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Creditors May Repossess Cars Even During Bankruptcy Under Maryland Law - Ford Motor Credit Co. v. Roberson

August 1, 2011

Because our Corona consumer bankruptcy attorneys work with clients who are in bad financial situations, we sometimes represent people who are trying to hold on to basics of life, including a car. A case in the Maryland Court of Appeals took a look at the issue of whether cars can be repossessed during bankruptcies in that state, and concluded that they can. In Ford Motor Credit Company v. Roberson, Maureen Roberson sought to sue Ford's credit arm for repossessing her car shortly after her Chapter 7 bankruptcy was discharged. Roberson had made her payments before, during and after the bankruptcy, but had never actually reaffirmed the debt during her bankruptcy, which violated a clause of the credit agreement. The appeals court ruled that this was enough to support Ford's repossession.

Roberson filed a Chapter 7 bankruptcy in late 2007 and received a discharge on January 30, 2008. As part of that case, she listed her car as an asset and Ford as a creditor. No one disputed that Roberson was current on her car payments. However, she failed to enter into a reaffirmation agreement with Ford over the auto loan debt -- that is, she did not strike an agreement with Ford that kept her personally liable for the debt after discharge. Her contract with Ford said she would be considered in default on her loan if she filed for bankruptcy, and repossession would be one remedy open to Ford. However, she could cure the default by reaffirming the debt.

Because she intentionally turned down reaffirmation, Ford repossessed the car and Roberson opened a new Chapter 13 bankruptcy on February 21, 2008, solely to recover the car and seek damages against Ford for violations of her discharge injunction and various state and federal laws. Ford later returned the vehicle, but disputed damages. Roberson moved to certify the question of "Whether the repossession of a vehicle based solely on the violation of an ipso facto clause of a vehicle retail installment contract, in the absence of any other breach, is permissible under Maryland law."

The certified question went to the Maryland Court of Appeals, which said yes. Roberson argued that the language of the contract allowing repossession was prohibited by a Maryland law outlawing contract clauses that accelerate a debt's maturity or allow repossession because the creditor deems itself insecure. However, the court said, both parties agreed that the Credit Grantor Closed End Credit Provisions (CLEC) of the Maryland code controlled the contract. Under that code, as Roberson noted, a creditor may not accelerate the maturity of a debt just because it believes itself insecure. Under a different section of the state code (OPEC), creditors are also prohibited from repossessing properties because they find themselves insecure. However, the Court of Appeals found that the legislature had intended the two sections of the law to operate separately. Because CLEC was the controlling part of the law and OPEC could not be drawn in, the court found that Ford's contract provision allowing repossession was not illegal. Thus, Ford's actions were legal under Maryland law and Roberson could not collect damages under that law.

Our Fullerton individual bankruptcy lawyers represent people in California, not Maryland. However, this case is a good reminder that you should make decisions during bankruptcy with the best legal advice. This decision says Roberson turned down the reaffirmation that Ford offered her during her bankruptcy, saying she preferred to stick to the original contract. It's not clear whether she misunderstood the situation or had another reason to say no, but she could have kept her car without all of the extra legal proceedings (and legal bills) by reaffirming the debt. As Los Angeles County personal bankruptcy attorneys, we help our clients understand the consequences of their decisions during bankruptcy as thoroughly as possible, because we know those decisions can have a large effect on their later lives and usually can't be taken back.

If you're deep in debt and you can't see a realistic way to pay it all back with your current situation, you should call Howard Law PC to discuss whether bankruptcy is right for you. For a free consultation, send us a message through our website or call 1-800-872-5925.

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