SC: Magistrate’s Court Might Be the Best Bet For Reclaiming a Wrongfully Repossessed Car
By Bankruptcy Attorney on Feb 20, 2007 in Automatic Stay, Chapter 7 Bankruptcy, Protecting Assets In Bankruptcy
Bankruptcy debtors in Chapter 7 must file a statement of intentions with respect to their secured property. When the secured property is an automobile, the lender will undoubtedly push the debtor to sign a reaffirmation agreement. Debtors who are asked to reaffirm their automobile loans but decline to do so, for whatever reason, may well wake up one day to find their cars repossessed - even if they’re current on their car loan. Does the failure to reaffirm equate with a substantial impairment of that lender’s interest? That’s the question, at least in South Carolina (and other states with similar Uniform Consumer Credit Code provisions enacted into state law).
One option: bringing a suit in Magistrate’s Court (if the value of the vehicle debt is under the jurisdictional limit of $7500) for claim and delivery. This is an action to seek the recovery of personal property. Magistrate courts are typically viewed as more favorable to consumer parties, and the equities of the situation may receive a more equitable hearing.
South Carolina statutes will govern the case, and when the lender argues that its interests - the receipt of future payments - are impaired because the debtor failed to reaffirm, and that the bankruptcy filing itself constitutes a default. The key is that without a default, there is no right to repossess the collateral. Under SC law, a default can exist either due to the failure to pay as obligated, or where the prospect of payment is substantially impaired. That burden - the burden of proving a substantial impairment - is on the creditor.
Other claims or defenses can be joined to such a claim, but if the value of the claim in question rises above $7500, the case will properly belong in Circuit Court, rather than Magistrate’s Court. The differences are mainly procedural - there is no discovery in the Magistrate’s Court as it exists in Circuit Court, and the time from filing to hearing is generally much shorter in Magistrate’s Court (but that will depend on the court’s docket, of course).
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