Lost Collateral in Chapter 13 Cases

Posted by Kevin Ryan | Mar 20, 2017 | 0 Comments

Situations sometimes arise in Chapter 13 cases where the Debtor is unable to physically surrender collateral which secures a debt to a creditor.  The reasons may be that the collateral was stolen,  title documents were not properly executed, or ( in the case of the debtor's residence) the collateral was abandoned.  

The general rule in the 11th Circuit ( which includes Alabama) is that the Debtor is not required to physically turn over collateral to a creditor in every case where the Chapter 13 Plan provides for it.  The Debtor is required to step out of the way of the creditor's exercise of its legal rights, and to reasonably cooperate with the creditor to obtain possession of the collateral where feasible.   

The debtor can be found to be legally responsible for the cost of the lost or abandoned collateral where the debtor has not acted in good faith. This would include situations where the debtor intentionally destroyed the collateral, or where the debtor intentionally conveyed possession of the collateral to a party who cannot be located.    So long as the debtor has acted in good faith with respect to abandoned or lost collateral securing a loan, the Debtor should not have to worry about being responsible for paying the secured as anything other than a general unsecured creditor in the Chapter 13 Plan. 

The legal issues that can arise in these situations of lost collateral can be complicated.   Sometimes the debtor will be required to meet a burden of proof that the debtor acted in good faith even though the collateral securing a loan cannot be located.   The debtor may have to work with his or her attorney to obtain discovery documents from any third party, such as an auto dealer, to track down the title history of the collateral.  The most important thing for the debtor is to always act honestly and in good faith with respect to creditors both before and after the completion of the loan transaction.  

About the Author

Kevin Ryan

"I'll never be the kind of attorney your creditors want me to be. I'll always be the kind of attorney you NEED me to be. Call me. I'll BE there for you. And I'll make them go away."  -Kevin Ryan, Attorney at Law Kevin Ryan is a graduate of the College of Wooster and the Cleveland Marshall College of Law. He is admitted to practice before all Alabama State Courts, the United States District Court for the Southern District of Alabama, and the United States Bankruptcy Court for the Southern District of Alabama. The United States Bankruptcy Court is a part of the United States District Court. Since 1998, Mr. Ryan has represented thousands of individual clients in bankruptcy, criminal, divorce, probate, personal injury, and real estate matters.  Attorney Ryan is also a licensed real estate agent in Alabama.  He handles  Bank-owned properties, short sales, and conventional sales in addition to conventional real estate listings.   This wide range of experience enables Attorney Ryan to take a wider look at your legal matter. It is important to consult with an attorney who can see from experience how other legal issues may affect your situation, and advise you accordingly. Personal Info Kevin Ryan is a member of First Baptist Church in Silverhill, Alabama. He resides in Silverhill with his wife Jessica and their three children. Committed to helping our Clients achieve a fresh financial start Our practice focuses primarily on consumer bankruptcy matters under Chapter 7 and Chapter 13 of the United States Bankruptcy Code.  Our law practice also includes matters where bankruptcy litigation, appellate work, or involvement in civil lawsuits is needed by a client.     No representation is made that the quality of any of these legal services is of higher quality than another attorney or law firm.   The United States Bankruptcy Code requires the following notice:  We are a Debt Relief Agency, which means we help people get legal relief from their Debts through the bankruptcy process. Interested in learning more about our bankruptcy attorney near Mobile, Alabama? Contact Us for help with chapter 7 bankruptcy or chapter 13 bankruptcy in Mobile, Baldwin and Washington counties. Education Juris Doctor, Cleveland Marshall College of Law, 1997 Employed full time as a paralegal while attending law school in the evenings. B.A., The College of Wooster, 1994 NCAA Div.III All Conference (N.C.A.C.) Football Team : Defense 1993; Most Inspirational Senior Award 1993; Co-captain 1993; Letterman 1991-1993; Phi Sigma Alapha Fraternity 1991-1994; Athletic Director Jurisdictions Admitted to Practice Alabama


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I'll BE there for you.

I'll never be the kind of attorney your creditors want me to be. I'll always be the kind of attorney you NEED me to be. Call me. I'll BE there for you. - Kevin Ryan, Attorney at Law