Auto Repossession

[tmcherney]

What is the name of your state? Minnesota

Our chapter 7 has discharged. Our atty advised us NOT to reaffirm our vehicles, but that we could keep them as long as we continued payments. We did for a while, but got behind again. (We thought this might happen - that's why no reaffirm.)

Both vehicles have been repossessed. The auto loan co. says they will auction and then we will still be responsible for the remaining part of the loan the auction does not cover - plus fees.
This is a huge amount.

We have been told by an atty friend that they can repossess, but cannot make us pay for the balance of the loan since we did not reaffirm.

We would be happy to let the vehicles go - if this is true.

Please advise?

 

[JETX]

The fact that you continued making payments BEYOND the bankruptcy filing reaffirmed and created a new debt. Depending on the specifics of the action, it is likely that you are liable for the deficiency.

 

[tmcherney]

Auto repossession

Thank you for your reply. Our atty friend is a bankruptcy atty, and said this is a federal law. I've been trying to research this online - is there a resource that you know of on federal bankruptcy law?

 

[JETX]

"is there a resource that you know of on federal bankruptcy law?"
*** Yep, the entire federal bankruptcy code can be found online at:
http://www4.law.cornell.edu/uscode/11/

 

[tmcherney]

Thank you - looks like I'm having a hard time with legalese though. Will most likely have to consult another atty for 2nd opinion to verify.

There is nothing in writing as to an agreement between the loan co. and us.

Thank you for your time.

 

[JETX]

Simply, upon your filing your petition for bankruptcy, an automatic 'stay' is imposed on ALL creditors. This stay remains until the court rules or the petition is withdrawn (see 11 USC 362).

Once the court has discharged your debts (or petition withdrawn) any NEW debts that you enter are NOT protected by the court. And upon making post-ruling payments, you extended your obligation beyond the bankruptcy.

 

[planner]

You had the debt discharged, it's gone.

The only way they can come after you is if you signed, and the court approved, a reaffirmation agreement. Your action of performance (paying the old debt) did not and could not create a new agreement.

Who are you going to put your faith in the underpaid Auto loan jocky or your attorney?

 

[tmcherney]

Planner - thank you for your response - that is my feeling - we never received anything in writing stating "now that your bankruptcy has been discharged, we need to enter into a new agreement."

 

[JETX]

Sorry, but 'planner' is absolutely WRONG. But go ahead, believe what you want....

 

[tmcherney]

It's not what I want to believe - just trying to make sense of it.

The reference you gave me discussed "agreements" made - I guess I somehow entered into an undocumented agreement by simply paying on the loan?

How is it you have such knowledge - are you in the legal field?

 

[JETX]

"How is it you have such knowledge - are you in the legal field?"
*** Yes. After all, this is supposed to be a LEGAL site, huh??

 

[tmcherney]

I realize that - but then "Planner" has a legal background as well? That's my point....

 

[Ladynred]

It has been my understanding all along that in situations where you don't reaffirm, the debt is discharged - you are released from ALL further liability for that debt. Paying a debt that HAS been discharged is completely voluntary - they'll accept your payments and let you keep the vehicle (usually) but they are NOT allowed to do anything that would even SMELL of collection on that discharged debt. The BK law does not prohibit you from making voluntary repayments.

Sorry, JetX, but I have to disagree with you on that basis. They were voluntarily paying on a discharged debt, but the liability for it, repo or not, is gone.

The Nolo Press book on CH 7 goes into this scenario in detail. They have no liability whatsoever for any deficiency w/o a reaff agreement.

To quote the book:
"Some bankruptcy courts allow you to keep secured property as long as you remain current on your payments under your contract with the creditor. If you fall behind, the creditor can take the property, but your personal liability for the debt is wiped out by the bankruptcy."

"Informal repayment can be used when lien avoidance or redemption is not available and allows for payments in installments rather than a lump sum. Unlike reaffirmation, it also leaves you teh option of walking away from a debt without being personally liable for the balance owed."

 

[tmcherney]

Thank you for your response - I am grateful for all advice.

We found this that seems to validate your opinion and our friend atty:


Do I Still Owe Secured Debts (Mortgages, Car Loans) after Bankruptcy?

Yes and No. The term "secured debt" applies when you give the lender a mortgage, deed of trust or lien on property as collateral for a loan. The most common types of secured debts are home mortgages and car loans. The treatment of secured debts after bankruptcy can be confusing.

Bankruptcy cancels your personal legal obligation to pay a debt, even secured debt. This means secured creditors can't sue you after a bankruptcy to collect the money you owe.

But, and this a big "but," the creditor can still take back their collateral if you don't pay the debt. For example, if you are behind on a car loan or home mortgage, the creditor can ask the bankruptcy court for permission to repossess your car or foreclose on the home. Or the creditor can just wait until your bankruptcy is over and then do so. Although a secured creditor can't sue you if you don't pay, that creditor can usually take back the collateral.

For this reason, if you want to keep property that is collateral for a secured debt, you will need to catch up on the payments and continue to make them during and after bankruptcy, keep any required insurance, and you may have to reaffirm the loan.

 

[nissandave]

JETX is dead wrong here.

In 8 states in the country, a debtor has a "keep current" option in order to keep secured collateral without remaining liable for the repayment of any part of the loan.
I know NC is one of these states. You can only use this option IF you are current on the payments of the loan securing the collateral at the time of petition filing. Look at the below pasted text contained between the 2 smileys.

Here is a copied part of the US bankruptcy code:

Section 524,(c)

An agreement between a holder of a claim and the debtor, the consideration for which, in whole or in part, is based on a debt that is dischargeable in a case under this title is enforceable only to any extent enforceable under applicable nonbankruptcy law, whether or not discharge of such debt is waived, only if -

(1)such agreement was made before the granting of the discharge under section 727, 1141, 1228, or 1328 of this title;



(2)
(A)such agreement contains a clear and conspicuous statement which advises the debtor that the agreement may be rescinded at any time prior to discharge or within sixty days after such agreement is filed with the court, whichever occurs later, by giving notice of rescission to the holder of such claim; and

(B)such agreement contains a clear and conspicuous statement which advises the debtor that such agreement is not required under this title, under nonbankruptcy law, or under any agreement not in accordance with the provisions of this subsection;

(3) such agreement has been filed with the court and, if applicable, accompanied by a declaration or an affidavit of the attorney that represented the debtor during the course of negotiating an agreement under this subsection, which states that -

(A) such agreement represents a fully informed and voluntary agreement by the debtor;

(B)such agreement does not impose an undue hardship on the debtor or a dependent of the debtor; and

(C) the attorney fully advised the debtor of the legal effect and consequences of -

(i) an agreement of the kind specified in this subsection; and

(ii) any default under such an agreement;

(4) the debtor has not rescinded such agreement at any time prior to discharge or within sixty days after such agreement is filed with the court, whichever occurs later, by giving notice of rescission to the holder of such claim;

(5) the provisions of subsection (d) of this section have been complied with; and

(6)
(A) in a case concerning an individual who was not represented by an attorney during the course of negotiating an agreement under this subsection, the court approves such agreement as -

(i) not imposing an undue hardship on the debtor or a dependent of the debtor; and

(ii) in the best interest of the debtor.

(B) Subparagraph (A) shall not apply to the extent that such debt is a consumer debt secured by real property.



Also, read page 5 of this linked material:

http://www.ncwb.uscourts.gov/opinions/images/0230218.1.o.pdf