What is the law regarding a bankruptcy filing and repossession of a vehicle?
Question Details: We are a finance vehicles company. We had a customer skip town on us and not makes payments for months. We finally tracked them down in another state and repossessed the vehicle. Then 6 days after we picked it up we got a call from an attorney stating the customer had just filed bankruptcy 6 days after the repo and we needed to return the vehicle to the customer. Are we obligated to do so or can we proceed with having it transported back to us since the repo happened before the bankruptcy filing?
My sentiment is that since the repossession happened before the bankruptcy filing of the debtor under your security agreement with him or her, you are entitled to hold possession of it until an order by the bankruptcy court stating otherwise. Your possession of the vehicle taken before the filing would not be in violation of the automatic stay provisions of 11 U.S.C. section 362.
However, do not auction off the vehicle at this time. I would contact a bankruptcy attorney and seek relief from the automatic stay to try and auction off the vehicle under your security agreement with respect to its loan per bankruptcy court approval in writing.
Since you repossessed the motor vehicle prior to bankruptcy filing, you are certainly not required to transport the vehicle back. The person still owes the debt and if he is smart he will realize that if you sell the vehicle, you can simply negotiate with him to not collect on the deficiency. Either way, file the claim once the bankruptcy is entered so that your proof of claim is with the court. If you have a bankruptcy filing notice, file your response to the attorney by writing it to the trustee, and sending it by registered or certified mail (whatever your jurisdiction requires for notice filing) to the attorney. Do not contact the debtor because it would be a violation of the Fair Debt Collection Practices Act. If the attorney works for a large firm, contact the President of the firm to discuss this matter.
