 251, 254 (B.A.P. 1st Cir. 2009). The conversion of a petition from one chapter to another generally moots an appeal taken from an order in the original chapter. Id.
To the extent that AmeriCredit appeals the portion of the bankruptcy court's order overruling its objection to the confirmation of the Chapter 13 plan, this appeal is moot, as the conversion of the case to Chapter 7 renders the plan irrelevant and this Court unable to provide effective relief in that respect. We agree with the parties, however, that in the case at hand part of the appeal of the bankruptcy court's order is not moot, despite the conversion of the petition from Chapter 13 to Chapter 7. Whether an unsecured claim is allowed is a determination that, unlike many orders entered with respect to a Chapter 13 petition, has an impact on the distribution of assets in a Chapter 7 proceeding. We may therefore still grant AmeriCredit effective relief because, if its claim is allowed, it may take part in any future Chapter 7 distribution. Cf. In re Howard's Express, Inc., 151 F. App'x 46, 48-49 (2d Cir. 2005) (summary order). Although the Tompkinses have received a Chapter 7 discharge during the pendency of the litigation, the case is not yet closed. See In re Boodrow, 126 F.3d 43, 47 (2d Cir. 1997) (finding that the entry of a discharge did not alone moot an appeal); see also In re Sherman, 491 F.3d 948, 968 (9th Cir. 2007) (same). Any assets that may yet come into the estate can, therefore, still be distributed to the creditors. Given that at this time there has been no distribution of assets to other creditors - nor, indeed, have any assets been found to distribute - the equitable concerns that often make fashioning relief impracticable in bankruptcy cases are lacking here.
We therefore turn to the substantive merits of the case, addressing the import of a "notorious" provision of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"), Pub. L. No. 109-8, 119 Stat. 23, the so-called "hanging paragraph," which follows subparagraph (9) of 11 U.S.C. § 1325(a). In re Peaslee, 547 F.3d 177, 184 (2d Cir. 2008). AmeriCredit argues that contrary to the bankruptcy court's conclusion, the hanging paragraph did not bar its unsecured deficiency claim in the Chapter 13 bankruptcy proceeding, so that this claim should have been allowed and AmeriCredit should be able to take part in any future Chapter 7 distribution. ...