Theodore A. Thompson v. GMAC ( 2009 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 08-2077
T HEODORE A. T HOMPSON,
Debtor-Appellant,
v.
G ENERAL M OTORS A CCEPTANCE C ORPORATION, LLC,
Creditor-Appellee.
Appeal from the United States Bankruptcy Court
for the Northern District of Illinois, Eastern Division.
No. 08 B 2560—A. Benjamin Goldgar, Judge.
A RGUED F EBRUARY 10, 2009—D ECIDED M AY 27, 2009
Before C UDAHY, W ILLIAMS, and T INDER, Circuit Judges.
W ILLIAMS, Circuit Judge. This case involves an all too
common occurrence that bankruptcy courts must deal
with: a buyer defaults on his car payments, a secured
creditor seizes the asset, the buyer files for Chapter 13
bankruptcy, and the big question that ensues is whether
the creditor must return the car to the bankruptcy estate.
In this case, we are asked to consider a procedural
conflict between many bankruptcy courts within this
2 No. 08-2077
circuit, and those in the sixth, eighth, ninth, and tenth
circuits.
We must decide whether an asset that a secured creditor
lawfully seizes pre-petition must be returned to the
buyer’s estate after he files for Chapter 13 bankruptcy,
and, if so, whether the creditor must immediately return
the asset even in the absence of a showing that the
debtor can adequately protect the creditor’s interest in
the asset. In the United States Bankruptcy Court for the
Northern District of Illinois, it has been an accepted
standard procedure for a creditor to retain possession of
a seized asset until the creditor subjectively determines
that the debtor has shown the creditor that it can provide
adequate protection of the creditor’s interests. If a
dispute ensues, it is the debtor’s obligation to litigate
the adequate protection issue in turnover proceedings
before the bankruptcy court. In the sixth, eighth, ninth,
and tenth circuits, the procedure is just the opposite. Upon
the debtor filing for Chapter 13, the creditor must im-
mediately return the asset to the bankruptcy estate, and,
if the debtor and creditor cannot achieve accord on the
issue of adequate protection, it is the creditor’s obliga-
tion to file a motion before the bankruptcy court.
Here, a creditor refused to relinquish possession of an
asset because it felt that the debtor could not adequately
protect its interests. The debtor claimed that this refusal
violated the Bankruptcy Code’s stay provisions and
moved for sanctions against the creditor. The bankruptcy
court denied this motion. Because we find that a plain
reading of the Bankruptcy Code’s provisions, the Supreme
No. 08-2077 3
Court’s decision in United States v. Whiting Pools, Inc., 462
U.S. 198, 211 (1983), and various practical considerations
require that a creditor immediately return a seized asset
in which a debtor has an equity interest to the debtor’s
estate upon his filing of Chapter 13 bankruptcy, we
reverse.
I. BACKGROUND
On April 5, 2003, Debtor-Appellant Theodore Thompson
entered into an installment contract with Creditor-Appel-
lee General Motors Acceptance Corporation (“GMAC”) for
the purchase of a 2003 Chevy Impala. Thompson defaulted
on his installment payments, and, on January 24, 2008,
GMAC repossessed the vehicle.
On February 5, 2008, Thompson filed for Chapter 13
bankruptcy in the United States Bankruptcy Court for the
Northern District of Illinois. Needing his car to commute
to work, on February 6, 2008, Thompson requested that
GMAC return the vehicle to his bankruptcy estate. When
GMAC refused to return the vehicle to the estate absent
what it deemed “adequate protection” of its interests,
Thompson moved for sanctions pursuant to 11 U.S.C.
§ 362(k), claiming that GMAC willfully violated the
automatic stay provision in 11 U.S.C. § 362(a)(3).
The bankruptcy court denied the motion for sanctions
because it found the In re Nash, 228 B.R. 669 (Bankr. N.D.
Ill. 1999) and In re Spears, 223 B.R. 159 (Bankr. N.D. Ill.
