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United States Court of Appeals,
Fifth Circuit.
No. 95-31124.
In the Matter of William T. JOHNSON, Jr.; Marilyn A. Johnson,
Debtors,
William T. JOHNSON, Jr.; Marilyn A. Johnson, Appellants,
v.
SUN FINANCE COMPANY, Appellee.
July 26, 1996.
Appeal from the United States District Court for the Eastern
District of Louisiana.
Before POLITZ, Chief Judge, and JOLLY and BARKSDALE, Circuit
Judges.
PER CURIAM:
On appeal is the district court's upholding of the ruling by
the bankruptcy court that the debtors William T. Johnson, Jr., and
Marilyn A. Johnson must, under 11 U.S.C. § 521, state their
intention with respect to a certain camcorder, a secured consumer
good, to either surrender the property or retain it and, if the
latter is chosen, to advise whether they: (1) claim that the
property is exempt, (2) will redeem the collateral, or (3) will
reaffirm the debt. On the facts as found and the reasons assigned
by the bankruptcy court in its Reasons for Order dated May 3, 1995,
a copy of which is attached hereto, adopted by the district court
and now approved and adopted by us and made the opinion of this
court, we AFFIRM.
APPENDIX
UNITED STATES BANKRUPTCY COURT
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FOR THE EASTERN DISTRICT OF LOUISIANA
In the Matter of William T. Johnson, Jr., Marilyn A. Johnson,
Debtors.
Bankruptcy No. 94-12904-JAB
CHAPTER 7
REASONS FOR ORDER
This matter came before the court on January 4, 1995 as a
hearing on the motion of Sun Finance Company ("Sun") to dismiss or
alternatively motion to compel. (Pl.11). The alternative part of
the motion is granted for the reasons stated below.
BACKGROUND
William and Marilyn Johnson ("debtors") purchased a Sony
camcorder from Campo Westbank on December 12, 1993, signed a
promissory note for the purchase price of $760.57 and gave Sun
(Campo's assignee) a security interest in the camcorder. (Pl. 18,
Debtor's Post-Trial Memorandum, Ex. FN-2).
On August 29, 1994, the debtors filed for protection under
Chapter 7 of the Bankruptcy Code. The parties dispute whether the
debtors stated their intentions with respect to the camcorder at
the Section 341 creditors meeting. It is undisputed, however, that
the debtors did not file a statement of intention with respect to
consumer debts in accordance with 11 U.S.C. § 521(2) until November
2, 1994. On November 2, 1994, the debtors filed Official Form No.
8, Chapter 7 Individual Debtor's Statement of Intention ("statement
of intention"), and selected none of the alternatives listed on the
form. (Pl.8). Instead, they indicated "N/A" next to the three
alternatives listed: (1) reaffirmation pursuant to § 524(c), (2)
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redemption pursuant to § 722, and (3) avoidance pursuant to §
522(f). Id. The debtors did not give any indication on the form
as to their intentions with respect to the camcorder, and the
debtors have not otherwise informed Sun of their intentions as to
the camcorder.
The affidavit of Adam B. Marcus, account representative with
Sun, states:
The balance on the [debtors'] account was $541.31 as of
December 29, 1994, and the account is in default due to the
failure of the debtors to pay the monthly installment of
$55.68 due September, 1994, or any installments thereafter.
(Pl.21, Ex. A). The debtors have not controverted the allegations
of this affidavit.
ANALYSIS
Sun argues that 11 U.S.C. § 521(2) requires the debtors to
elect one of the three options set forth in the statute and on the
statement of intention. The debtors argue that the three options
set forth in Section 521(2) are not exclusive, and that the debtors
are entitled to retain the camcorder until any of the following
occurs: (1) a request for turnover from the trustee; (2) seizure
of the property pursuant to state court process; or (3) rescission
of the contract of sale by Sun for non-payment of the purchase
price under Article 2013 and 2018 of the Louisiana Civil Code.
