Secured Creditor Duties Ripe For High Court Consideration

The circuit courts continue to wrestle over the duties imposed by the Bankruptcy Code’s automatic stay on creditors concerning turnover of a debtor’s impounded vehicle. Is a creditor required to automatically turn over the vehicle as soon as the bankruptcy petition is filed, or can it retain possession while awaiting an order of the bankruptcy court adjudicating turnover in an adversary proceeding?

Five circuits, including the U.S. Court of Appeals for the Seventh Circuit in City of Chicago v. Robbin L. Fulton, have held that the automatic stay requires a creditor to immediately release an impounded vehicle when the owner files for bankruptcy. On the other side of the split, the U.S. Court of Appeals for the Tenth and D.C. Circuits have rejected this argument. They have now been joined by the U.S. Court of Appeals for the Third Circuit in In re Denby-Petersen.

The original article, "Secured Creditor Duties Ripe For High Court Consideration," first appeared in Law360 on November 21, 2019.