The Supreme Court Monday agreed to use a Missouri case to clarify the procedure for deciding which creditors in a bankruptcy case get the value of a car recently purchased on credit.
The court said it will hear arguments by a company that financed a Missouri woman's car that it, not the woman's other creditors, is entitled to the value of the car.The case involves a bankruptcy petition filed in November 1994 by Denise Renee Beasley in federal bankruptcy court in Kansas City, Mo. She had recently purchased a Ford Probe with a loan from Fidelity Financial Services.
The bankruptcy trustee sought to set aside Fidelity's priority right to collect on the car because it was recently purchased and Fidelity did not file its lien on the car within 20 days as specified by federal law. Fidelity said Missouri law gave it 30 days to file the lien.
A bankruptcy judge ruled against Fidelity. A federal judge agreed, as did the 8th U.S. Circuit Court of Appeals, which said Missouri law did not apply in determining when Fidelity filed its lien.
In the appeal granted review Tuesday, Fidelity's lawyers said the state law should decide when its lien was filed. The lawyers said a ruling in the case could affect thousands of auto-purchase transactions.
But the bankruptcy trustee said the case was one of "creditor versus creditor" and would not affect consumers. The trustee said Congress intended for such issues to be decided under federal law so that bankruptcy laws would be uniform nationwide.
The case is Fidelity Financial Services vs. Fink, 96-1370.