In re Look, The Maine Bankruptcy Court ruled that the so-called "hanging paragraph" attached to Section 1325 of the Bankruptcy Code permitted a debtor to "cram down" the debt of a car lender when there was "negative equity" in the vehicle loan. In other words, where a car lender refinanced old debt on a trade-in car, as well as financing a new car loan, a debtor could reduce the amount paid for the new car in a Chapter 13 to the value of the car. In re Look has recently been affirmed on appeal by the Maine Federal District Court. An appeal to the First Circuit Court of Appeals is expected.
The Maine Bankruptcy Court issued a second ruling on the "hanging paragraph" in the case of In re Littlefield. In Littlefield, a commercial truck was determined to be "any other thing of value" as that phrase is used in the "hanging paragraph", and the debtors were prohibited from cramming down the truck loan to the value of the commercial truck. This decision caused the debtors to convert their case to Chapter 11, to enable them to cram down the loan to the truck value using that Chapter's more liberal cram-down provisions.
Maine is one of the first jurisdictions in the First Circuit to interpret these sections of the "hanging paragraph".