Repossession of collateral (mostly a vehicle) by secured creditors can possibly be taken back through the bankruptcy filing. It is important for the debtor to file a petition for bankruptcy along with a motion for the return of the repossessed property against the creditor, as soon as possible. The creditor, repossessing the property, should be informed about the filing and the motion, immediately after they are filed. It is extremely necessary to give the notice to the creditor, as there are strong chances that the creditor might have intentions to sell the repossessed property. Thus, time plays a vital role here.
Once the court grants the motion, an order is issued for the turnover and the creditor is obliged to return the property either to the bankruptcy trustee of the debtor or to the debtor itself. However, the debtor may also be required to make some additional fees to the creditor to keep the property. An example of such a case is of Hundley, which was a case of vehicle repossession. In it, the vehicle was returned to the debtor. In addition, the court had asked the debtor to pay the fees for repossession and storage, along with making the car loan payments on time, as a part of the Chapter 13 repayment plan.
It will be better to consult an experienced bankruptcy lawyer, like the Recovery Law Group, before filing the bankruptcy petition and the motion. You can either visit Recovery Law Group or call 888-297-6203.
Getting the Property Returned
As per the turnover order under Bankruptcy Code 11 U.S.C. § 542, the creditor is supposed to hand over the repossessed property to the bankruptcy trustee. The ‘property of the estate’ is broadly defined in § 541 of the Bankruptcy Code. According to the Supreme Court and smaller federal courts, properties repossessed by the creditor, before the debtor filed for a bankruptcy petition, are all included in the ‘property of the estate’, provided the debtor had some legal interest in the property in question, at the time of filing.
A creditor can’t sell away the property immediately after the repossession, as the debtor is mostly entitled to a right of redemption, especially in Texas. There, it is necessary for the creditor to inform the debtor prior to selling the repossessed property, and the debtor must acknowledge it with an objection, within 20 days of receiving the notification.