Local Rule 6007-1 – Surrender of Collateral in Chapter 13 Cases
Scope and Timing
This rule was created in connection with the uniform plan opt-out and governs the surrender of collateral in chapter 13 cases. The rule does not apply if the court orders otherwise, or Debtor and Creditor enter a written agreement (cannot impose personal liability or limit discharge).
Debtors can either surrender pre-confirmation via the plan (Paragraph 7 of plan), or post-confirmation via a Surrender Notice (Paragraph 20 of plan). These procedures must commence within 7 days of the confirmation order, or between 21 – 28 days of Surrender Notice. Either:
Debtor must send a letter offering immediate possession of surrendered collateral via US Mail to all secured creditors. If a dispute among secured creditors arises, Creditors must promptly notify Debtor and Debtor must vacate within 14 days of receipt of the notice. If Creditor requests possession, Debtor must fully cooperate and vacate by the date in the request which cannot be sooner than 14 days. Requests must be emailed to the debtor’s attorney and served on Debtor.
Creditor must file and serve via US Mail a Delivery Notice instructing Debtor of a specific delivery location (as defined by 6007-1(f)(ii)) and how to dispose of the keys. Debtor must deliver the vehicle within 14 days of the Delivery Notice file date.
Creditor can repossess the vehicle if Debtor is unable to deliver. Debtor must provide written notification to Creditor within 7 days of the Delivery Notice file date of the circumstance preventing delivery (e.g. uninsured, vehicle not operable, debtor not in possession).
Creditor must make reasonable efforts to take possession of the surrendered collateral within 28 days of confirmation or the Surrender Notice.
Failure to Comply
If Debtor fails to comply, Creditor can compel compliance and seek reasonable costs and attorney fees. If Creditor fails to comply, Debtor can compel compliance and impose monthly storage fees equal to 0.5% of the collateral’s value for everyday post-deadline.
For more information, contact Julian Cotton, Esq.