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A Creditor Must Timely Return a Vehicle It Repossessed or Be in Violation of the Bankruptcy Code's Automatic Stay

In In re Nathan B. Makowski, the 9th Circuit ruled that a creditor willfully violated the automatic stay by failing to return a debtor’s vehicle immediately following his filing for Chapter 13 relief.

A credit union in Nevada, that financed the purchase of debtor’s truck, repossessed the vehicle one week before the debtor filed for relief under Chapter 13 of the bankruptcy code. After the debtor’s attorney informed the credit union of the bankruptcy filing he demanded the truck’s return. The credit union refused and instead said it was going to request stay relief from the Court. Debtor’s attorney was forced to file a motion to compel the credit union to return the vehicle and requested sanctions be imposed against the credit union.

Debtor’s attorney contacted the credit union on a Friday and demanded its return no later than noon the following Monday. The credit union refused although after being advised by debtor’s attorney of the Motion to Compel, the credit union returned the vehicle later Monday afternoon. The 9th Circuit ruled that the time frame given by debtor’s attorney was reasonable and the credit union’s delay willfully violated the stay by retaining the vehicle past the deadline. The Court further stated that the credit union’s initial refusal to return the vehicle required the debtor to take legal action that should not have been necessary. As a result, the credit union was ordered to pay the debtor’s attorney fees and costs.

Cited Sources:

In re Makowski, Slip Copy, 2013 WL 2154788, Bkrtcy.D.Alaska,2013