Bankruptcy "Stay Process" Violation?

[1richard1]

Important, if a vehicle is "voluntarily surrendered" back to the bank can the bank sell the car at auction even without obtaining approval from the BK trustee?

My understanding, regardless the bank must file a motion to obtain approval from the trustee to sell the vehicle, being it's part of the bankruptcy estate. Reason I ask, car is scheduled for auction this week however confirmed bank never even filed a motion with the court.

[justbroke]

True, they can not sell it if your case has not been discharged. Otherwise, if the case has discharged and the Trustee abandoned all assets (no asset case), then they don't have to obtain permission via a Motion for Relief from the Automatic Stay. Besides, I think only the Trustee may have recourse (a cause of action) since it would be property of the estate.

When is your discharged scheduled?

[1richard1]

BK discharge is not for 1 month, middle of July.

Today, confirmed the car is scheduled for auction this Friday, June 17. Confirmed with Wells Fargo Bank, bankruptcy department. Also called the car auction company, confirmed it has a scheduled date of auction of this Friday too. However, in speaking with my BK attorney and in looking on all the screens for Pacer, Wells Fargo never even filed any motion, Relief of Stay. My "assumption," Wells Fargo BK dept. figures since the car was voluntarily surrendered they can just sell it prior to discharge. Interested to know what recourse, or penalties Wells Fargo would incur for violation of the Stay Process.

[justbroke]

I don't believe that YOU have recourse since your statement of intentions was to surrender, and you in fact surrendered. The only "cause of action" (or recourse) would be from the Trustee. If your discharge is in 30 days (1 month), then 30 days has elapsed since your first scheduled 341 Meeting. (I'm assuming that was your first "scheduled" 341 Meeting.) As such, the lender would be able to sell the collateral 45 days after the 341 Meeting.

I think that the creditor would only be in trouble by the Trustee and only the Trustee has any rights, unless you suddenly decide to redeem or reaffirm prior to the expiration of the 45 day period.

In other words, they are treading on thin ice! I don't think that you have any personal right to seek a violation/contempt order, but the Trustee certainly does, but only if the Trustee provides adequate protection and had you surrender the vehicle to the Trustee; as clearly outlined in 11 USC 521.

11 USC 521(a) (hanging paragraph) If the debtor fails to so act within the 45-day period referred to in paragraph (6), the stay under section 362(a) is terminated with respect to the personal property of the estate or of the debtor which is affected, such property shall no longer be property of the estate, and the creditor may take whatever action as to such property as is permitted by applicable nonbankruptcy law, unless the court determines on the motion of the trustee filed before the expiration of such 45-day period, and after notice and a hearing, that such property is of consequential value or benefit to the estate, orders appropriate adequate protection of the creditor's interest, and orders the debtor to deliver any collateral in the debtor's possession to the trustee.

Now, it's a game and since I'm pro se, I might want to dabble in this, but you have already decided to surrender the vehicle and did do so. If you're looking to "earn" some money by filing a motion seeking damages for violation of the stay... it's s stretch.

[1richard1]

The scheduled date for auction is this Friday, June 17 (37 days) from my initial 341 Hearing.

Previously, bank refused to negotiate and compromise on a settlement agreement. So, in turn vehicle was voluntarily surrendered. Once educating myself to the 722 Motion for Redemption considering this option. Also, that the trustee uses various factors in considering the AS IS value for a car. N.A.D.A and Kelly Blue Book are to be used as a guide, not as a set in stone value. Also, the creditor/debtor's value judgement will be subjective (i.e wear, tear) as well as objective (i.e. cost to repair the vehicle damage, mechanical breakdown or body damage). The trustee is to consider all facts relevant to the determination of the value.

Is there a cutoff point for filing a Motion 722? I have faxed Wells Fargo BK dept. to re-consider a settlement, asked them for their best offer. Also, that if they still refuse to compromise then will have my attorney file a Motion 722, BK Trustee make the car value determination. I was not certain if this needs to be filed within 45 days after the 341 hearing, meaning within 8 days or so, since currently been 37 days. Or, if the motion can be filed up to the date of BK discharge.

[justbroke]

11 USC 521 requires the debtor to take action on what their intention is... within 45 days of the 341 Meeting. So, yes... you need to file the Motion! I think that you are indecisive at this point and are trying to figure out what you want to do, but now you have the looming Friday sale. I would try to get this all in order well before Friday; perhaps as early as tomorrow.

Do you have all your Redemption financing in place? Is this what you really want to do (redeem)? What's your end game?