1998) decisions, which held that a creditor need not
return seized property to a debtor’s estate absent ade-
4 No. 08-2077
quate protection of its interests, dispositive on the issue.
Thompson sought direct appeal.
The bankruptcy court certified this case as one appro-
priate for direct appeal under 28 U.S.C. § 158(d)(2)(B)(i).
On June 2, 2008, we found that it met the statutory re-
quirements and accepted the appeal. As a result, we
have jurisdiction under 28 U.S.C. § 158(d)(2)(A).1
II. ANALYSIS
A. Introduction
We review a bankruptcy court’s underlying factual
findings for clear error and its conclusions of law de novo.
Union Planters Bank, NA v. Connors, 283 F.3d 896, 899 (7th
Cir. 2002). A debtor is entitled to actual damages and
attorneys’ fees if he is “injured by any willful violation
of a stay provided by this section” committed by a creditor.
11 U.S.C. § 362(k)(1). Under the Bankruptcy Code’s stay
provision, no creditor may commit “any act to obtain
possession of property of the estate or of property from
the estate or to exercise control over property of the estate”
1
GMAC’s argument that we are deprived of jurisdiction
because Thompson filed his request for sanctions as a motion,
rather than as an adversary complaint, is unavailing. Mere
procedural miscues differ from jurisdictional deficiencies. See
Kontrick v. Ryan, 540 U.S. 443, 453-54 (2004). Further, having
jurisdiction in this case, we need not, and do not, take a posi-
tion on whether Thompson should have filed his request for
sanctions as an adversarial complaint rather than as a motion.
No. 08-2077 5
after a debtor has filed for bankruptcy. 11 U.S.C. § 362(a)(3)
(emphasis added). In order to determine whether GMAC
violated section 362(a)(3), we must resolve two ques-
tions. First, we must determine whether GMAC
“exercised control” over property belonging to Thomp-
son’s bankruptcy estate simply because it refused to
return it to the estate after Thompson filed for bank-
ruptcy. If so, we must decide whether GMAC, or a
like-situated creditor, is required to return the asset prior
to the bankruptcy court establishing that the debtor can
provide “adequate protection” of the creditor’s interest
in the asset.
B. GMAC “Exercised Control” Over Thompson’s Vehicle
There is no debate that Thompson has an equitable
interest in the Chevy, and, as such, it is property of his
bankruptcy estate. See United States v. Whiting Pools, Inc.,
462 U.S. 198, 203 (1983) (“Section 541(a)(1) defines the
‘estate’ as ‘comprised of all the following property, wher-
ever located: (1) . . . all legal or equitable interests of the
debtor in property as of the commencement of the case.’
Although these statutes could be read to limit the estate
to those ‘interests of the debtor in property’ at the time
of the filing of the petition, we view them as a definition
of what is included in the estate, rather than as a limita-
tion.”). GMAC contends, however, that it did not “exercise
control” over the Chevy within the meaning of 11 U.S.C.
§ 362(a)(3). Rather, GMAC argues that it passively held
the asset and that further action, such as selling the car,
is required to satisfy the Code’s definition of “exercising
6 No. 08-2077
control” over the asset. In support of this proposition,
GMAC relies solely on In re Spears, 223 B.R. 159, 165 (Bankr.
N.D. Ill. 1998), which simply reiterates the rationale
expressed in In re Young, 193 B.R. 620, 624 (Bankr. D.D.C.
1996). These courts find that a creditor that retains posses-
sion of a lawfully seized vehicle does not take any action;
instead, these courts reason that the creditor simply
maintains the pre-bankruptcy status quo (creditor in
possession of the asset), which is the purpose of the Code’s
automatic stay provision. They hold that the “Code
restricts only obtaining possession of the property, rather
than the passive act of simply continuing to possess it.” In
re Young, 193 B.R. at 624.
This interpretation is at odds with the plain meaning
of “exercising control.” Webster’s Dictionary defines
“control” as, among other things, “to exercise restraining
or directing influence over” or “to have power over.”
