Wednesday, January 15, 2020

What Happens To Repossessed Property Upon Filing Bankruptcy

So, you had some personal property repossessed.  Now what.  Can you get it back?  If so, what do you have to do?  When do you have to do it?  Do you need an attorney?

Well, the answer is, like in so many cases, "It Depends."  I know that response may sound outdated, but in the bankruptcy world, it is anything but outdated.

How does this work with bankruptcy?

When one files bankruptcy, there is something that automatically comes into play without the need for a court order, referred to as an "automatic stay".  It stays creditors from initiating collection efforts or proceeding with collection efforts.  Some appellant courts have interpreted this as meaning repossessed property had to be returned to the debtor (with some exceptions) automatically, or the creditor could face sanctions for violating the automatic stay.  This is the holding in the Second, Seventh, Eighth, Ninth and Eleventh Circuits.

To the contrary, the Tenth Circuit and the District of Columbia have interpreted the code provision as meaning the property may have to be returned, or face sanctions, only after a court order has been entered.

So, which of the courts are correct?

Hopefully we will soon find out.  This is a question that is before the Supreme Court of the United States, for which has been granted a Writ of Certiorari in December of last year, in City of Chicago, Illinois vs. Fulton (19-357).

This issue has been extensively written about for over a decade.  If you have property that has been seized by a creditor, I highly recommend you seek the advice of a competent bankruptcy attorney in your area for advise ASAP, as your rights may be negatively effected with the passage of time.