[AngelinaCatHub]

JB it has been a long time since 341. I have a gut feeling our OP wishes to cause the bank a bit of trouble more than the desire to redeem the auto. Why did the OP not "pay through"? Why was the car willingly forfeited? All depends on your last question, does the OP have cash in hand to 722 and if so, best get on it as the Trustee (perhaps his lawyer as well) can only attempt the stop of the sale. 'Hub

[1richard1]

You're very much accurate, in your thoughts.

Depending on the settlement $$$ amount: I have done research online, 722 Redemption financing. Essentially they'll pay Wells Fargo the settlement amount, transfer title to them. I've spoken with a couple companies, yet have held off thus far. Or, if Wells Fargo would actually provide a settlement agreement within reason then would personally pay them. I don't think the actual payment to Wells Fargo would transpire till "after" the trustee makes the final determination as to the value, or approves the 722 Motion of Redemption. But yes, agree need to have lined up how I'll handle this.

My attorney wants $995 "up front." Says court fee and his fee to file the Section 722 Motion. Any other options on this, such as using an outside attorney to file the motion? Attorney has been reluctant all along on filing the motion, little advice and info. provided on filing for a redemption. Took doing research myself online and on the BK forums.

[1richard1]

JB it has been a long time since 341. I have a gut feeling our OP wishes to cause the bank a bit of trouble more than the desire to redeem the auto. Why did the OP not "pay through"? Why was the car willingly forfeited? All depends on your last question, does the OP have cash in hand to 722 and if so, best get on it as the Trustee (perhaps his lawyer as well) can only attempt the stop of the sale. 'Hub

Owned vehicle for 4 years, never a missed payment till after bankruptcy filed since the engine ceased. Correct, engine and car non operable and in discussions with Wells Fargo BK dept. they refused to compromise on a settlement figure. They said the Fair Market Value is $14,750 (approx.), I offered them both verbally and in faxed documentation to their BK dept. a settlement of $4,000. Also, to please advise as to their best offer. They refused to do this, advised me they can sell the car at auction even without an operable engine for closer to $10,000. However, I've even faxed both my attorney and Wells Fargo BK dept. the documentation from the dealership "service manager" 2 spread sheets with a line by line breakdown of a new engine, parts, labor and CA sales tax.

I elected to voluntarily surrender the vehicle, as Wells Fargo refused to compromise. The 341 hearing was 37 days ago, and since this timeframe have become enlightened about the 722 Redemption Process. I DO have the desire to redeem the car, yet #1 issue is at what amount??? This is the end game, settlement dollar amount for the car. To date, bank refused to compromise. However, come to the realization the BK judge will make the final value determination. My attorney said he'd file the motion however can not make any guarantees, nor even offer any inclination as to the value.

[justbroke]

The Trustee does not make a determination of value. Only the judge can do that. This is why you file a Motion to Redeem. The process is very specific and is there for a reason. This is all very time sensitive.

It appears that you hired an attorney at a very cheap rate that did not include any "special" services, such as special motions or even redemption. This is why the attorney wants to charge you more. You could do it yourself (pro se), but you are really late to this game. People who are doing redemptions usually file within a week of filing. (I filed my Motion to Redeem the SAME day that my case was converted to Chapter 7.)

You're in a tough position right now. Again, you could try to do this on your own and file the Motion and serve it (properly) on the creditor and Trustee. Depending on procedure in your court, you may need to request a hearing (and schedule it yourself by calling the Clerk of the Court to schedule). Scheduling may need to be done "before" you even serve and file the Motion (District procedural dependency).

I'm not saying it's impossible, but you're in a tough position to change your mind this late. The creditor will probably scream foul and that you prejudiced them by waiting so long (and changing your mind). You have the right to change your mind, it's just the timing that's going to be a "procedural" issue for you. Especially since you have an attorney and probably won't be using your attorney.

Have you done the math? What's the FMV of the vehicle (based on "rough retail")? How much do you still owe (balance on loan)? How many months are left on the loan with the current lender? What's the percentage rate that you pay the current lender? Percentage rate to 722Redemption? Again, have you done the math?

[1richard1]

FMV is $14,750 per Wells Fargo Bank

2 page spread sheet, line by line breakdown from dealership service manager:
$7,939 (Engine replacement)
$2,677 (Labor fees) Remove current engine, install replacement engine
$694 (CA sales tax)

Both Wells Fargo Bank BK Dept. and my attorney have had all this documentation for approx. 1 month, vehicle became inoperable just a few days after my 341 hearing. Bank says they'd sell car at auction, informed me the balance remaining from sell of vehicle at auction would be a write off through the Ch. 7 BK. Entire process bank has "refused" to verbally offer any form of settlement. They DO negotiate, had a 15 minute phone call with them a couple weeks back. However, they feel at auction they can get more $$$ for the car then my $4,000 offer. Asked them for their best offer, they refused.

So, at this point will likely file the Motion to Redeem. Based on the evidence provided, written documentation would think $4,000 seems reasonable. In all sincerity, I don't know if the judge would agree to my offer or what dollar amount. This has been the sticking, dollar cost as a settlement with Wells Fargo or the dollar amount the BK judge will approve, Section 722.

[1richard1]

The BK law firm was paid a total of $2,000, included their legal fees along with the court fees too. This does not include any extra legal services like filing the motion. However, $995 seems rather steep to file a Motion to Redeem. My assumption is because the attorney would need to put forth time, effort in preparing himself as to communicating back and forth with the bank. Also, he'd attend the Section 722 Motion to Redeem hearing too.

[justbroke]

It does not matter what "you" THINK the value is. It is up to the Judge to decide based on the evidence. The only way to get this valuation, is to file a Motion to Redeem Collateral and to appear before the Judge in an evidentiary hearing. In that hearing, each party will provide "evidence" as to the value of the vehicle. The Judge then makes a ruling on what the value is.

You can, at that time, decide that the valuation is not what you want and "surrender" the vehicle.

I believe that you went about this entirely the wrong way. In a bankruptcy, you don't "negotiate" the value of a piece of collateral with the creditor. You either file a "Motion to Determine Secured Value" or a "Motion to Redeem" (if it's a redemption issue). I believe that you're trying to "bootstrap" a negotiation on value, and that's entirely not now it works. I believe that the reason you are here, at this point, is because you don't want to pay your attorney approximately $1K in fees to pursue the Redemption. Instead, you tried to "negotiate" with the Bank. I believe that you wasted your time doing this.

(I will add that filing the Motion to Redeem and listing what you feel is the value, based on attached documentation, is a starting point. Then, and only then, do you work on a stipulated agreement on the value with the creditor. The key is that the creditor "knows" that the court will determine the value short of a stipulated agreement. This is the only procedural way to be successful at this.)

[1richard1]

Over the last month my BK attorney was against filing a Motion to Redeem. He said based on the engine damage, ceased motor to simply surrender the car. Further, in my questions asked him about redemption the answers provided were more or less that the bank would decide upon a dollar amount, settlement agreement. In speaking with my attorney, he said it was ok for me to negotiate with the bank by phone. I inquired with him about doing this, also kept him informed by phone conversations and email over the last month, once vehicle engine ceased, which transpired after the 341 hearing, 37 days ago.

I do understand and agree entirely, the value is not what I think, nor what the bank thinks as they've refused a settlement. The FMV would be 100% up to the discretion of the BK judge. Based on the factors provided, any idea as to what the judge would determine the value to be? $14,750 est. FMV yet documentation provided with over $11,000 for engine repair costs. (Engine, parts, labor, CA sales tax). I truly have no idea if the judge would stick with the $14,750, the $4,000 or somewhere in the middle. My attorney would not provide me any input on this, once asked. Just to pay him the $995 fee and he could not make any promises, nor elaborate.

[justbroke]

I'm now see why your attorney wanted nothing to do with this. (If you haven't noticed, the attorney "punted" and basically told you to go deal with the bank.) With a ceased motor, why do you even want a car that would require, based on your posting, $11K of work? This is what we call a "no brainer" in the Bankruptcy world. That is, it's a "no brainer" to surrender the vehicle. If you have $7K laying around somewhere, or even $4K... go purchase a comparatively "decent" beater car and drive that for a year. Save your money and then get a more substantial vehicle if your budget allows it.

I have read many stories here on BKForum where debtors are trying desperately to save a home that is underwater. Here, you are trying to save a vehicle that just isn't worth it. I would take whatever emotion there is, out of this equation, and let the car go.

It is true that your attorney is paid for his work (hours billed). I'm guessing, again, that you paid very little for your Chapter 7 (less than $2K no-look fee), and any other services were not covered. If you believe that the vehicle is really only worth $4K and the balance is $14K, maybe spending $1K on attorney fees to prosecute a Motion to Redeem, is worth it. However, I just don't see any value in this at this point.