Articles Posted in Automatic Stay and Bankruptcy

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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.

tn_cg4945df33c5ea50.jpg 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.

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Car Lenders don’t have to wait a certain number of months to repossess your vehicle if you are behind. They don’t have to wait at all. Making a partial payment won’t legally ensure the repossession doesn’t happen either and neither will the fact that you are struggling financially.

Having said that, most car lenders will attempt to work with you if you are late on payments. They typically don’t just take the car the first day you are late.

If you are late and do not see an easy way to catch the car up, here are some options:
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Auto finance companies can repossess your car if your are late, they don’t have to wait a certain period of time to do so. Partial payments won’t typically slow the repossession process down and pleading your case to the lender doesn’t guarantee that they will wait forever.

If you are unable to catch up the car payments and the car is repossessed, the “repo man” can’t “breach the peace” however. Generally, this means that he can’t:

1. forcibly remove you from the car 2. force you to stop 3. break into property in order to get the car 4. pretend to be a law enforcement officer 5. threaten you or assault you
If any of the above occur, it is probably wise for you to step away and call the police.

If you want to save the car you may have one of the following options:
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Every so often, I read a letter or receive a call from an attorney or creditor after the filing of a client’s bankruptcy, that attempts to explain to me the need for my client to file a motion with the local court to obtain a ruling as to whether the automatic stay applies to a collection case against the debtor.

Doing so is unnecessary. (although providing notice to the local court and other parties may be in order to ensure they are aware of the filing).

The filing of the bankruptcy petition alone invokes the bankruptcy code’s automatic stay and it applies to collection activity in and out of court. (See 11 U.S.C. Section 362 of the bankruptcy code).

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If you file for bankruptcy, all collection activity by creditors must stop with a few exceptions. The part of the law governs this is called the “automatic stay”.

So if a creditor is trying to collect from your or sue you based on a credit card, medical, breach of contract or other debt, they must stop all activity against you once you file.

They can’t file a lawsuit, continue in a lawsuit, record a lien, report the debt to the credit reporting agency or seize property without permission from the court.

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The bankruptcy automatic stay or simply the “stay” from here on out, is a Court Order that becomes effective on the date of the bankruptcy filing that protects the bankruptcy filer from most creditor activity.

The following is a brief breakdown of the benefits, exceptions and other interesting bits of information related to it.

Benefits

1. Collection contact must stop – Once the stay is in effect most lawsuits, calls, letters, etc. etc. must stop. Even from the IRS.
2. The stay doesn’t require the debtor to “ask” the Judge for it. It is automatic.
3. The stay remains in place during the length of the chapter 13 plan 4. The stay halts foreclosure activity – allowing the debtor a chance to propose a plan to catch up arrears.
5. The stay stops vehicle repossession and may be able to help get a car back that has already been repo’d.
6. Liens cannot be filed after the stay becomes effective 7. Debts cannot be reported to the credit reporting agency
8. Levy and Garnishment of assets in accounts and paychecks must stop 9. The debt component of a criminal proceeding will be placed on hold 10. Tax liens can’t be filed 11. Tax levy must stop 12. Co-Debtors are protected immediately from collection activity and may be permanently protected depending on how the debt is treated in the chapter 13 plan.

How Long the Stay Lasts

The stay will last until the court confirms the chapter 13 plan which replaces the stay as a protective order OR when the case is dismissed.
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