Don’t Want To Reaffirm in Bankruptcy? Change The Law!

30 Jun Don’t Want To Reaffirm in Bankruptcy? Change The Law!

 

 

 

If you have been reading Bankruptcy Law Network recently, you would have seen various articles about reaffirmations. What they are, what they do, under what circumstances you should reaffirm a debt or mortgage and when you should not. There are even some courts that say you must reaffirm a car loan in bankruptcy. But there is one avenue not yet explored and applicable if you do not want to reaffirm. Change the law. Last time I looked, the United States was still a democracy. That means that everyone has a voice and your can be heard too. You don’t have to lobby Congress to change the bankruptcy Code; there are many ways you can do this on the local level. Let me give you an example.

After the revisions to the Bankruptcy Code can into effect in 2005, car loan companies thought that they had sewn up a requirement that you cannot keep a car secured by a car loan after bankruptcy unless you reaffirm the loan. Reaffirming the loan puts you back on the hook personally for the car loan as if the bankruptcy had not been filed. If you did not reaffirm the car loan, the car companies were taking the position that you could not keep the car EVEN IF YOU WERE CURRENT IN YOUR PAYMENTS.

So companies like Chrysler Credit and Ford Motor Credit were repossessing cars from borrowers who had filed bankruptcy, simply because they had filed bankruptcy and did not reaffirm and no other reason. This seems patently unfair. If you are making your payments and have the insurance in effect on the car and you are keeping the car in good shape, what difference does it make to car loan companies whether or not you file bankruptcy? If you don’t pay, they can take the car then.

Like Captain Kirk in Star Trek facing the Kobayashi Maru scenario, we changed the rules in Connecticut.

Although bankruptcy is a Federal Law, the law governing car loans is a state matter. The right to repossess is governed by State Law. So if you default on a car loan, state law governs the procedure a car loan company has to follow, not bankruptcy law. So, we added a provision to the Connecticut laws on repossessions that says that filing a bankruptcy is not an event that can trigger repossession. You have to fail to keep insurance on the vehicle or default in your payments.

And so with the addition of a few words to a sentence, sanity was returned to the car loan world.

It is not hard to lobby your local state representatives for such a change. The change makes simple sense. Why should a car loan company take a car if you are current in your payments and maintain insurance? Isn’t money what they really want?

If you are a citizen and you vote, contact you local government representatives now and see what you can do to avoid the injustices of the Bankruptcy Reform Act.

“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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