On February 6, 2008, the Ninth Circuit Bankruptcy Appellate Panel issued its ruling confirming the Bankruptcy Courts decision that Ride Thru no longer exists as a result of the new Bankruptcy Laws that went into effect on October 17, 2005. So what does this mean?
First of all, a Bankruptcy Appellate Panel (BAP)decision is not binding on Bankruptcy Courts, but it may as well be since very few courts will issue rulings counter to a BAP decision. So at least for courts in the Ninth Circuit, most will follow this ruling.
Ride Thru used to be a method to keep a secured debt without executing a formal reaffirmation agreement and filing the same with the Bankruptcy Court. With a reaffirmation agreement, the debtor is contractually put back on the hook as far as liability is concerned despite a bankruptcy filing.
But instead of reaffirming a debt, it used to be that debtors could keep their secured assets, such as their car, motorcycle, boat, etc., provided they maintained payments. If they stopped paying, the asset would be repossessed, but there would not be any personal liability remaining in light of the Bankruptcy. This used to be called Ride Thru.
Now, with the new ruling, if the debt is not reaffirmed, the asset may be taken. This means that if you are totally current on payments and insurance, if you did not reaffirm the debt, you could wake up one morning a year later and find your car has been repossessed. This is precisely what happened with my client and why we appealed.
But fear not. The Appeals process is not over yet. This case will next be appealed to the Ninth Circuit. Depending on where it goes there, it may eventually reach the Supreme Court of the United States.
Even if Ride Thru is ultimately struck down, there still may be state law remedies for such a wrongful repossession.
Always consult with your attorney if you have any doubts concerning Ride Thru or Reaffirmation Agreements.
Written by Michael Doan
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