#222 - My Customer Filed BK, Now What?

You are listening to the Independent Dealer Podcast with hosts Luke Godwin and Jeff Watson.

Hello and welcome to the Independent Dealer Podcast. This week brought to you by Buckeye Dealership Consulting. If you guys know Buckeye is a great friend of the podcast, they back up Buy here, pay Here dealers. They put their money where their mouth is. So if you're looking for reinsurance products, if you're looking for performance groups or advice or consulting, the guys at Buckeye are the ones to go with.

Yeah, they're the best, Jeff. And what's interesting this week we have Jane Downey, who is a bankruptcy attorney and what's, you know, a lot of Buy Here Pay Here dealers deal with bankruptcy. And Jane's the person to talk to about that for sure. And Buckeye helps us with all of our reinsurance products and BSI and all those things that really get Buy Here pay here stores on the. On the right path.

Yeah. So Jane, let's jump into it. You know, we know that bankruptcy filings are kind of at an all time low right now. You know, there was a ton of COVID money that went out and people have, thankfully, you know, when Covid hit, I battened down the hatches and I went running and covered and thought the sky was falling and everyone was going to file bankruptcy and be out of work and return their cars. Hasn't happened, luckily, but the big looming cloud. And when we say we're talking about bankruptcy, we don't mean we're talking about Carvana and all the dot coms that are kind of crashing right now. We mean from a consumer standpoint, what's your outlook? Are you optimistic or I guess optimistic for you is pessimistic for us. Right?

That is exactly right. I hate to lead off with that, but when, when your work is up, mine is down and vice versa. I always said that it would be best to be a bankruptcy attorney and a real estate attorney and then I'd be busy all the time, but then I might not want that either. So we definitely thrive in a bad economy. And right now with your business, used cars are at an all time high value. And that I think is a little bit of a distraction from filing bankruptcy and thinking that you're going to change the terms of the car loan just because of the value.

In part, you're right. They're not as upside down as they typically would be. Right. Even if they filed bankruptcy, they might be like, well, wait a minute, I'm not giving that thing back. I've actually got equity in this thing.

And what happens a lot of times with consumers who file bankruptcy and have to make that decision about the car? What are they going to do if they give you back your car? How are they going to get another car? I mean, they've already been struggling to pay for the car that they have. How can they give back a car and go finance a different car? That's going to be super expensive for them as well.

Yeah, their monthly payment is going to go up by 25%.

And what's interesting, that leads us into two different types of bankruptcies we all see out there in this chapter seven and chapter 13. Jane, can you kind of a quick overview of the difference in the two?

