IN RE VAUGHN Case No. 03-CV-70906-DT. (E.D. Mich. Jan 06, 2006)

Jan 06, 2006

OUTCOME: The Court finds that Vaughn's interest in the vehicle did not terminate upon repossession. and that the bankruptcy judge's conclusion that return of the vehicle for inclusion in the bankruptcy estate was not in error.

Debtor Gordon Vaughn filed a Chapter 13 petition in the United States Bankruptcy Court for the Eastern District of Michigan on October 25, 2002. Tidewater held a perfected security interest in a contra ... ct for the sale of a vehicle originally financed by the Debtor through a car dealer on June 27, 2002. The contract was assigned to Tidewater. The contract was for $14,503.00, payable in monthly installments of $400.14 for sixty months with interest at 21.95%. There was a security interest in the vehicle as collateral for the unpaid purchase price and costs. Debtor Vaughn defaulted on payments due September 2, 2002 and October 2, 2002 and the vehicle was repossessed by Tidewater on October 23, 2002. Two days after repossession by Tidewater, Vaughn filed a Chapter 13 petition and demanded return of the vehicle to him. In his Chapter 13 plan dated October 24, 2002, Vaughn stated the value of the vehicle was $11,690 and proposed that he retain the vehicle and that Tidewater receive the amount of $11,690 with interest at 12% per annum over 54 months at $294.76 per month and that Tidewater's claim in excess of the $11,690 be treated as an unsecured claim. At that time the vehicle was in Tidewater's possession; it had not been disposed of by Tidewater. The amount Tidewater claimed remaining on the contract for the vehicle was $15,208. Tidewater filed a Motion to Terminate the Automatic Stay on November 5, 2003, seeking liquidation of the vehicle that it had repossessed prior to the filing date of the Chapter 13 Petition. Tidewater also filed a Motion for an Order Reserving Litigation Rights on November 5, 2003, seeking to allow the parties to litigate as though Tidewater had possession of the vehicle and avoid the risk of sanctions under 11 U.S.C. § 362(h). The Bankruptcy Court confirmed the Plan over Tidewater's objection on February 28, 2003, having denied Tidewater's Motion to Lift the Stay on February 26, 2003. The Bankruptcy Court in denying the Motion for Relief from the Automatic Stay held that, "the vehicle became the property of the bankruptcy estate upon the filing of the bankruptcy petition," citing In re Elliott, 214 B.R. 148 (6th Cir. B.A.P. 1997). (Order Denying Motion for Relief from Stay, February 26, 2003, United States Bankruptcy Court, E.D. MI.) Tidewater timely appealed.