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Automatic Stay Lifted on ALL of Creditor’s Secured Property
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Bankruptcy Automatic Stay Terminates on ALL of Creditor’s Secured Personal Property, Regardless of Whether Identified On Debtor’s Schedules, Where Debtor Fails to Timely File a Statement of Intention Regarding the Property and Trustee Fails to Object to Creditor’s Stay Relief Motions

The U.S. Court of Appeals for the Ninth Circuit affirmed a bankruptcy court’s decision to grant relief from stay to a creditor where certain factors aligned in the creditor’s favor.

On June 21, 2012, the court adopted the bankruptcy appellate panel’s decision.  The panel held that the lower bankruptcy court correctly granted Western Capital Partners, LLC’s (Western Capital’s) motion for relief from stay, effectively allowing Western Capital to repossess personal property belonging to the debtor that was not specifically identified in the Debtor’s schedules as securing the debt.

The question before the court was whether § 362(h) terminates the automatic stay on all personal property of the estate pledged to secure a scheduled debt or only terminates the stay on personal property specifically identified in a debtor’s schedules as securing the debt.

Two important underlying facts in In re: Blixseth[1] are that Blixseth failed to file and comply with a statement of intention as required by 11 U.S.C. § 521(a)(2)(A),[2] and the Trustee failed to object to Western Capital’s stay relief motions “indicating to [the] Court that the bankruptcy estate has determined that Debtor’s personal property is of inconsequential value to the bankruptcy estate.”

A failure to file a statement of intention under § 521(a)(2)(A) can result in termination of the stay under § 362(h).  Section 362(h) states the stay shall be terminated if an individual debtor fails to file and comply with a statement of intention, and if the trustee fails to file a motion to determine value of the property or otherwise object to a creditor’s stay relief motions under 362(h).

The court concluded that the plain language of § 362(h) and § 521(a)(2) does not lead to an absurd result. Under the unambiguous language of 362 (h), all personal property secured by a scheduled debt is released from the automatic stay if a debtor fails to timely file and comply with her statement of intention.

Now is the time to prepare to protect your rights as a creditor by developing a relationship with an experienced business litigation and transactional law firm before adversity arises. 

Glass & Goldberg provides high quality and cost-effective legal services and advice for clients in all aspects of business litigation and transactional law.  Call us at (818) 888-2220, email us at info@glassgoldberg.com, or visit us on the web at www.glassgoldberg.com to learn more about the firm and sign up for future newsletters.

[1] In re: Edra D. Blixseth, No. 11–60042, BAP No. 10–1334 (9th Cir. 2012).

[2] This section requires that a debtor file a statement of intention indicating whether she will surrender or retain personal property pledged to secure a debt within 30 days after filing a petition under chapter 7 or on or before the date of the § 341 meeting of creditors, whichever is earlier, or within such additional time as the court, for cause, fixes.  Additionally, if as in this case, the debtor’s case was converted to chapter 7, the statement of intention must be filed within 30 days after entry of the conversion order, or before the first date set for the meeting of creditors, whichever is earlier, or within an extended time if sought and granted. Rule 1019(1)(B).

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