What Are Courts Doing With 'Negative Equity'?

Law360, New York (October 13, 2009, 11:10 AM EDT) -- "Negative equity" is the excess of the amount owed on a trade-in item over the market value of the item. If the item is traded-in, the seller of the new, replacement item, will usually pay the entire balance owed on the trade-in item, including the "negative equity."

If the buyer later goes into bankruptcy, should this "negative equity" be counted as part of the seller's purchase money security interest or should it be considered an unsecured claim?

Initially, it appeared courts were coming down on the...
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