Yeah. So let's talk about Chapter seven first. Chapter seven is sometimes known as a liquidation chapter. Some people call it a straight bankruptcy. And for the most part, the debts that are affected in the Chapter 7 bankruptcy are going to be unsecured debt, such as a credit card, even finance companies, even those are secured by some household goods, medical bills. You know that those type of debts are the ones that are impacted the most. And the idea is that somebody's going to file Chapter seven and they're just going to wipe out those debts. So a Chapter seven trustee gets appointed, and that person, number one, is looking to make sure that the person told the truth on what's called the bankruptcy schedules, which is the forms that someone files and discloses their assets and their debts and their income and their expenses and things like that. The second thing the trustee is looking for is to see if there are unexempt assets available that the trustee can sell. So that's where this car value sometimes comes in, because the trustee is going to look at the car value. We have exemptions in South Carolina. If you just Google 1541, 1540, 41, 30, you come up with the South Carolina exemptions, and you find out that you can have a little bit more than $6,000 of equity in a vehicle and the trustee won't sell it. So, for example, if you've got a $12,000 vehicle and a $2,000 car loan, and then you add six or $7,000 of equity to it, you still have a few thousand dollars of unexempt equity that, unless you use another exemption, like a wildcard exemption, is fair game for the trustee to sell. So part of the hesitation and people filing Chapter seven is going to be, do they have assets with unexempt equity? Now, in a Chapter seven, when you have secured debt like you're going to have with Your car loan. The debtor has three choices. So the way you're going to find out these three choices is, is first you're going to get a copy of the notice of bankruptcy mailed to you, and that's going to be informative to you that the debtor has filed bankruptcy and what date the bankruptcy was and what chapter the bankruptcy was. So let's say you see that it's chapter is chapter seven. You are not going to have a copy of the schedules, but you can call an attorney or you can go to a website, www.pacer.gov p a c e r.gov and you can create a user name and password and then you can go look at the schedules. And in the back of the bankruptcy schedules, there's going to be a document called the statement of intent. And that statement of intent is going to disclose what the debtor wants to do with the vehicle. And the choices are going to be the debtor can surrender the vehicle. But just because the debtor says, I'm going to surrender the vehicle, that doesn't mean you get to go green light and get it. There's, there's still some things you've got to do, but that's going to let you know the debtor intends to surrender the vehicle and you can head down that path as long as you, you know, abide by the bankruptcy laws. And then the second thing the debtor can do is the debtor can just say, you know, I'm, I'm just going to pay for this vehicle. Now you can ask the debtor to reaffirm the debt, but which means that the debtor creates a new binding contract. And the reason that you would do that is if the debtor defaults after signing the reaffirmation agreement, you can actually sue the debtor for the deficiency. But in real life, a debtor who's going to default on a vehicle and you're going to repossess it is going to be judgment proof. And so even if you sue the debtor and you get a judgment, you're really not going to get anything. So probably most of the time you're just going to say, all right, that's fine, just continue to pay me pursuant to the contract and, you know, we'll go forward. But there's one more option that is probably not going to be used right now very much with the high cost of used cars, and that is redemption. And so what the debtor can do in a chapter seven is pay the value of the vehicle. But the debtor has to do it lump sum. And there are some finance companies out there. Like, there's one called 722 Redemption and there's one called Nabs that will help the debtor finance that. So what I mean is that if the vehicle is worth 7,000, but the debtor owes 10,000, if the debtor can come up with 7,000, the debtor can redeem the vehicle, pay for the value. But right now, with the high price of vehicles, you may be seeing that the debtor owes less than what the car is worth.

Yeah, that's interesting. Yeah, I think about that. I. Even with the high price of vehicles, I don't think any of our. I mean, typically my customers don't have $6,000 of equity in their car. If they do, I'm not doing well.

When your cars are not worth $6,000, Jeff?

Well, yeah, they weren't worth six from the beginning, but I'm not doing a good job of trading them in. If someone's got six grand in equity, I should have traded that car in and got them into something nicer. But we know we always.

Trustee is going to sell it if the.

Yeah.

If the debtor wants to redeem it, you're not factoring in the exemption. It's just if the trustee is going to sell it.

So, yeah, that's if they have a second or third car. Right. They wouldn't sell their primary transportation.

They. They would if it had more than the exemption of equity. Yeah. Say something.

So you wouldn't be doing that.

Yeah, right. Some people think that, oh, you, you're entitled to have a car now. You're entitled to have a car up to a certain amount of equity, and to the extent it's above that amount of equity, then it's fair game for the trustee to sell. But, but there, there's another exemption called a wild card exemption, so they kind of get to double that. So they really. They have to have, you know, more like 13,000 of equity before, you know, the car is going to get sold. Nobody has that. Yeah, because, I mean, that's, that's falling bankruptcy.

I mean, that. That's the reason. I guess chapter sevens are. I mean, not that they're rare, but I mean, what's the difference. What's the percentage difference between a chapter 13 and chapter 7? When you see it, most of the.

Time you are going to have a lot more chapter 13. And one of the reasons that you have more Chapter 13 is the way that attorneys get paid. Because in a Chapter seven, the attorney's Fees have to be paid up front. So let's say a bankruptcy is going to cost $4,000. Then a debtor who's filing chapter seven has to have that $4,000 upfront to file. Whereas in a chapter 13, we actually can be paid over time by the Chapter 13 trustee. So that might be a good time to talk about chapter 13.

It's all, it's just, if you want to know the answers, everyone follow the money. So.

Yeah, follow the money.

That's right. That's right.

So let's, let's Summarize the Chapter 7 real quick. You get notice, you see that it's a Chapter seven. I didn't know about this statement of intent. That's very interesting to me. I didn't know to go look for that. I would typically try to contact the attorney or the trustee and be like, hey, what are they doing with the car? Are they keeping it, reaffirming it, or are they giving it back? Right. Those are kind of the two main things that I see. They're either keeping it and they're going to reaffirm, keep paying, or they need to bring it back to me or I need to get the go ahead from the attorney to go pick it up. I did not know that was in the statement of intent off of the pacer.gov site. That's great for me to know. I can cut some. Cut some.