Merriam-Webster’s Collegiate Dictionary (11th Ed. 2003).
Holding onto an asset, refusing to return it, and other-
wise prohibiting a debtor’s beneficial use of an asset all
fit within this definition, as well as within the common-
sense meaning of the word.
Moreover, to hold that “exercising control” over an
asset encompasses only selling or otherwise destroying
the asset would not be logical given the central purpose
of reorganization bankruptcy. The primary goal of reorga-
nization bankruptcy is to group all of the debtor’s
property together in his estate such that he may rehabili-
tate his credit and pay off his debts; this necessarily
extends to all property, even property lawfully seized pre-
No. 08-2077 7
petition. See Whiting Pools, Inc., 462 U.S. at 203-04; see also
In re Yates, 332 B.R. 1, 5 (BAP 10th Cir. 2005) (“As a practi-
cal matter, there is little difference between a creditor
who obtains property of the estate before bankruptcy
is filed, or after bankruptcy is filed. The ultimate result
is the same—the estate will be deprived of possession of
that property. This is precisely the result § 362 seeks to
avoid.”). An asset actively used by a debtor serves a
greater purpose to both the debtor and his creditors
than an asset sitting idle on a creditor’s lot.
Further, Congress’s decision to amend section 362
evinces its intent to expand the prohibited conduct
beyond mere possession. Prior to 1984, the Code’s stay
provision only prohibited any act to obtain possession of
property belonging to a bankruptcy estate. Subsequently,
Congress amended section 362(a)(3) when it passed the
Bankruptcy Amendments and Federal Judgeship Act of
1984 to include as prohibited conduct “exercising control”
over any asset belonging to the bankruptcy estate. Pub.L.
No. 98-353, 1984 U.S.C.C.A.N. (98 Stat.) 371. Although
Congress did not provide an explanation of that amend-
ment, In re Young, 193 B.R. at 623, the mere fact that
Congress expanded the provision to prohibit conduct
above and beyond obtaining possession of an asset sug-
gests that it intended to include conduct by creditors
who seized an asset pre-petition. See In re Del Mission
Ltd., 98 F.3d 1147, 1151 (9th Cir. 1996); In re Javens, 107
F.3d 359, 368 (6th Cir. 1997). In fact, one court has gone
as far as saying that “[w]ithholding possession of property
from a bankruptcy estate is the essence of ‘exercising
8 No. 08-2077
control’ over possession” because it prevents the debtor
from achieving beneficial use of the estate’s property.
In re Sharon, 234 B.R. 676, 682 (BAP 6th Cir. 1999).
For these reasons, we find that the act of passively
holding onto an asset constitutes “exercising control” over
it, and such action violates section 362(a)(3) of the Bank-
ruptcy Code. Accord In re Yates, 332 B.R. at 5; In re
Sharon, 234 B.R. at 682; In re Abrams, 127 B.R. 239, 241-43
(BAP 9th Cir. 1991); In re Knaus, 889 F.2d 773 (8th Cir.
1989). Here, GMAC exercised control over Thompson’s
vehicle when it refused to return it to the bankruptcy
estate upon request.
C. The Issue of “Adequate Protection” Does Not Stay
a Creditor’s Obligation to Return the Seized Asset
to the Bankruptcy Estate
There is no debate that a debtor must provide a secured
creditor with adequate protection of its interests in the
seized asset if the creditor requests such protection. Under
11 U.S.C. § 363(e), “on request of an entity that has an
interest in property used, sold, or leased, or proposed to
be used, sold, or leased, by the trustee, the court, with or
without a hearing, shall prohibit or condition such use,
sale, or lease as is necessary to provide adequate protec-
tion of” the creditor’s interest. The issue in controversy is:
whether (1) the creditor must return the asset to the
bankruptcy estate and then seek adequate protection in
court; or, whether (2) the creditor may retain possession
of the asset placing the onus on the debtor to bring an
No. 08-2077 9
action for turnover before the bankruptcy court in a
separately filed adversary proceeding.2
The majority of district courts in Illinois, as well as
several district courts in other jurisdictions, have
followed the precedent set forth in In re Nash, 228 B.R. 669(Bankr. N.D. Ill. 1999) and In re Spears, 223 B.R. 159 (Bankr.
