Bankruptcy Court, Debtor, Ball Three

17 Nov Bankruptcy Court, Debtor, Ball Three

In baseball, a well-known play is called the ‘walk’. When the pitcher throws the ball outside the strike zone and the batter doesn’t swing, it is called a ‘ball‘. Four ‘balls’ and the batter gets to walk to first base. Chrysler Credit has thrown its third ball in Bankruptcy Court in Connecticut this past week. They had sought permission to repossess a car from a debtor who was current in payments, but did not reaffirm the loan. Chrysler alleged that it needed an order so that their repo man would feel comfortable in repossessing the car.

Under the revisions to the Bankruptcy Code in 2005, creditors had hoped to require debtors to reaffirm car loans in every bankruptcy case. A reaffirmation would put debtors back into a pre-bankruptcy posture as if the bankruptcy had never been filed as to that loan. The revisions appeared to require a reaffirmation, or redemption (by paying the loan off) or surrender of the vehicle. Some jurisdictions recognized a so-called fourth option, commonly called “keep and pay”.

Last year, Judge Krechevsky of the Bankruptcy Court of the District of Connecticut in Hartford declined to grant Chrysler Credit’s Motion for Relief from Stay so it could repossess a Jeep Wrangler when the loan was prepaid through the end of the year. Judge Dabrowski in New Haven ruled a similar Motion for Relief From Stay as moot. The law as it currently reads, provides that the Automatic Stay of bankruptcy protection terminates automatically if the debtor does not carry out his intent ro reaffirm, redeem or surrender the vehicle within certain time frames. Both Judges determined that since the statute was self-executing, there was nothing for them to do. Both Judges indicated to the creditor that it would be risky to repossess a car when the loan was entirely current in payments.

This past week, Judge Weil in New Haven joined Judge Krechevsky and Judge Dabrowski in ruling that the request for a relief from the bankruptcy stay was moot and refused to give Chrysler Credit a “comfort order”. There is one more Bankruptcy Judge in Connecticut. A ruling from that Court will determine whether it is Chrysler Credit or the debtor who ‘walks’.

“ConnecticutGene Melchionne is a bankruptcy lawyer covering the entire State of Connecticut. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.

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