Super great. Yeah. Super great knowledge.

Yeah. And, and let me tell you another thing about reaffirmation that might come into play. So if somebody says, hey, I just want to keep the car and continue making payments, can I do that? You have the right to say no. You have the right to say no. I want you to reaffirm. But most of the time, car dealers will let them do that if they have a good payment history. And part of the reason is that if you look at the bankruptcy schedules that get filed, Schedule I is this income, and Schedule J is the expenses. A lot of people who file Chapter seven are going to be upside down. Their expenses are going to be higher than their income. They're going to be negative each month. And, and if you do a reaffirmation agreement and the debtor is negative, then it requires a court hearing. And it's very possible that the judge is going to allow the reaffirmation, but it's just a little bit of a pain because you got to wait and go to a court hearing and have the judge say that the debtor can reaffirm before it's actually official. So if you're really not, yeah, it costs money to do that. So if you're really thinking, you know, I wouldn't go after this debtor anyway, I would just repossess the car down the road. If they don't pay, then don't worry about a reaffirmation.

One quick thing that you brought up, the repossession work in chapter seven, if they. If you continue to let the debtor pay according to the contract, can you repossess the car if someone is in chapter seven?

So the stay has to be lifted for you to be able to repossess the car. And In a Chapter 7 case, well, any case, really, the stay is lifted either when the court says it is or when the debtor gets a discharge or the case is closed. And the debtor may get a discharge prior to the case closing. Most of the time it happens about the same time because there is no asset for the trustee to sell. And so the court just issues the discharge and closes out the case all at once. But if the trustee has found something to sell, the debtor may get a discharge. The case may still be open for the trustee to be selling whatever it is. But after the debtor gets a discharge, the state is listed.

And so a chapter seven doesn't take very long then. I mean, the whole like. So how long is the typical Chapter 7 bankruptcy?

That's a great question. So I would say a chapter seven is about five months long. So the process is that the case gets filled, filed, and within 30 days, you have what's called a meeting of creditors. And you do not have to be a lawyer to attend the meeting of creditors. So if you have some questions about your collateral. Right now, all of the meetings of creditors are telephonic. And so you could just jump on the phone and you could ask the debtor questions that you have. Like, I just had one where the debtor was Chapter seven and the debtor wasn't paying. And so I jumped on the phone and I said, what are your intentions about paying? You're behind? And she said, oh, I didn't realize I wasn't paying.

This sounds super familiar to me.

It sure does, doesn't it? And so if you were questioning whether your collateral was insured or you thought maybe it had been driven out of state, you weren't sure he was driving it. Those are some of the questions you could jump on the 341 meeting and ask that the debtor cannot get a discharge earlier than 60 days after that first scheduled meeting of creditors. So if you do that math, you have the meeting of creditors about 30 days, then you add 60 days. And so the discharge can't be in the first 90 days of the case. And so typically it's about four or five months out when the court processes the discharge.

But in a 7, they're still paying this whole time. Right. Because they've decided to keep the car. They're supposed to stay current on the car. Right. And here's the thing. So let's stay on sevens for a minute. You, us as creditors, and we love a post seven. Right. If someone's like, oh, I filed chapter seven, I just got my discharge letter. We're like, awesome, like, green light. Get this guy a car, he's got. No, he's wiped clean. And he can't file for six years. Seven years.

You can't file back to back sevens for eight years.

Eight years. So those are like the golden goose, right? Those are the ones we want post chapter seven. And after a discharge letter, people that are tied up in the middle of a seven, oh, I filed, but if I buy your car, I'll reaffirm it. Is that, is that something we want to get tangled up in or can that be a slippery slope? Because they could then convert it to a 13 and then we're stuck in that.

Yes. You don't have any control over their decision making, even though they say promises could be empty promises.

Yeah. Okay. Wait for the discharge letter in a 7 before you do anything. But those are great and they are a way better situation for the creditor. So I think if we're ready, let's transition to the ever dreaded 13.

Well, let me say one more thing.

Go ahead.

