Memorandum Decision re: Request for Turnover of Vehicle Repossessed Prepetition

below are satisfied.


Albert Velasco and his father, Guadalupe Velasco, are the registered owners of a 1994 Chevrolet Silverado pickup truck, which they purchased on or about January 16, 1994. After making a down payment, they financed the balance through General Motors Acceptance Corporation ("GMAC"). During the original 48 month financing term, their payments were late more than 31 days five times and more than 61 days twice. In addition, GMAC allowed them to suspend two monthly payments and to extend the maturity date of the contract twice. When the 48 months had elapsed, GMAC refinanced the $10,366.85 balloon payment as it was required to do under its Smart Buy Contract. The refinancing was accomplished only after numerous attempts by GMAC representatives to locate the truck, Albert Velasco and Guadalupe Velasco. The new three year loan term began on July 16, 1998.

From April 1998 until February 1999, Albert Velasco was his mother's primary caretaker and he lived with her in Mexico. The truck was with him in Mexico from October 1998 until his return to the United States. He did not make any payments on the three year loan during this time. Meanwhile, Guadalupe Velasco filed a voluntary petition under Chapter 7 of the Bankruptcy Code on October 5, 1998. GMAC received relief from the stay as to the truck on November 13, 1998. When Albert Velasco returned to California with the truck in February, GMAC repossessed it.

GMAC sent Albert Velasco a notice of intent to dispose of vehicle on February 22, 1999. The notice advised him of his right to redeem and that he had lost his right to reinstate the contract because the truck had been taken out of state.

Albert Velasco filed his Chapter 13 petition on March 11, 1999.


On March 26, 1999, Albert Velasco filed the instant complaint to compel turnover of the car as estate property. He contends that GMAC's possession was wrongful after March 15, 1999, when he provided proof of insurance and demanded the truck's return. Albert Velasco is starting a new job and needs the truck to travel to work.

Albert Velasco timely made his first plan payment to the Trustee on April 12, 1999. He has secured full coverage insurance for the truck from Viking Insurance and listed GMAC as the lienholder. He is willing to stipulate to an adequate protection order which would include such items as keeping GMAC advised of the truck's location and maintaining full-coverage insurance. He proposes to treat GMAC's claim as fully secured in his plan, including storage charges and attorney fees.

GMAC has provided the Court with a vehicle condition report indicating that repairs to the truck will cost $2,152.50. Additionally, according to a DMV report obtained by GMAC, Albert Velasco's driver's license has been suspended four times since October 1992, including once for driving without proper insurance. His driver's license is only valid if he is insured. GMAC contends that the only acceptable form of adequate protection is for Albert Velasco to redeem the vehicle in full at once or allow GMAC to retain and sell it.


The question presented is whether, when a motor vehicle is seized prepetition but the debtor's right to redeem under state law has not yet expired and a sale has not yet been held, the vehicle becomes property of the bankruptcy estate at the time of filing. If it does, then continued retention by the secured creditor violates the automatic stay and the debtor is entitled to turnover of the vehicle. If not, the secured creditor may retain the vehicle without violating the stay unless the debtor redeems the vehicle in full. Albert Velasco has filed an adversary proceeding seeking turnover of the truck. The matter is therefore properly before the Court.GMAC cites In re Fitch, 217 B.R. 286 (Bankr. S.D. Cal. 1998), for the proposition that because the car was seized prepetition, Albert Velasco lost his right to possession and has only the right to redeem. According to Fitch, the right to redeem is property of the estate, but the right to possess the car remains with the secured creditor and does not become property of the estate. Id. at 291 ("Since the Debtor did not have the unfettered right to possession at the time the petition was filed the unfettered right to possession did not become property of the estate."). Therefore, a secured creditor does "not violate the automatic stay by retaining the car pending adequate protection." Id. at 290.

Although Fitch was the first published California case to address this issue, it stands almost alone among bankruptcy courts in other states. "[T]he vast majority of courts have concurred that where repossession of a vehicle has occurred prepetition, but the vehicle has not yet been sold, a Chapter 13 debtor retains a sufficient interest in the vehicle so that turnover may be appropriate." Spears v. Ford Motor Credit Co. (In re Spears), 223 B.R. 159, 163 (Bankr. N.D. Ill. 1998).(1) Spears and the cases it cites rely heavily on a seminal Supreme Court case, U.S. v. Whiting Pools, 462 U.S. 198, 103 S. Ct. 2309, 76 L. Ed. 2d 515 (1983).

