When secured creditors repossess collateral, often a vehicle, it is possible to have it returned by filing for bankruptcy. The debtor must immediately file a bankruptcy petition and motion for turnover against the creditor that repossessed the property. The entity in possession of the property should be notified of the bankruptcy filing and motion as soon as they are filed. Notice is especially important because often the possessor intends to sell the property, and time is of the essence.
If the Motion for turnover is granted, the court will issue an Order for Turnover, and the entity in possession of the property is required to turn it over to the debtor’s bankruptcy trustee or the debtor. There may be ancillary fees that the debtor is responsible for. The court may also require the debtor in bankruptcy to make adequate payments to the creditor in order to keep the property.
For example, in In re Hundley, a vehicle repossession case, the court ordered the vehicle be returned to the debtors. In addition to making timely car loan payments as part of their Chapter 13 plan, they were responsible for paying the repossession and storage fees.
Getting your property back
An Order for Turnover under Bankruptcy Code 11 U.S.C. § 542 requires the entity in possession of the property to turn it over to trustee. Section 541 of the Code defines “property of the estate” broadly. The Supreme Court and lower federal courts have ruled that property of the estate includes any property that was repossessed by a creditor prior to the filing of the debtor’s bankruptcy petition, as long as the debtor had some legal or equitable interest in that property at the time of filing.
Debtors often have a right of redemption after repossession, so a creditor may not be able to sell the property immediately. This is especially true in Texas, where a creditor must notify a debtor before selling repossessed collateral, and a debtor has up to 20 days to respond with an objection.
Contact an experienced bankruptcy attorney in Texas today
If your vehicle or other property has been repossessed, you need help getting it back. Speak with a knowledgeable Texas bankruptcy lawyer at Marcos D. Oliva, P.C. today.