In November 2023, DebtStoppers achieved a significant victory in advocating for client rights in Chapter 13 bankruptcy cases with the ruling in In re Cooke, 22 B 5968 (Bankr. N.D. Ill. Nov. 27, 2023). In a Chapter 13 bankruptcy, a debtor is typically permitted to pay back their vehicle at a reduced amount and use the bankruptcy to get the vehicle current. Once the case is approved and confirmed, the terms of the plan are generally fixed. However, there is a significant divide in bankruptcy case law regarding whether a debtor can modify the plan to surrender the vehicle if it becomes unnecessary, such as due to theft or damage.
In the Cooke case, the debtor's vehicle was stolen, creating a need for a replacement car. However, the debtor could not afford both the payments for the car in the plan and another vehicle. DebtStoppers filed a motion to surrender the vehicle, which was initially opposed by the Chapter 13 Trustee. Following a briefing schedule, the bankruptcy court sided with DebtStoppers, ruling that the debtor had the right to surrender the vehicle without having to fully pay for it.
This case was argued successfully by Michael Miller, chair of DebtStoppers Pro Bono Clinic, marking it as the first in the Northern District of Illinois to permit the surrender of a car in a confirmed Chapter 13 case. This decision represents a major victory for debtors in Illinois.