One, one thing that applies to the sevens and the thirteens as we Transition over to 13 is your idea of calling the debtors counsel is fine. You know, you, you can completely do that. And also if somebody tells you that they have filed bankruptcy, in addition to looking on Pacer or calling an attorney, there's something called VCIS. And if you just Google VCIS bankruptcy, you'll come up with an 800 type number that you can call and punch in the name of somebody and find out if they filed and what chapter they filed. And if somebody's telling you, oh, I'm going to file, that doesn't count. Like you can still collect point that they file.

But we all know that if you hear or the word is they're going to file or whatever reason you repo the car, they file within the cure period. And this is what we talked about. I mean, you can, you could slap my mom in the face and I would probably be less angry or demoralized than someone who files a bankruptcy during the cure period. After I picked up the car. That is like the worst thing for a buy here, pay here. You chase a car, you chase a debtor, you get them, you finally have that car back in your lot, and then you get the call from the attorney that's like, well, they just filed bankruptcy. You have to get the car back.

Let's, let's, let's start down the rabbit hole of the chapter 13 and that's the ones we do dread. So, Jane.

Yes.

What is a chapter 13?

So chapter 13 is a payment plan. It's known as a reorganization chapter. The typical person who files a chapter 13 either is rich in assets, equity and assets and is going to lose those if the person files chapter seven. Or what's more likely, the debtor is behind on some type of payment and needs time to catch up. And those could be a mortgage, those could be a apartment rental, those could be a car, could be domestic support obligations, taxes. Basically a chapter 13, depending on the person's income, is going to be payments for a period of three to five years. And so this person needs more time than is available to catch up on something.

So that, that, that comes into what we deal with. And so I know there's a lot of caveats, but in general, if a customer bought a car this month, today and files it two months down the road, what can I do? Jane, how can I call you or another bankruptcy attorney and say, we got to get this fixed? They're trying to cram me down, they're doing all this. What can we do? What's out there for us?

So the process that I do when you call me with that situation is I first go on, on PACER and I look at the bankruptcy schedules and I want to see on schedule B, I'll see what personal property the person owns. On schedule A, I'm going to see what real estate the person owns and I'm going to try to figure out maybe why this person filed bankruptcy. You know, you can look at the bankruptcy schedules and you can kind of see, oh, was there an eviction going on? And it just is coincidental that the car was tied up in it. However, sometimes they do file bankruptcy, say to try to change the interest rate. And if the bankruptcies file that quickly after the car purchase, then I'm going to be zeroing in on, is this a bad faith filing? And so I'm going to want to look at Schedule I, which is the income, and Schedule J, which is the expenses. I'm going to want to look at. Are they paying for a car for somebody else in addition to this car? Do they have another car they can drive? And we should argue that they don't need this car, you know, kind of what's going on here with it? And then I'm going to scrutinize some of the expenses. And for one thing, you know, it may not be that I think they're spending too much on other things. It may be that I'm going to harp on. This car is too expensive for them. They need to let it go. And so I'm going to kind of read through the answers to the questions that they have on the schedules and what we call the statement of financial affairs. Then I'm going to turn to the plan of reorganization. And within the plan, you're going to be listed if the car is. If a loan is less than two and a half years, which is going to be most of the time with your loans, they cannot change the amount that they're paying. They have to pay the total balance. If the loan is older than two and a half years, they can pay the value of the vehicle over time. So that's going to be one thing I'm looking at, is how old is this car loan? And then the typical interest rate that they're going to change to is going to be five and a quarter. And so I'm going to ask you, are there extended circumstances where it would really be wrong for this person to get to change the interest rate, such as the loan is only two months old. So what we can do is we can object to the plan and we can say we don't like the terms for whatever reason, and then there'll be a hearing. Problem is that the hearing is not going to be for a few months. And then the other thing we can do is if we feel like the entire case was filed in bad faith, you know, we can file a motion to dismiss the case as a bad faith filing. And again, that takes a few months to get heard. So there's. Unless we have grounds for an emergency hearing, like maybe there's no insurance, you know, so in that situation, we might file a motion to lift the automatic stay, saying you can go forward with the bankruptcy, but we don't want to be a part of it because this car isn't insured. And most of the time the debtor will want to settle and the debtor will say, oh, I got insurance yesterday. Let me show you. You know, and can I please keep the car? And in that case, what we usually do is try to work in the attorney's fees work and a payment plan and have a provision. Okay, well, if you let your insurance lapse again, this stay is lifted and we can come get it. Another thing that you'll see in the plan is that the trust that the debtor is going to take your loan, let's say you have a $12,000 vehicle. If you look at the plan, it's going to say you're going to get $200 a month for the next five years. But the trustee does pay the secured creditors before the unsecured creditors. So don't let that bother you too much. You know that the amount that the debtor is paying into the plan is probably most important because the trustee is going to be dispersing that and secured creditors are going to get paid at the top.

