• Automatic Stay and the Return of Repossessed Collateral
  • April 17, 2017 | Authors: Lawrence D. Coppel; Christopher R. Rahl
  • Law Firm: Gordon Feinblatt LLC - Baltimore Office
  • Creditors know that when a debtor files for bankruptcy, there is an automatic stay of all actions against the debtor including any act exercising control over property of the estate. A Bankruptcy Court may hold the creditor in contempt and enter judgment for actual or even punitive damages if the stay is violated. In a recent decision, the United States Court of Appeals for the 10th Circuit considered the question of whether the stay is violated by a creditor that has refused to return repossessed collateral (a truck) after bankruptcy was filed. Although a majority of the circuit courts of appeal have held that the stay is violated when collateral is not returned after bankruptcy, in that the creditor is exercising control over the debtor's property, the 10th Circuit, based on a strict reading of the Bankruptcy Code's stay section, held that the stay is not violated by a creditor that passively holds onto collateral after bankruptcy is filed. The 4th Circuit, in which Maryland is located, has not ruled on this issue. While it is not known how the 4th Circuit would decide this question, the 10th Circuit's decision should strengthen a Maryland creditor's arguments concerning this issue. Please contact Lawrence Coppel with questions concerning this topic.