## Facts

- Thomas Howard Bell and Margaret Louise Bell filed a Chapter 7 bankruptcy petition in 1980.
- Before filing, they bought a 1978 Chevrolet van financed through General Motors Acceptance Corporation (GMAC) under a purchase-money security agreement payable in equal monthly installments.
- At filing, the Bells were current on their payments and not otherwise in default, and the van’s fair market value exceeded the remaining loan balance by about $1,000.
- The van became property of the estate; the Bells claimed an exemption in their equity, and the trustee abandoned the estate’s interest.
- GMAC filed a complaint to reclaim the van.
- The Bells counterclaimed, seeking to keep the van by “redeeming” it under 11 U.S.C. § 722 through continued monthly payments rather than a lump-sum payment.
- The bankruptcy court allowed redemption by installments; the district court reversed, holding § 722 requires payment in full at redemption.

## Issues

1. Whether 11 U.S.C. § 722 permits a Chapter 7 debtor to redeem collateral through installment payments over time rather than by a single lump-sum payment of the allowed secured claim.
2. Whether a bankruptcy court may use equitable authority to authorize “installment redemption” that functions like continued post-discharge payments.

## Decision

- The Sixth Circuit affirmed the district court.
- Section 722 redemption requires a contemporaneous lump-sum payment of the amount of the creditor’s allowed secured claim.
- Bankruptcy courts lack authority to create an “installment redemption” remedy under § 722.
- Debtors who want to retain collateral through ongoing payments must proceed, if at all, through reaffirmation under § 524(c), not through installment redemption.

## Legal Principles

- Redemption under 11 U.S.C. § 722 is accomplished “by paying” the lienholder the amount of the allowed secured claim, which the court construed as requiring present, lump-sum payment.
- Allowing installment “redemption” would effectively replicate reaffirmation while bypassing § 524(c)’s statutory safeguards for post-discharge repayment agreements.
- Bankruptcy courts’ equitable powers cannot be used to create remedies that conflict with the Bankruptcy Code’s statutory structure, including the separation between § 722 redemption and § 524(c) reaffirmation.

## Conclusion

The Sixth Circuit held that a Chapter 7 debtor cannot redeem personal property collateral under § 722 by continuing installment payments; redemption requires a lump-sum payment, and any continued payment arrangement must comply with § 524(c)’s reaffirmation requirements.


In re Bell, 700 F.2d 1053 (6th Cir. 1983)