Yeah. And let's kind of glanced over that insurance deal because there's so many dealers out there that go, hey, the debtor doesn't have insurance, I can go repossess the car. No, you can't do that. There's a process, and I think the process is Motion 362. Is that what we do, Jane?

That's exactly right. And so you have your choice of just filing the motion and then the debtor has 14 days to object. And if there is no objection, you have to stay lifted. But typically the debtor always objects. And so then you're going to have a hearing. So it might be a month down the road, but if you feel like there's a circumstance to where, you know, people are in jeopardy or your collateral is in jeopardy and you need to have an emergency hearing, then we can ask for that as well and then maybe get a shortened notice peering period and a quicker hearing.

What would happen, Jane, if just let's say I have a 20 or $30,000 suburban out there and the customer files bankruptcy and then they don't have insurance and they reckon total the collateral is, are they gonna still have to pay for it or I'm just left holding the bag?

I think you're going to be left holding the bag in that situation unless we can go on other grounds. You know, but the problem is that somebody who was in that situation is not going to have anything. So you're, you're back in tune of, you know, well, I might find some things to sue this person for. But if I do. Am I really going to collect anything? You're just spending more money and not getting a return on that situation.

Yes. And that's the reason, as soon as they don't have insurance, we, we try to file the Motion360 to go through the steps of filing that. And what is great is that tends to, if we have to get to that position, that the debtor is going to have to pay the, the attorney fees because of that.

Correct?

Typically. So a lot of that's going to depend on what your contract says. So you want to make sure your contract is tight. I just had a situation to where a repossession was involved and the judge was questioning whether the contract allowed for acceleration of the debt. And that became an issue about did the debtor have the right to redeem the vehicle and pay for the vehicle in the plan, or could the creditor really accelerate the debt and demand payment and you know, going to your right to cure issue that you were talking about earlier, you have to really be in, in the know on what you're doing.

You know, so, so, so my biggest issue is this. When I get the Chapter 13 notice and I go ahead and file my proof of claim, right? I say, hey, here's what the car's worth, here's their interest rate, here's their payment, blah, blah, blah. And then the trustee or the attorney or whoever takes that paper and just throws it straight in the trash can and says, well, your car is not worth 13, it's worth 5. And your interest rate's not 24, it's 6. Here you go. You know what I'm saying? How much?

Yeah, let's talk about that.

How much luck do we have fighting that to say, no, no, no, no, no. This is ridiculous.

You bring up some really great points. Okay, so let me start first with you got that notice. And that notice said that you need to file a claim and you're in a chap. First of all, the trustee is not going to pay you anything unless you have filed the claim. Now you're still going to have your lien. And five years down the road after the car's not worth anything and the debtor's bankruptcy is over and you haven't gotten paid for five years, you can still pursue your, your lien, but you don't want to do that. You want to go ahead and file the claim. And it's really easy to file the claim. You can do it electronically again. You don't need to have a lawyer do it. If you, if you Want to have a lawyer do it one time with you just to kind of show you the ropes, you can do it. If you want to hire a lawyer to do it, it's only going to cost a few hundred dollars to do it. If you have in your loan documents that that attorney fee can be passed on, then when you pay the lawyer to file the proof of claim, you just add that to the balance of the loan. And then when the attorney files the claim, it includes that attorney's fees. That's possible as well. So, so you get your claim filed. You can go to the court's website in South Carolina, that's www.scb.us courts.gov. and if you just Google South Carolina bankruptcy court, you'll find it as well. But you want to make sure you file that claim. Then what you're talking about is whether the debtor has to pay the full balance or whether the debtor can pay the value of the vehicle. And again, that's going to depend on how old you the loan is. So if the loan is not two and a half years old and the debtor and you know your, your vehicle is just secured by the vehicle, you don't want to secure the vehicle by the vehicle. And something else, you don't want to have one loan that's got two cars on it or something like that. Just have your loan be on that vehicle. Then the debtor is going to have to pay, pay the full balance along with any collection fees or, you know, any fees that your contract says that you can get. But the debtor is going to be able to stretch that loan out over the life of the plan, although it's not going to take you the full life of the plan to get paid. And ordinarily the debtor is going to get to change the interest rate to five and a quarter unless you object and have some grounds why it shouldn't be five and a quarter.

