CREDIT UNION LENDER MUST IMMEDIATELY RETURN TO DEBTOR REPOSSESSED VEHICLE UPON NOTICE OF BANKRUPTCY FILING
Media Contact: Michael L. Moskowitz 212.684.7800 | Richard E. Weltman 212.684.7800 or 201.794.7500
E-mail: mlm@weltmosk.com or
rew@weltmosk.com
For Immediate Release
NEW YORK, NY – On December 22, 2010, an upstate New York bankruptcy court in an adversary proceeding filed by debtor Christopher Weber against SEFCU (“Credit Union”), granted Credit Union’s motion for summary judgment. The court denied debtor’s claim to damages and/or sanctions due to Credit Union’s failure to immediately upon the filing of the chapter 13 petition return to him his vehicle which Credit Union had repossessed pre-petition. On March 23, 2012, Northern District of New York Judge Glenn T. Suddaby reversed the bankruptcy court’s Order granting Credit Union summary judgment and remanded the case back to the bankruptcy court for further review. A brief recitation of the facts follows.
Credit Union repossessed debtor’s vehicle on January 10, 2010. It mailed two right-to-redeem letters. Four days later debtor sought Chapter 13 bankruptcy protection. On the filing date, debtor sought the return of his vehicle pursuant to 11 U.S.C. §362. On January 22, 2012, after Credit Union failed to return debtor’s vehicle, debtor commenced an adversary proceeding. Credit Union still refused to return the vehicle until after a hearing held by the bankruptcy court on March 5, 2010. Discussing the Supreme Court’s 1983 decision in United States v. Whiting Pools – and disagreeing with a local bankruptcy decision – District Judge Suddaby ruled that a creditor who takes lawful possession of debtor’s property before a bankruptcy petition, must return the propertyimmediately upon learning of the bankruptcy, as long as debtor retains an interest in the property, and any provision of the Bankruptcy Code makes the property available to the reorganization estate.
In view of this ruling, we urge our bank and credit union clients to contact Weltman & Moskowitz to discuss best practices to follow regarding the return of a repossessed vehicle to a customer or member who files for bankruptcy protection.
Richard E. Weltman and Michael L. Moskowitz are members of Weltman & Moskowitz, LLP, a business – oriented law firm having offices in New York and New Jersey. The firm handles cases involving bankruptcy and creditor’s rights, business litigation, technology law, real estate, dispute resolution and many types of buy-sell agreements, partner disputes, and transactional matters. They can be reached at 212.684.7800 or 201.794.7500 or by e-mail at mlm@weltmosk.com orrew@weltmosk.com.