Section 521 describes the debtor's duties in a bankruptcy
case. Subsection (2) provides:
(2) if an individual debtor's schedule of assets and
liabilities includes consumer debts which are secured by
property of the estate--
(A) within thirty days after the date of the filing
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of a petition under chapter 7 of this title or on or
before the date of the meeting of creditors, whichever is
earlier, or within such additional time as the court, for
cause, within such period fixes, the debtor shall file
with the clerk a statement of his intention with respect
to the retention or surrender of such property and, if
applicable, specifying that such property is claimed as
exempt, that the debtor intends to redeem such property,
or that the debtor intends to reaffirm debts secured by
such property;
(B) within forty-five days after the filing of a
notice of intent under this section, or within such
additional time as the court, for cause, within such
forty-five day period fixes, the debtor shall perform his
intention with respect to such property, as specified by
subparagraph (A) of this paragraph; and
(C) nothing in subparagraphs (A) and (B) of this
paragraph shall alter the debtor's or the trustee's
rights with regard to such property under this title.
11 U.S.C. § 521(2).
Whether a debtor is limited to the three options of
reaffirmation, redemption or surrender of the property, and the
meaning of Section 521(2) has been hotly contested in recent
jurisprudence.
The Seventh and Eleventh Circuits hold that debtors must
choose to reaffirm the debt, redeem the property, or surrender the
collateral, and nothing else. Taylor v. AGE Federal Credit Union
(In re Taylor), 3 F.3d 1512 (11th Cir.1993); In re Edwards, 901
F.2d 1383 (7th Cir.1990). These circuits find that the statute is
unambiguous, and that the options in the statue are exclusive.
The Fourth and Tenth Circuits hold otherwise. The Fourth
Circuit has determined that the three options set forth in Section
521(2) do not prevent the further alternative of retaining the
property and remaining current on the debt. In re Belanger, 962
4

F.2d 345 (4th Cir.1992). The Tenth Circuit has determined in the
case of Lowry Federal Credit Union v. West, 882 F.2d 1543, 1546
(10th Cir.1989), that Section 521(2) prescribes only three options,
but that under the facts of the case in which neither the debtor
nor the creditor would be prejudiced, the bankruptcy court could
allow retention of the property "conditioned upon performance of
the duties of the security agreement as a condition of retention".
The Fifth Circuit has not addressed the issue.
The district and bankruptcy courts are similarly divided.
See, e.g., In re Gerling, 175 B.R. 295 nn. 1 & 2
(Bankr.W.D.Mo.1994) (holding that the debtor had to choose between
the three options, and discussing the recent decisions).
Another option discussed in the decisions is whether the
debtor may retain the property without either reaffirming or
redeeming, and stay current on the payments owed. The decisions
all involve cases where the debtor is not in default for failure to
keep the payments current.
The debtors in the case at bar have not kept current on the
payments, but nevertheless argue that they may keep the property
until the trustee requests turnover, the property is seized
pursuant to state court process, or Sun rescinds the contract.
The court disagrees with the debtors' position. The clear
language of Section 521(2) states that "the debtor shall file with
the clerk a statement of his intention". Filing a statement of
intention indicating that none of the three statutory alternatives
are applicable, and failing otherwise to inform Sun of their
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intention is not in compliance with Section 521(2). This court
adopts the reasoning of the Eleventh Circuit in Taylor, and holds
that the debtors are limited to the three options set forth in the
statute.
If the payments are in default, as the Sun affidavit shows,
Sun can always move to lift the stay in order to foreclose. Sun's
motion to dismiss the case is, however, too harsh a remedy and is
denied. Sun's alternative motion to compel will be granted. Sun's
request for reasonable attorney's fees and costs will be denied at
this time. If the debtors do not notify Sun within 10 days of
entry of this order of their intention to reaffirm the debt, redeem
or surrender the camcorder, the court can then either dismiss this
case under Section 105 or deny the debtors their discharge under
Section 727(a)(6). The court can also reconsider granting the
attorney's fees that are denied at this time.
An order will be entered in accordance with these reasons.
New Orleans, Louisiana, this 3rd day of May, 1995.
/s/ Jerry A. Brown
JERRY A. BROWN
United States Bankruptcy Judge

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