Collateral Bankruptcy Services, LLC is your source for consulting and collateral services surrounding consumer bankruptcy filings, including collateral surrendered in Chapter 7 and Chapter 13 Bankruptcy cases, whether or not surrendered pre-filing or through the bankruptcy schedules. Our clients include Trustees, Debtor's Attorneys, Bankruptcy Form Preparers, and Debtors alike.
Vehicles with No Equity to be Surrendered by the Debtor
Many Debtors take the opportunity to maximize their fresh start in Chapter 7 bankruptcy and surrender a vehicle that they can no longer afford. While this may be of great benefit to the Debtor, these surrendered vehicles offer nothing but exposure to bankruptcy estates. This is especially true in states like Florida where vehicle owners are vicariously liable for the damages and injuries caused by a vehicle.
For these reasons the United States Trustee maintains that Chapter 7 Trustees are “[t]o immediately abandon fully secured property … of no value to the estate.” (Handbook for Chapter 7 Trustees, Page 6-4). Moreover, the United States Trustee further contends that “[i]f a loss occurs as a result of the trustee’s failure to insure or protect estate property, the trustee could be subject to liability including a surcharge.” (id.)
As if having Debtors driving around in Estate owned vehicles wasn’t enough for Chapter 7 Trustees to be concerned about, the Trustees need to also be aware that under 11 U.S.C. § 704(a) they have an affirmative duty to secure the vehicle. Under § 704(a)(3) the trustee shall “ensure that the debtor shall perform his intention as specified in section 521(a)(2)(B) [the Statement of Intentions].
Vehicles with no equity to be surrendered by the Debtor surely cannot be ignored by the Chapter 7 Trustee. Yet the prevailing practice by most Chapter 7 Trustees is to do just that. Nothing.
When a Trustee does nothing about a surrendered vehicle with no equity, they are incurring unnecessary exposure to the estate and failing to fulfill an express statutory duty.
Best practices for a Chapter 7 Trustee, when appointed to a case with a vehicle to be surrendered to its secured creditor, is to immediately abandon the vehicle and contact the secured creditor and direct them to secure the vehicle. Clearly, absent a formal abandonment of the vehicle, the vehicle shall remain both property of, and exposure to, the estate. But less clear, is that the Trustee has to give affirmative direction to the secured creditor to secure its collateral. Without the affirmative directive from the Trustee, the secured creditor is prohibited by the automatic stay to taking steps to secure the vehicle.
Unfortunately, whether it be due to poorly filled out schedules or a financing environment with ever changing names, a Chapter 7 Trustee is at an immediate disadvantage when attempting to make contact with the secured creditor of a surrendered vehicle. In many instances, the secured creditor is a large nationwide institution that doesn’t have an obvious way of being contacted by the Trustee or does not understand the role the Trustee plays in the surrender of the vehicle. This can lead to a lot of unpaid time and frustration. Its bad enough that the Chapter 7 Trustee has to incur the cost of serving the Notice of Abandonment (especially in a no asset case), but to than spend an hour getting nowhere on the phone can be reason enough to go back to doing nothing about these cars.
For these reasons, Collateral Bankruptcy Services, LLC, (or CBS) was started.
CBS provides the following services:
- Within 24 hours, CBS will draft, serve and provide to the Trustee a Notice of Abandonment that is ready to be filed with the Court.
- CBS will coordinate with the Debtor and/or Debtor’s Attorney to pick up the surrendered vehicle.
- CBS will provide a Receipt of Possession to the Debtor upon pick up of the vehicle.
- CBS, in full compliance with state law, will verify and provide notice to the appropriate secured creditor as to the vehicle’s secure location and contact information to arrange its retrieval.
- CBS is appropriately insured and can produce certificates of insurance upon request.
Zero Cost to the Trustee:
Collateral Bankruptcy Services, LLC does not seek any fees or costs from the Trustee for the services it provides nor does CBS need to be officially employed by the estate. The Trustee need only email the case number and verify their intent to have the vehicle picked up, and CBS will begin working on the matter immediately.
Zero Cost to Debtors and Debtors' Attorneys: