The debtor and creditor entered into a contract for the purchase and financing of a vehicle, granting the creditor a security interest in the collateral. The debtor defaulted on the loan and surrendered the vehicle to the creditor. Subsequently, the debtor filed for Chapter 7 bankruptcy, listing no vehicle on their Schedule C and claiming no exemption. However, the debtor disclosed that the creditor repossessed the vehicle and stated that the debtor’s intent was to surrender the vehicle. The creditor sought relief from the automatic stay to continue with the sale of the vehicle. The debtor opposed stay relief, arguing that the creditor held no interest in the contract or collateral because a third party had begun servicing the loan prepetition. The bankruptcy court granted stay relief, and the debtor appealed.
In Vora v. Mechanics Bank (In re Vora), No. NC-25-1180-BGP, 2026 WL 905481, 2026 Bankr. LEXIS 805 (B.A.P. 9th Cir. Apr. 2, 2026) (unpublished opinion), the Bankruptcy Appellate Panel of the Ninth Circuit considered whether the bankruptcy court abused its discretion in granting relief from the automatic stay for “cause.” The panel reasoned that the debtor maintained legal and equitable interests in the vehicle at the time of the petition and those interests became part of the bankruptcy estate under § 541(a). In re Fitch, 217 B.R. 286, 290 (S.D. Cal. 1998); In re Ochoa, No. 10-55950 CN, 2010 WL 3909496, at *2 (Bankr. N.D. Cal. Oct. 1, 2010). Under § 362 (d)(1), which allows a creditor to seek relief from an automatic stay, the court determined the relief ahd been for “cause.” In re Kronemyer, 405 B.R. 915, 921 (9th Cir. BAP 2009). The court found that: (1) the creditor lawfully gained possession of the vehicle prepetition, (2) the debtor had not made payments for several months, and (3) the debtor’s intent was to surrender the vehicle. The court rejected the debtor’s argument on appeal that seeking stay relief was an impermissible collection action and concluded that the record supported a finding of “cause” to terminate the stay. Therefore, the Bankruptcy Appellate Panel of the Ninth Circuit affirmed the lower bankruptcy court’s order.
By Deanna Dulske [email protected]
Edited By Andrew Fielden [email protected]
Edited By Olivia Lewis [email protected]
Edited By Taylor O’Brien [email protected]