amp EXPO Repossession and Bankruptcy The NittyGritty By Michael W Dunagan Attorney Jameson amp Dunagan PC Hyatt Hill Country Resort San Antonio TX July 2325 2017 Why Follow Repo Rules ID: 696095
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TIADA 2017 ANNUAL CONFERENCE & EXPO
Repossession and Bankruptcy:
The Nitty-Gritty
By Michael W. Dunagan, Attorney
Jameson & Dunagan, P.C.
Hyatt Hill Country Resort
San Antonio, TX
July 23-25, 2017Slide2
Why Follow Repo Rules?Class Action SuitsAggresive Plaintiffs’ AttorneysRepossession Triggers Anger
OCCC Audits
MVD Audits
Criminal Penalties and Civil Damages
CFPB ScrutinySlide3
DamagesActual damages, orStatutory damages - amount of finance charge plus 10 per cent of principal
$500 on certain violations
Personal injury damages when breach of the peace occurs
Punitive damages
Fines for violating bankruptcy staySlide4
The Legal Basis of RepossessionWhat is Self-Help Repossession?Repossession is Not TheftIs Prior Notice Required?The Danger of Waiving Strict Compliance
The Effect of AccelerationSlide5
When Can I Repo?Valid security interestOCCC Dealer Finance LicenseDefaultTypes of default
When to send cure letter prior to repo
AccelerationSlide6
Do I Have to Give Advance Notice?Under Texas law, no advance notice is required if debtor is in default.However, some courts have held that a creditor may have waived strict compliance by accepting late and/or partial payments in the past. Slide7
What is Waiver?A creditor’s actions (accepting late/partial payments) may alter terms of contract. Suddenly repossessing and accelerating without notice may be seen as unfair.Use of “cure” letter before repo is better practice. Slide8
What is Cure Letter?Cure letter gives debtor notice that late/partial payments won’t be accepted in future.Debtor given opportunity to bring account current.CFPB uses fairness standard in applying UDAAP.Slide9
Breach of Peace and Other LimitsTypes of breach of peacePhysical forceUniformed officer
When is repo complete?
Servicemembers Civil Relief Act
Bankruptcy staySlide10
Creditor LiabilitySanchez vs. Mbank caseDue diligence in selectionUse hold harmless agreement
Use arbitration agreement
Insurance coverageSlide11
Post-Repo ProceduresSecure propertyReturn personal propertyChoose method of disposition
Commercial reasonableness
Right to redeem
Charging repo feeSlide12
Disposition MethodsSigned Waiver (Voluntary Acceptance of Collateral in Satisfaction)Strict Foreclosure (Non-Voluntary Acceptance of Collateral)
Private SaleSlide13
Obtaining Signed WaiverWhen to use Proper formMust be totally voluntary
Legal significance
no notices necessary
release from claims and suits
acknowledge receipt of personal property
deficiency is waivedSlide14
Debtor’s Signed Waiver Upon Voluntary Return
Debtor’s Signed Waiver Upon Voluntary Return
Agreement to Accept Collateral in Full Satisfaction of Indebtedness
___________________, 20_____
To: (Name of Secured Party)
RE:
(Description of vehicle), and Motor Vehicle Installment Contract
dated ________________________, ______
I (we) have voluntarily returned the above-mentioned vehicle, which is collateral under the above-referenced contract, to you. I (we) consent to your acceptance of the collateral in full satisfaction of the remaining indebtedness, and I (we) relinquish all rights to the vehicle. I (we) waive my (our) right to notification of disposition of collateral and my (our) right to require disposition of the vehicle under Section 9-620(e) of the Uniform Commercial Code. I (we) release you from any claim or liability, in tort or breach of contract, violation of the Texas Consumer Protection Act/Deceptive Trade Practices Act, the Texas Finance Code, or any federal law or regulation. You agree to release me (us) from any liability with regard to our obligations under the Contract, and agree not to pursue any deficiency against me (us).
I (we) have removed all personal property from the vehicle.
____________________________________
(Debtor)
____________________________________
(Co-Debtor or Guarantor)
Accepted:
____________________________________
(Secured Party)
(From
Texas Automobile Repossession: A Lien Holder’s Legal Guide
, copyright 2015 by Michael W. Dunagan)Slide15
Strict Foreclosure(Acceptance of Collateral in Satisfaction)
Easiest method of disposing of repos
No payment of surplus and no post-sale accounting
Proper notice form
60 per cent rule
20- day holding period – ownership reverts
Balance forgiven – no credit reporting of deficiency Slide16
Private Sale Difference between public and private saleNotice letter
Retail or wholesale
Sale at wholesale auto auction
Any surplus must be paid –
Any deficiency can be sought
Post-repossession accountingSlide17
Post-Repossession AccountingAfter Private SalePost repossession accounting form
When it must be sent?
To whom must it be sent?
What info must it contain?
Penalties for non-complianceSlide18
Using the CourtsSequestration: the processdue process requirementslimitations
justice courts
costs
Seeking criminal prosecutionSlide19
Related IssuesPersonal propertyAccessionsValid mechanics lien trumps security interest
Use of tracking devicesSlide20
Repossessing From MechanicMechanic lien is a possessory lienRelease of vehicle or private use waives mechanic lienInvoluntary repossession from mechanic’s premises does not waive lien Slide21
Bankruptcy Issues for BHPH DealersAvoid selling to bankruptcy candidatesBankruptcy trumps repo rights
The automatic stay
Pre-petition repo
Fixin’ to file
What to do when the bankruptcy notice arrivesSlide22
Avoid Being Victim of “BR Planning”Current and prior bankrupts are bad risksRequire listing of all debts on credit appsAsk magic questions on credit apps:
“Are you planning on filing bankruptcy?”
“Have you consulted with an attorney about filing bankruptcy?” Slide23
The Automatic Stay Creditors can take no action outside of bankruptcy courtSevere penalties for repossession after bankruptcy filed“Lifting” the automatic stay is goal of creditorSlide24
Pre-Filing Repossession: Can I Keep It?Courts consider bankruptcy stay as controlling repossessed vehicle not yet legally disposed of
Courts will order return of vehicles
Exception: If 20 days have passed after strict foreclosure notice, bankruptcy stay has no affect
Lesson: Send notice promptly and dispose of vehicle as soon as legally permissibleSlide25
Fixin’ To FileIf
b/r
petition not filed, there is no automatic stay – OK to repo
Debtor may file immediately after repo (see Pre-Filing Repo above)Slide26
What Do I Do When the Bankruptcy Notice Arrives?Any notice is legal notice (don’t ignore)Remember that bankruptcy stay trumps right to repo
Flag account -- Make no contact with debtor
Consider retaining counsel to get stay lifted if value of vehicle justifies expense