Holding onto repossessed collateral is not a violation of the automatic stay in 10th Circuit

In a newly decided case, WD Equipment v. Cowen (In re Cowen), 15-1413 (10th Cir. Feb. 27, 2017), the 10th Circuit ruled that holding onto repossessed collateral is not a violation of the automatic stay.  In the 9th Circuit, which encompasses all of California, it is.  The 10th Circuit case creates a wider split between the two interpretations, which may pressure the Supreme Court to make decision regarding this issue to resolve the controversy.

Typically, the scenario where this is relevant would occur when secured property like a car is repossessed or a home is foreclosed after the bankruptcy is filed.  Ordinarily, the car would be returned or the sale of the home reversed.  However, during the interim period, while the bankruptcy is pending, the creditor may or may not have to return the property to you depending on which circuit you are in.  This creates leverage issues, such as reaffirming debt that would otherwise be discharged for debtors who may need the property during the three or four months that a Chapter 7 bankruptcy takes.

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