In re: Denby-Peterson, No. 18-3562 (3d Cir. 2019)Annotate this Case
Denby-Peterson purchased a Chevrolet Corvette. Several months later, the Corvette was repossessed by creditors after Denby-Peterson defaulted on her car payments. Denby-Peterson subsequently filed an emergency voluntary Chapter 13 petition, notified the creditors of the bankruptcy filing, and demanded that they return the Corvette to her. They did not comply with her demand. Denby-Peterson filed a motion in the Bankruptcy Court, seeking to require the creditors to return the Corvette and sanctions for alleged violation of the Bankruptcy Code’s automatic stay. The court ordered turnover of the Corvette to Denby-Peterson but denied her request for sanctions. The district court and Third Circuit affirmed. As a matter of first impression, the Third Circuit held that a secured creditor’s failure to return collateral that was repossessed pre-bankruptcy petition upon notice of the debtor’s bankruptcy is not a violation of the automatic stay. A secured creditor does not have an affirmative obligation under the automatic stay to return a debtor’s collateral to the bankruptcy estate immediately upon notice of the debtor’s bankruptcy because failure to return the collateral received pre-petition does not constitute “an act . . . to exercise control over property of the estate,” 11 U.S.C. 362(a)(3).