N.D. Ill. 1998), which hold that a creditor need not return
seized property to a debtor’s estate absent adequate
protection of its interests. These decisions reason that
requiring immediate turnover would force the creditor
into an untenable position—having to turn over an asset
in which the creditor has an interest without being ade-
quately assured that its value will be retained. They
further reason that since the purpose of the Bankruptcy
Code’s stay provision is to maintain the status quo, the
car should be kept by the party that had possession
immediately prior to the filing of the bankruptcy petition.
Although our circuit has not ruled on this issue, several
circuits have held that the creditor must first return the
asset to the bankruptcy estate and then move to have its
interests adequately protected. See In re Yates, 332 B.R.
at 7; In re Sharon, 234 B.R. at 685; In re Abrams, 127 B.R.
at 246; In re Knaus, 889 at 778.
A plain reading of 11 U.S.C. § 363(e) and 542(a), the
Supreme Court’s decision in Whiting Pools, 462 U.S. 198,
and a myriad of policy considerations, support our sister
circuits’ view. At oral argument, GMAC argued that all
2
See Fed. R. Bankr. P. 7001.
10 No. 08-2077
a creditor must do to comply with the stay provision is
place the adequate protection issue before the bank-
ruptcy court. GMAC is correct that it has the burden of
requesting adequate protection for its interest either
directly under 11 U.S.C. § 363(e) or by moving for relief
from the stay under 11 U.S.C. § 362(d)(1).3 See In re Yates,
332 B.R. at 6; In re Sharon, 234 B.R. at 683-84. However, if
a creditor is allowed to retain possession, then this
burden is rendered meaningless—a creditor has no incen-
tive to seek protection of an asset of which it already has
possession. Thus, in order for the language of 11
U.S.C. § 363(e) to have meaning, Congress must have
intended for the asset to be returned to the bankruptcy
estate before the creditor seeks protection of its interest.
A reading of 11 U.S.C. § 542(a) also indicates that turn-
over of a seized asset is compulsory. This provision states
that a creditor in possession of an asset belonging to the
bankruptcy estate “shall deliver to the trustee, and account
for, such property or the value of such property, unless
such property is of inconsequential value or benefit to
the estate.” 11 U.S.C. § 542(a) (emphasis added). The
majority of appellate courts have found that section 542(a)
works with the stay provision in section 362(a) “to draw
back into the estate a right of possession that is claimed
3
This provision reads: “On request of a party in interest and
after notice and a hearing, the court shall grant relief from the
stay provided under subsection (a) of this section, such as by
terminating, annulling, modifying, or conditioning such
stay—(1) for cause, including the lack of adequate protection
of an interest in property of such party in interest.”
No. 08-2077 11
by a lien creditor pursuant to a pre-petition seizure; the
Code then substitutes ‘adequate protection’ for possession
as one of the lien creditor’s rights in the bankruptcy
case.” In re Sharon, 234 B.R. at 683. The right of possession
is incident to the automatic stay. A subjectively perceived
lack of adequate protection is not an exception to the
stay provision and does not defeat this right. Id. at 684.
Instead, section 362(d) “works in tandem with § 542(a) to
provide creditors with what amounts to an affirmative
defense to the automatic stay.” In re Yates, 332 B.R. at 5.
First, the creditor must return the asset to the bankruptcy
estate. Then, if the debtor fails to show that he can ade-
quately protect the creditor’s interest, the bankruptcy
court is empowered to condition the right of the estate
to keep possession of the asset on the provision of certain
specified adequate protections to the creditor.4 See id.; see
also In re Colortran, 210 B.R. 823, 827-28 (BAP 9th Cir.
