It is not uncommon for someone to call our office after a car was repossessed and ask if filing a bankruptcy case can be a mechanism to get the vehicle back. The answer to that question is always fact specific, so give us a call to discuss your situation if it happens to you. In the Eastern District of North Carolina, the bankruptcy courts have tended to follow an interpretation of the law that requires the return of a vehicle to the debtor upon the filing of a Chapter 13 bankruptcy case.
This is because the filing of a bankruptcy case creates an estate of “all legal or equitable interests of the debtor in property as of the commencement of the case,” 11 U.S.C. § 541(a)(1), including property that is being held by someone else, id. § 541(a). Further, section 542(a) of the Bankruptcy Code provides that during bankruptcy proceedings, an entity “in possession, custody, or control” of certain property in the estate “shall deliver” that property to the trustee, or in this case, the Chapter 13 debtor acting with the rights and powers of a trustee. So, if someone’s vehicle is repossessed and the vehicle is necessary to keep, filing a Chapter 13 bankruptcy case might be a very effective way of retrieving the vehicle and curing the default on the loan payments over the course of time with Chapter 13 plan payments.
Attached to this Blog entry is a copy of a redacted Order entered by a Bankruptcy court in Raleigh, North Carolina, not too long ago that explains some of the law in this area. As you can read in this Order, the attorney for the debtor won an award of fees in additional to retrieving the vehicle because initially the car company that repossessed the car willfully refused to turn over the vehicle after the Chapter 13 case was filed.