The Court of Appeals for the Fifth Circuit has affirmed that a Chapter 7 debtor lost the automatic stay protecting her vehicle, and any chance to redeem it, after she did not reaffirm or redeem the debt within the window the Bankruptcy Code allows.
The background: The dispute grew out of a debtor’s effort to hold onto a 2017 Cadillac Escalade after filing for Chapter 7 bankruptcy protection.
- After the meeting of creditors last year, the debtor first indicated she intended to reaffirm the auto loan, but neither side ever drafted a reaffirmation agreement.
- The lender moved for relief from the automatic stay so it could repossess the SUV.
- At a hearing on that motion, the debtor changed course and said she wanted to redeem the vehicle rather than reaffirm, prompting the bankruptcy court to reset the hearing and give her time to file a motion to redeem.
- The debtor filed that motion on the forty-fifth day after the creditors’ meeting, the last day of the statutory window, but she never made the lump-sum payment that redemption requires.
- When the bankruptcy court reconvened, it found the automatic stay had already terminated because the debtor had neither reaffirmed nor redeemed in time, which left nothing for the redemption motion to act on.
- Representing herself on appeal, though she had counsel at the bankruptcy court, the debtor argued the bankruptcy court could not end the stay without addressing the statutory predicates, wrongly denied her an evidentiary hearing, made redemption impossible by never valuing the car, and relied on unproven assertions to find cause.
The ruling: The Appeals Court affirmed the lower courts, holding that the stay ended automatically by operation of law once the deadline to reaffirm or redeem passed, and that the lapse left the debtor with no vehicle to redeem.
- Three of the debtor’s four arguments, covering the denied hearing, the missing valuation, and the reliance on unproven assertions, were forfeited because she never raised them before the bankruptcy court; ordinary forfeiture rules apply even to those who represent themselves, and she had a lawyer during the periods when she could have acted.
- On the one preserved argument, the judges agreed the stay terminated on its own because the debtor did not reaffirm or redeem within the allotted time, and that filing a motion at the buzzer did not count, because the statute “demands compliance with the specified action, not a good-faith attempt.”
- Once the stay lapsed, the vehicle dropped out of the bankruptcy estate, which mooted the redemption motion; with the car no longer hers to reclaim, the debtor could neither redeem it nor seek its abandonment, and no relief remained for any court to grant.