1997) (“A creditor who requires possession in order to
achieve or maintain perfection has the right to file a motion
for relief from the stay and request adequate protection
such that its lien rights are preserved. However, the
creditor must tender the goods or face sanctions for
violation of the stay. The creditor has a right to and may
request terms of adequate protection while simultaneously
returning the goods. However, while the creditor may
suggest terms of adequate protection, it may not unilater-
ally condition the return of the property on its own deter-
4
A creditor may also argue that the debtor has a total lack of
equity in the asset, in which case the court can order the
immediate return of the asset to the creditor.
12 No. 08-2077
mination of adequate protection.”), rev’d on other grounds,
165 F.3d 35 (9th Cir. 1998).
The Supreme Court, in Whiting Pools, 462 U.S. 198, 204,
adopted this interpretation of section 542(a) in the
context of a Chapter 11 corporate reorganization bank-
ruptcy. In Whiting Pools, a debtor corporation asked
the Court to determine whether the I.R.S., which had
seized some of the debtor’s assets prior to its bankruptcy
filing, was subject to the stay provisions of section 362(a).
Id. at 200. The Supreme Court unanimously held that
the I.R.S. is subject to these provisions. Id. at 209.
The Court further held, after analyzing the relevant
legislative history, that section 542(a) “requires an entity
(other than a custodian) holding any property of the
debtor that the trustee can use under § 363 to turn that
property over to the trustee.” Id. at 205. The Court stated
that when a creditor seizes property before a debtor files
for Chapter 11, the creditor’s “lien does not dissolve nor
is its status as a secured creditor destroyed.” Id. A creditor
is entitled to adequate protection for its interests, but it
is required to seek protection of these interests according
to congressionally established bankruptcy procedures
rather than by withholding seized property from a debtor’s
efforts to reorganize. Id. A creditor must look to section
363(e) for protection “rather than to the nonbankruptcy
remedy of possession.” Id. at 204.
GMAC’s only argument against Whiting Pools’s direct
applicability to this case is that, in a footnote, the Court
commented that it was not expressing an opinion as to
how section 542(a) functioned in Chapter 7 or 13 pro-
No. 08-2077 13
ceedings. Id. at 208 n.17 (“Section 542(a) also governs
turnovers in liquidation and individual adjustment of
debt proceedings under Chapters 7 and 13 of the Bank-
ruptcy Code. Our analysis in this case depends in part
on the reorganization context in which the turnover order
is sought. We express no view on the issue whether
§ 542(a) has the same broad effect in liquidation or ad-
justment of debt proceedings.”) (citations omitted). Our
sister circuits have resoundly rejected GMAC’s argument
and found that Whiting Pools’s analysis applies equally
to Chapter 13 cases. See, e.g., In re Yates, 332 B.R. at 6-7(“Although the Court specifically narrowed the holding
of Whiting Pools to govern only Chapter 11 cases, we see
no reason why it should not apply with equal force to
proceedings under another rehabilitation chapter,
Chapter 13.”). We agree. The principle behind Chapter 11
and Chapter 13 is the same—allow the debtor to reorganize
and repay the majority of his debts without having
to liquidate his assets. The need to retain the beneficial
use of productive assets to effectuate this purpose is the
same in each case. GMAC fails to proffer any reason
why section 542(a) does or should function differently
under Chapter 13 than it does under Chapter 11.
The contrary view, most vociferously expressed in In re
Young, focuses on the decades old pre-Bankruptcy Code
procedure, which the Young court said required that a
debtor obtain “an order of the court and [ ] some proof
of adequate protection by the debtor or trustee before” the
bankruptcy court would order a creditor to return an
asset seized pre-petition to a debtor’s bankruptcy estate.