Whiting Pools must be both the starting and ending point for a discussion of this issue, for its legal reasoning is directly on point. According to the Supreme Court, the Bankruptcy Code section dealing with property of the estate is to be broadly interpreted. 462 U.S. at 205. It is so broadly interpreted, in fact, that even property in which the debtor lacks a possessory interest may become property of the estate. Id. at 206. Therefore, secured creditors are afforded extra protections, "including the right to adequate protection, and these rights replace the protection afforded by possession." Whiting Pools, 462 U.S. at 207. Whiting Pools concluded that "the reorganization estate includes property of the debtor that has been seized by a creditor prior to the filing of a petition for reorganization." Id. at 209.

This Court finds that Whiting Pools, although decided in the context of a Chapter 11 reorganization, is directly on point. Property seized prepetition but not yet sold is still property of the estate and the right to possession of that property belongs to the estate. Because Whiting Pools is binding precedent, the Court respectfully disagrees with the Fitch court's conclusion that when a debtor lacks the right to possession at filing, that "unfettered right" may not become property of the estate.

Since GMAC will lose the protection afforded by possession, it must receive adequate protection in another form. The following adequate protection must be provided to GMAC before the truck will be turned over to Albert Velasco and must be maintained on an ongoing basis as applicable:

  1. Full insurance coverage must be paid three months in advance at all times. In the event GMAC requests proof of such prepayment and it is not made available within ten days, GMAC will be entitled to full and complete relief from the automatic stay and may repossess the vehicle.
  2. Vehicle registration must be kept current. In the event GMAC requests proof of such registration and it is not made available within ten days, GMAC will be entitled to full and complete relief from the automatic stay and may repossess the vehicle.
  3. Albert Velasco's plan must provide for GMAC's claim to be treated as fully secured in the amount of $12,325.00 plus interest at 9.49%.
  4. GMAC must receive at least $195 per month under the plan, which payment shall increase to at least $365.75 per month when Albert Velasco's attorney fees have been paid.
  5. Albert Velasco must maintain timely payments under the Chapter 13 plan.
  6. Albert Velasco must keep GMAC apprised of the location at which the vehicle is garaged at all times.
  7. Albert Velasco may not remove the vehicle from the state of California.
  8. The vehicle may only be driven by a properly licensed driver.
  9. The vehicle may not be modified or driven in a manner tending to cause damage, e.g., racing, off-road use, reckless driving.
  10. GMAC may inspect the vehicle at reasonable times on 3 days' notice.
  11. In the event Albert Velasco fails to comply with the provisions of paragraphs 5, 6, 7, 8, 9 or 10, GMAC may send a ten day written notice of breach of condition to the debtor and his counsel, and GMAC shall be entitled to immediate relief from the automatic stay without further Court order on the 11th day in the event Albert Velasco fails to cure the breach.
  12. In the event Albert Velasco defaults on any of the provisions in paragraphs 5, 6, 7, 8, 9 or 10 three times and GMAC has sent a notice of breach of condition to him and his counsel on all three occasions, on the fourth occasion of breach, GMAC shall be entitled to immediate relief from the automatic stay without further notice and without further Court order.

The adequate protection terms described herein shall survive the confirmation of a plan of reorganization but shall terminate upon dismissal or conversion of this bankruptcy case or discharge of Albert Velasco.

Good cause appearing, IT IS HEREBY ORDERED.

1 The citations listed by the Spears court in support of this statement include:National City Bank v. Elliott (In re Elliott), 214 B.R. 148, 151 (6th Cir. BAP 1997); American Honda Finance Corp. v. Littleton (In re Littleton), 220 B.R. 710, 715 (Bankr.M.D.Ga.1998); Mattheiss v. Title Loan Express (In re Mattheiss), 214 B.R. 20, 32 (Bankr.N.D.Ala.1997); Turner v. DeKalb Bank (In re Turner), 209 B.R. 558, 562 (Bankr.N.D.Ala.1997); In re Sharon, 200 B.R. 181, 187 (Bankr.S.D.Ohio 1996); In re Pluta, 200 B.R. 740, 744 (Bankr.D.Mass.1996); In re Young, 193 B.R. 620, 621 (Bankr.D.D.C.1996); Karr v. General Motors Acceptance Corp. (In re Karr), 129 B.R. 498, 502 (Bankr.S.D.Ohio 1991); Leverette v. NCNB South Carolina (In re Leverette), 118 B.R. 407, 409 (Bankr.D.S.C.1990); In re Bingham, 116 B.R. 541, 543 (Bankr.N.D.Ohio 1990); Wallace v. G.M.A.C. (In re Wallace), 102 B.R. 114, 116 (Bankr.S.D.Ohio 1989).

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