West Case Update

Repossessed Cars Not Part of Bankruptcy Estate

Description Appeals court held that creditors of motor vehicles who repossess the vehicles upon payment default are the owners of the vehicles, so long as the repossession takes place before bankruptcy is filed. The vehicles do not become a part of the bankruptcy estate.

Topic Bankruptcy

Key Words Secured Creditors; Repossession; Automobiles

C A S E S U M M A R Y

Facts In two separate cases, automobiles bought on credit were repossessed by the finance companies when the purchasers failed to make payments. Immediately after the cars were repossessed, the debtors filed for bankruptcy and the bankruptcy courts ordered the return of the cars to await the court's determination of what would be done with those assets of the debtors. Creditors who had repossessed the cars appealed and the district court held that the repossession of the vehicles was proper. Both cases were appealed.

Decision
Affirmed. The ownership of motor vehicles securing the creditors' claims passed from the bankruptcy debtors to the creditors once the cars were repossessed because of the payment defaults. Hence, the debtors had no ownership interest in the vehicles. Consequently, they were no longer a part of the bankruptcy estate.

Citation In re Kalter, 292 F.3d 1350 (11th Cir., 2002)

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Repossessed Cars Not Part of Bankruptcy Estate
Description	Appeals court held that creditors of motor vehicles who repossess the vehicles upon payment default are the owners of the vehicles, so long as the repossession takes place before bankruptcy is filed. The vehicles do not become a part of the bankruptcy estate.
Topic	Bankruptcy
Key Words	Secured Creditors; Repossession; Automobiles
C A S E S U M M A R Y
Facts	In two separate cases, automobiles bought on credit were repossessed by the finance companies when the purchasers failed to make payments. Immediately after the cars were repossessed, the debtors filed for bankruptcy and the bankruptcy courts ordered the return of the cars to await the court's determination of what would be done with those assets of the debtors. Creditors who had repossessed the cars appealed and the district court held that the repossession of the vehicles was proper. Both cases were appealed.
Decision	Affirmed. The ownership of motor vehicles securing the creditors' claims passed from the bankruptcy debtors to the creditors once the cars were repossessed because of the payment defaults. Hence, the debtors had no ownership interest in the vehicles. Consequently, they were no longer a part of the bankruptcy estate.
Citation	In re Kalter, 292 F.3d 1350 (11th Cir., 2002)