193 B.R. at 626. The bankruptcy court in Young reasoned
14 No. 08-2077
that that the language of Whiting Pools indicates that the
Supreme Court did not intend to abrogate this pre-Code
practice, but rather wanted to maintain the purported
status quo of requiring a debtor to provide proof of
adequate protection before the asset would be returned
to his estate. Id.The Young court’s analysis is not persuasive. There is
no evidence that it was uniform pre-Code procedure to
require a debtor to offer adequate protection prior to a
court ordering the asset’s turnover. The Young court
read into the procedural history of Reconstruction Finance
Corporation v. Kaplan, 185 F.2d 791, 795 (1st Cir. 1950), and
inferred that the pre-Code procedure required that a
debtor show adequate protection before a bankruptcy
court would mandate the return of a seized asset. A fair
reading of Kaplan (and the one employed by the
Supreme Court in Whiting Pools) indicates that it stands
only for the proposition that prior to the advent of the
Bankruptcy Code, bankruptcy courts “could order the
turnover of collateral in the hands of a secured creditor.”
Whiting Pools, 462 U.S. at 208. Kaplan does not reach the
adequate protection question. In any event, “at a mini-
mum, it appears that bankruptcy courts approved of
differing practices concerning adequate protection
when Whiting Pools was decided” and, since then, “the
majority of courts have interpreted § 362(a)(3) to mean
that any postpetition retention of a debtor’s property
violates the automatic stay and is sanctionable.” In re
Sharon, 200 B.R. 181, 190-91 (6th Cir. 1996).
It is also undisputed that Whiting Pools did not
explicitly address the question of whether the creditor
No. 08-2077 15
must turn over the seized asset prior to the determina-
tion of the adequate protection question. However, there
is language in Whiting Pools that the Young court over-
looked which tends to indicate that the Supreme Court
favored an approach whereby the creditor would first
turn over the seized asset and then petition the bank-
ruptcy court for adequate protection. The Court com-
mented that the Bankruptcy Code “requires an entity
(other than a custodian) holding any property of the
debtor that the trustee can use under § 363 to turn that
property over to the trustee.” Whiting Pools, 462 U.S. at
205 (emphasis added). It further stated that turnover is
not explicitly required in only three specific situations,
lack of adequate protection not being among them. Id. at
206 n.12 (“Section 542 provides that the property be
usable under § 363, and that turnover is not required in
three situations: when the property is of inconsequential
value or benefit to the estate, § 542(a), when the holder
of the property has transferred it in good faith without
knowledge of the petition, § 542(c), or when the transfer
of the property is automatic to pay a life insurance pre-
mium, § 542(d).”). Further, the Court intimated that the
onus is on the creditor, rather that the debtor, to seek
relief in the bankruptcy court when it stated: “At the
secured creditor’s insistence, the bankruptcy court must
place such limits or conditions on the trustee’s power to
sell, use, or lease property as are necessary to protect the
creditor.” Id. at 204 (emphasis added). This language,
combined with our analysis of sections 362(a)(3) (which
was not amended at the time of the Whiting Pools decision)
and 542, shows that it is unlikely that Congress, in creating
16 No. 08-2077
the Bankruptcy Code, intended to affirm any pre-petition
convention that might have existed that allowed a
creditor to retain possession of an asset properly
belonging to a debtor’s bankruptcy estate while awaiting
an adequate protection determination. See In re Sharon,
200 B.R. at 190-91 (“The 1983 Whiting Pools decision
obviously preceded the 1984 Amendments and therefore
could not, and does not, contain an analysis of the ‘exercise
control’ language added to § 362(a)(3). Similarly, Whiting
Pools could not have considered the 1987 addition of
paragraph (d) to Bankruptcy Rule 4001.”).
Finally, noteworthy additional considerations also
militate in favor of placing the onus on the creditor, rather
than on the debtor, to seek judicial relief if it believes
that its interests are not adequately protected. First, the
purpose of reorganization bankruptcy, be it corporate or
personal, is to allow the debtor to regain his financial
foothold and repay his creditors. See Matter of Aberegg,
961 F.2d 1307, 1309-10 (7th Cir. 1992) (“[T]he basic legisla-
tive purpose underlying Chapter 13 [ ] is to provide
debtors with a flexible means for repaying creditors.”).
