Supreme Court Rules against Texas Couple in Bankruptcy Case

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WASHINGTON (AP) -- The Supreme Court has refused to give a financial break to people who file for bankruptcy protection and are allowed to keep property over creditors' objections.

Such people still must pay for property they are allowed to keep, including cars or homes bought on credit. Ruling 8-1 Monday in a Texas case, the court said people must pay the amount it would cost to buy a replacement car or house.

A Texas couple wanted to pay a lower amount based on what their truck would have brought if it were foreclosed and sold. However, bankers and automakers' groups had urged the justices to rule against the Texas couple and require people to pay the higher cost. In a separate business-related decision Monday, the court said a 1986 law that made it easier for private citizens to sue federal contractors for allegedly defrauding the government cannot be applied to cases that happened earlier. The unanimous ruling said lower courts should have dismissed a $50 million lawsuit against Hughes Aircraft Co. A former employee claimed that Hughes improperly tried to charge the government for a radar system it was developing for Air Force planes. In the bankruptcy-protection case, Justice Ruth Bader Ginsburg wrote for the court that when someone surrenders property to a creditor, the creditor can sell it immediately and use the proceeds. But when someone is allowed to keep property over a creditor's objections, the creditor gets "neither the property nor its value and is exposed to double risks: the debtor may again default and the property may deteriorate from extended use," she said. The debtor still gets to use the property, Ginsburg noted. Therefore, she said, the property should be valued at the generally higher cost of buying a replacement. Elray Rash bought a heavy truck in 1989 for his freight-hauling business in Lufkin, Texas. …