Joy Denby-Peterson v., 941 F.3d 115

In July 2016 Joy Denby-Peterson bought a used 2008 Chevrolet Corvette financed by Pine Valley Motors (assigned to NU2U Auto World). She missed a deferred down payment and the car was repossessed pre-petition.
Denby-Peterson filed an emergency Chapter 13 petition on March 21, 2017; creditors received notice within days and she demanded return of the Corvette.
She moved in Bankruptcy Court for turnover under § 542(a) and for sanctions under the automatic-stay remedy (§ 362(k)) for willful violation of § 362(a)(3).
The Bankruptcy Court ordered turnover (the car returned) but denied sanctions, adopting the minority rule that passive post‑petition retention of pre‑petition repossessed collateral does not violate § 362(a)(3).
The District Court affirmed; the Third Circuit, in an opinion by Judge Fuentes, also affirmed, holding that a secured creditor’s mere retention of collateral repossessed pre‑petition is not an “act . . . to exercise control over property of the estate” under § 362(a)(3), and that § 542(a) turnover is not self‑executing.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether a secured creditor violates § 362(a)(3) by retaining collateral repossessed pre‑petition after notice of the bankruptcy filing	Denby‑Peterson: § 362(a)(3) forbids any act to “exercise control” over estate property; retaining the car after demand is such an act. Also argues § 542(a) is self‑executing, so failure to turnover equals stay violation.	Creditors: They repossessed pre‑petition and merely maintained the status quo after notice; § 362(a)(3) bars post‑petition affirmative acts to obtain or exercise control, not passive retention. § 542(a) requires court action (adversary/turnover order) and is not self‑executing.	The court joined the minority: passive post‑petition retention of pre‑petition repossessed collateral is not an "act . . . to exercise control" under § 362(a)(3); § 542(a) is not self‑executing and turnover is effectuated by court order/proceeding, so no sanctions under § 362(k).

In re Fulton, 926 F.3d 916 (7th Cir. 2019) (holds post‑petition retention of pre‑petition repossessed collateral can violate the automatic stay).
In re Weber, 719 F.3d 72 (2d Cir. 2013) (majority view treating § 542 turnover as self‑executing and retention as stay violation).
In re Del Mission Ltd., 98 F.3d 1147 (9th Cir. 1996) (supports majority that refusal to return pre‑petition seized property can violate stay).
In re Knaus, 889 F.2d 773 (8th Cir. 1989) (same majority line).
In re Rozier, 376 F.3d 1323 (11th Cir. 2004) (per curiam holding refusal to return vehicle violated automatic stay).
In re Cowen, 849 F.3d 943 (10th Cir. 2017) (minority view: mere maintenance of pre‑petition possession does not violate the stay).
United States v. Inslaw, Inc., 932 F.2d 1467 (D.C. Cir. 1991) (minority view supporting restraint on only affirmative post‑petition acts).
Whiting Pools, Inc. v. United States, 462 U.S. 198 (1983) (Supreme Court recognizing turnover occurs under court supervision and can be conditioned on adequate protection).
Citizens Bank of Md. v. Strumpf, 516 U.S. 16 (1995) (holds temporary withholding pending assertion of a defense did not violate the stay; cautions against reading turnover provisions as automatically self‑executing).