(CN) – The 7th Circuit ordered General Motors’ financing arm to return a repossessed car to the buyer’s estate after he filed for Chapter 13 bankruptcy.
When plaintiff Theodore A. Thompson fell behind on his payments, General Motors Acceptance Corporation (GMAC) repossessed his vehicle. But Thompson then filed for Chapter 13 bankruptcy, raising the question of whether the creditor had to return the car to the bankruptcy estate.
Doubting Thompson’s ability to pay, GMAC refused to return the car. Thompson sued, claiming GMAC violated the Bankruptcy Code’s stay provisions.
The bankruptcy court denied Thompson’s motion for sanctions, saying GMAC need not return the car unless its interests were adequately protected.
Judge Williams of the federal appeals court in Chicago ruled that the clear language of the law – and Supreme Court precedent – were on Thompson’s side.
“[A] creditor must first return an asset in which the debtor has an interest to his bankruptcy estate and then, if necessary, seek adequate protection of its interests in the bankruptcy court,” Williams wrote.
The court remanded to determine if GMAC willfully violated the automatic stay, in which case the bankruptcy court could award sanctions.