The debtor filed a voluntary petition under chapter 7 of the Bankruptcy Code in October 2024. Her schedules listed a $22,474 debt partially secured by a 2022 vehicle (the “Vehicle”), with $14,500 treated as a secured claim and $7,974 treated as an unsecured claim. The bank asserted the value of the vehicle was $20,000 and that the amount due on the vehicle was about $21,000. The debtor did not claim the vehicle as exempt under 11 U.S.C. § 522(b). Under the retail installment sale contract (the “Agreement”), the debtor granted the bank a security interest in the vehicle, and the security interest had been perfected on the certificate of title. The debtor’s payment history showed that the debtor had made only two of the six required post-petition payments. The bank moved for relief from the automatic stay under Bankruptcy Code sections 362(d)(1) and 362(d)(2), seeking to repossess the vehicle and recover attorneys’ fees. The debtor did not respond to the motion or appear at the hearing, but the bank appeared through counsel.
In In re Marita Padiernos Rosado, No. 24-11851 (JLG), 2025 WL 1520515, 2025 Bankr. LEXIS 1312 (Bankr. S.D.N.Y. May 28, 2025) (opinion not for publication), the court granted the bank’s motion in part. The court first considered whether the bank was entitled to relief from the automatic stay under section 362(d)(1) for lack of adequate protection of an interest in the property. The court held the bank lacked adequate protection because the debtor had failed to fulfill its payment obligations in accordance with the Agreement. The court next considered whether the bank was entitled to relief under section 362(d)(2), which requires a demonstration of the claim’s amount, that the claim is secured by a perfected security interest, and that the debtor lacks equity in the property. Because the value of the claim exceeded the vehicle’s value, the court held the debtor lacked equity in the vehicle. Further, the debtor could not show that the vehicle was necessary to an effective reorganization, given that the case was a chapter 7 liquidation case; thus, there is “no reorganization for the Vehicle to effectuate.” Given that the bank had met its burden, the court found that the bank was entitled to relief from the automatic stay under section 362(d)(2). Finally, the court held that the bank was not entitled to attorneys’ fees because the debtor lacked equity in the vehicle; therefore, the bank was an undersecured creditor, and under 506(b), only a secured creditor is entitled to fees.
By Callighan Ard [email protected]
Edited by Conor Doris [email protected]
Edited By Hayden Mariott [email protected]