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Credit Union Repossession of Mobile Home

In this case, the U.S. Bankruptcy Court for the District of Rhode Island held that Equitable Credit Union acted properly when it repossessed debtor’s mobile home after the bankruptcy court discharged debtor and the bankruptcy stay had been lifted.

The debtor borrowed money from the credit union and granted a security interest to the credit union in his mobile home. Thereafter, the debtor filed a Chapter 7 bankruptcy and his personal obligations were discharged by the bankruptcy court.

On the same day the court discharged debtor, an Order was entered with the court terminating the automatic bankruptcy stay.

Immediately thereafter, the credit union repossessed its collateral without notice to the debtor. The credit union caused the debtor’s belongings in the mobile home to be placed in boxes and bags and placed in storage.

The debtor did not dispute the credit union held a valid security interest in his mobile home. The debtor argued that the credit union violated the bankruptcy stay in the manner in which the mobile home was repossessed (without notice and removal of personal effects).

The bankruptcy court noted that a creditor may not attempt to collect a debt after the filing for bankruptcy, however, the court held that:

…there is nothing in the Bankruptcy Code prohibiting a secured creditor from repossessing its collateral after the bankruptcy stay has been lifted; neither is there a requirement to give notice prior to repossession.

Hence, the credit union’s repossession was upheld and found to be within the law. Roland Champagne v. Equitable Credit Union (Case No. 92-1033).

Author: Charles R. Harroun, Attorney at Law