Need your car back? Not so fast.

A quick search of the internet will lead the casual observer to believe that filing a bankruptcy petition under Chapter 13 will guarantee them the return of their recently repossessed motor vehicle.  Unfortunately, the devil is in the details.  The Tenth Circuit (which encompasses Oklahoma, Colorado, Kansas, New Mexico, Utah and Wyoming) has held the position since 2017 that an auto lender is not required to return a car immediately upon the debtor’s filing Chapter 13.  This is in contrast to the position taken by the Second, Seventh, Eighth, Ninth and Eleventh Circuits.

In the case of WD Equipment v. Cowen (In re Cowen), 849 F.3d 943 (10th Cir. Feb. 27, 2017), the Tenth Circuit ruled that passively holding an asset of the estate in the face of a demand for turnover does not violate the automatic stay in Section 362(a)(3) as an act to “exercise control over property of the estate.”  That logic has been extended in the more recent Davis v. Tyson Prepared Foods Inc., 18-941 (Sup. Ct.), where the same court held that the automatic stay does not prevent a statutory worker’s compensation lien from attaching automatically after bankruptcy to a recovery in a lawsuit. Davis v. Tyson Prepared Foods Inc. (In re Garcia), 740 Fed. Appx. 163 (10th Cir. Oct. 17, 2018).

The Tenth Circuit and the District of Columbia Circuits are alone in their interpretation of the automatic stay.  In other circuits a creditor who repossessed an auto before bankruptcy must automatically return the car after the debtor files a Chapter 13 petition or risk contempt.

Fortunately, the Davis has requested Supreme Court review and could be heard this next term beginning October 2019.