That is why a stay is imposed. It allows a debtor free use
of his assets while the court works with both debtor and
creditors to establish a rehabilitation and repayment plan.
In theory, these assets will generate money that could
contribute to paying down the debtor’s obligations. If a
debtor’s car remains in the hands of a creditor, it could
hamper the debtor from either attending or finding work,
which is crucial for garnering the funds necessary to pay
off his debts.
No. 08-2077 17
Second, allowing the creditor to maintain possession
of the asset until it subjectively feels that adequate pro-
tection is in place, or until the debtor moves for the asset’s
return, unfairly tips the bargaining power in favor of the
creditor. By negotiating a better security package for
itself, the creditor can essentially remove the equitable
powers of the bankruptcy court and place itself in a
position above other secured creditors. See In re Knaus,
889 F.2d at 775 (“[I]f persons who could make no sub-
stantial adverse claim to a debtor’s property in their
possession could, without cost to themselves, compel the
debtor or his trustee to bring suit as a prerequisite to
returning the property, the powers of a bankruptcy
court and its officers to collect the estate for the benefit
of creditors would be vastly reduced. The general credi-
tors, for whose benefit the return of property is sought,
would have to needlessly bear the cost of its return. And
those who unjustly retain possession of such property
might do so with impunity.”). The common view is that “a
Chapter 13 debtor’s right to possession and use of her
car [should] not [be] dependent on the subjective judg-
ment of a creditor.” In re Sharon, 234 B.R. at 685. The
bankruptcy court should have “the prerogative to make
judgments whether a particular car should continue to be
used by a Chapter 13 debtor . . . and whether an offer of
adequate protection is sufficient to [allow] continue[d]
possession and use by the debtor.” Id.Third, requiring the debtor, rather than the creditor, to
bear the costs of seeking court relief hurts not only the
debtor but all of the debtor’s other creditors by virtue
of decreasing the value of the bankruptcy estate. It
18 No. 08-2077
makes far more sense for all creditors to move before
the court in a consolidated proceeding to have their
assets adequately protected than for the debtor to file
a myriad of motions in an attempt to recover his
dispersed assets. See In re Abrams, 127 B.R. at 243 (“[T]he
case law and the legislative history of § 362 indicate that
Congress did not intend to place the burden on the bank-
ruptcy estate to absorb the expense of potentially
multiple turnover actions, at least not without providing
a means to recover damages sustained as a consequence
thereof.”).
GMAC counters with a policy consideration of its
own. It claims that during the time period after it
transfers the asset back to the debtor but before the court
hears a motion for adequate protection, the asset may
lose substantially all its value (through depreciation or
destruction). Although this is theoretically possible, the
Bankruptcy Code already has a procedure in place to
combat such a problem—the emergency motion. Fed. R.
Bankr. P. 4001(a)(2); see also In re Colortran, 210 at 827-28
(“If the creditor is concerned that its interest will be
irreparably harmed if the property is turned over before
the motion for relief from stay can be heard it may
request an emergency hearing under § 362(f).”).
All in all, the Supreme Court’s reasoning in Whiting
Pools, a fair reading of the plain language of the relevant
Bankruptcy Code provisions, and the other considera-
tions mentioned require us to find that upon the request
of a debtor that has filed for of bankruptcy, a creditor
must first return an asset in which the debtor has an
No. 08-2077 19
interest to his bankruptcy estate and then, if necessary,
seek adequate protection of its interests in the bank-
ruptcy court. As such, we reverse the decision of the
bankruptcy court.
In order for a bankruptcy court to award sanctions
pursuant to 11 U.S.C. § 362(k), the court must find that a
creditor willfully violated the automatic stay. GMAC
correctly notes that the parties did not fully brief or
argue this issue below, nor did the court decide it. Thus,
we remand this matter to the bankruptcy court to deter-
mine if GMAC’s actions in violation of the stay were
willful.
III. CONCLUSION
The judgment of the bankruptcy court is R EVERSED. We
R EMAND the case for further proceedings consistent
with this opinion.
5-27-09