- Case Type:
- Case Status:
- 2020 WL 3833069; Case no. 19-8026 (6th Circuit, Jul 08,2020) Published
- Secured creditor does not violate discharge injunction by refusing to release lien on collateral surrendered by Debtor.
- Procedural context:
- Debtor filed for relief under Chapter 7 and filed Statement of Intention indicating that Debtor surrendered a vehicle encumbered by a lien in favor of OneMain Financial. Debtor received a discharge and demanded that One Main either release the lien or repossess the vehicle. When OneMain did not do so, Debtor filed a Motion to hold OneMain in contempt for violation of the discharge Order. The Bankruptcy Court denied the Motion and Debtor appealed. The 6th Circuit BAP affirmed the Bankruptcy Court's holding.
- Debtor owned a Dodge Dakota encumbered by a lien in favor of OneMain. Debtor filed for relief under Chapter 7, and scheduled the amount of the debt at $8000 while valuing the vehicle at $150. Debtor's Statement of Intentions indicated that Debtor intended to surrender the vehicle, and Debtor did not reaffirm the debt. After entry of the discharge, OneMain did not repossess the vehicle which was stored on property owned by Debtor's ex-father-in-law; and Debtor never paid the balance of the claim. Two weeks after entry of the discharge, Debtor called OneMain and asked that the lien be removed as the vehicle was "old, trash, totaled". OneMain responded that it retained the lien but if Debtor wanted to make offer to in exchange for lien release, OneMain would consider it, and suggested the Debtor contact local salvage yard for a possible offer. Debtor contacted OneMain again a few weeks later and was again advised that if Debtor or a third party wanted to make an offer OneMain would consider it. Debtor stated that the vehicle was not worth $100 and OneMain again advised Debtor to either make an offer or have at thrid party such as a salvage yard contact OneMain with a proposal. OneMain never received any proposal form Debtor or any third party. Court concluded that Creditor's actions did not violate discharge injunction. At no point did OneMain demand payment of any specific amount of money and repeatedly proposed to consider any offer that represented the value of the vehicle. Creditor “did not even demand $150 from Debtor in exchange for a lien release; in fact, Creditor did not ask Debtor to pay any funds to Creditor at all, let alone pay any specific amount.” Instead, Creditor offered Debtor several different methods of obtaining release of Creditor’s in rem rights in the vehicle. There was no evidence that options Creditor presented to accomplish a lien release were a subterfuge to coerce payment of the discharged debt. Debtor could have secured the lien release either by proposing nominal payment to OneMain, or by filing a motion to redeem the Vehicle under § 722 and offering a nominal amount. Absent objectively coercive effort to force Debtor to pay balance, creditor was under no obligation to release lien or to repossess collateral.
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