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Right to Prevent Modification of Stay Limited

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In re Aime; Case No. 07-12388-SSM; February 28th, 2008

This matter was before the court on the motion of the creditor to enforce a security interest in a motor vehicle and the debtor’s motion to amend the previously entered order conditioning the automatic stay. The Debtor was in default of her payments on the vehicle by 10 months, but needed the vehicle to get to work and wanted to enter into an agreement for additional time to make payments and otherwise catch up on her payments.

The court discusses the automatic stay and points out that “if the debtor is granted a discharge, the discharge acts as a permanent injunction against many kinds of creditor actions but does not prevent enforcement of a valid lien against property of the debtor, since liens, unless specifically avoided in the course of a bankruptcy, pass through and may be enforced against the collateral following discharge. Bankruptcy Code § 524(a)(2). The court holds that because it found that the substantial payment default, coupled with the trustee’s decision not to administer the property, the debtor’s financial inability to bring the payments current prior to the date she would receive the discharge, and the creditor’s unwillingness to agree to a reaffirmation except upon the original terms constitute cause for termination of the stay. The court noted that the debtor’s need for the vehicle, however great, cannot trump the secured creditor’s right to adequate protection of its security interest in the motor vehicle. “The longer an automobile lender goes without payments, the greater the risk that its collateral, if repossessed and sold, will not bring enough to satisfy the debt.

The court has no power in a chapter 7 case to require a creditor to agree to a loan modification or to a cure that would extend beyond the date a discharge is grated and the automatic stay terminates as a matter of law.

Court modifies the automatic stay to allow the lender to repossess its collateral as permitted by non-bankruptcy law, but may not pursue the debtor for any deficiency.

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