When lessee files for a Chapter 13 bankruptcy, he/she is provided with certain broad protections by the law. 11 U.S Code has stated that when Chapter 13 petition is filed, it operates as a stay that is usually applicable to all entities or on any act of the lessor to gain back the possession of a property of the estate or ‘exercise control’ over the property of the estate.
Usually, courts have held that when a lessor tries to take back control over a property on the eve of a lessee filing for bankruptcy, this is part of the ‘exercising control’ portion mentioned in 11 U.S Code.
Recent Case
Recently, this notion was reaffirmed when the court was dealing with a case where the City of Chicago had taken over some vehicles’ possession over non-payment of fines. After considering the facts, the court ruled that the City had to return the impounded vehicles if it is informed about Chapter 13 filings to comply with the ‘automatic stay’ provision of 11 U.S Code.
Different Opinions
Other courts have taken a differing stand and ruled that the taking over of property immediately before the bankruptcy filing does not violate the ‘automatic stay’ provision of 11 U.S Code.
If you are concerned about a property that may be repossessed, contact a Houston bankruptcy attorney to determine how you can keep your assets and get out from under financial stress