Okay, so if I'm hearing you right.

Two and a half years is the mark.

Two and a half. So they originated it. I originated the loan with them sooner than two and a half years. So they've had it for six months. And I say, okay, you still owe me 15 grand on this car. And the attorney or whoever says, well, it's only worth five, we're only going to pay you five. That's not a move they can do, even though they do it to me every single time.

Well, if they do it, then you can file an objection.

And they don't expect me to file an objection. So they just do it to us and expect us not to file an objection, and then they just move forward. Because none of my loans are over two and a half years. No one really makes it two and a half years. So. But every time my principal gets crammed down, every single time, it should never happen.

It shouldn't happen. And there actually is a law that says that you can't put stuff in plans that aren't legal. Like, you got to follow the law. And so those plans should not be getting confirmed. There should be a trustee, you know, looking at your claim and seeing that the loan is not two and a half, a half years old and stopping the debtor from doing that. But, you know, it's oversight on somebody's part. And so it really is up to you to file an objection and then, you know, probably add that attorney's fees for the objection to your loan. If your loan says that you get.

Let'S say this rate is not really, you know, do you see that happen often where you're like, look, man, I mean, I'm paying, I'm paying 12% for my money maybe, and I can prove that. How can they pay me six or five and a half?

Well, when it's an egregious situation, sometimes the debtor's counsel won't want to go in front of the judge and argue about it. And so sometimes, you know, you might start out with a contractual rate and then end up agreeing to something lower than the contractual rate, but higher than five and a quarter.

That's what we see a lot. And so can Jeff go? Let's just say that happened to Jeff, or he was crammed down before the two and a half year magic number. Can you go back and object to that at this point if it's later on? Or is this something that has to be done before the trustee signs off on it?

Well, I think it would be better if you do it in advance. You're going to get a plan, and the plan is going to have a deadline to object. And if you wait, you're going to have to explain to the judge why you didn't object on time. And your argument is going to be, well, it doesn't matter that I was late. They have to follow the law. And so we need to undo what we did and make them file a new plan. And that's probably just going to end up costing you more than if you objected within the time frame. And unfortunately, you can't represent your company. Like, if you're a person, you can go to court and represent yourself. But if you're arguing for a company, there has to be an attorney in bankruptcy court, which is another expense. And it's okay if the debtor ends up paying for the car and pays that expense back, but then if the debtor doesn't, you know, then you're kind of out a little bit more money.

Yeah, I mean, it's. The things that I've learned just by Jane helping me out is just crazy. Jeff, do you have something more to go on this?

Oh, yeah. Way too much. I don't know how long, but it would. It would. It would make sense to me that I'm in a small community. Right. So there's probably two or three main bankruptcy guys that I get all my notices from. Right. I know the law firms. So from your side, Jane, when you're filing a bankruptcy for a debtor and you see a certain creditor on their thing, do you kind of know how that's going to go? And you tell the debtor like, hey, yeah, I know you have your mortgage with so and so, or, hey, I know you have a car loan with these guys. Yeah, that's going to be a battle. Let's just not do it with them. I guess what I'm digging at is what I need is probably kind of a bulldog like Jane to just kind of punch some of these bankruptcy attorneys in the mouth a few times to let them know that if they're going to file against, you know, Jeff and his finance company, that they can't try anything sneaky because I'm going to run them through the ringer. You know, I almost feel like I become a soft target and they're like, oh, you have a loan with so and so just. Just do these things. They don't really pay attention or they don't know what they're doing or they won't notice.

Yeah, it could be that. Or it could be that the attorneys aren't even asking the question, how long have you had this loan? You know, it could that the attorneys are like, well, you know, you're kind of hurting for money, debtor, and so let's just see if this works. And it also could be they're not even asking. They're just assuming that they can value every car loan and maybe they are getting away with it.

Let me ask you. Sorry, Luke, go ahead.

I was just going to talk about GPS and disabling a car during bankruptcy and this type of thing. Jane, what have you seen going on with. With that? I mean, that's something you should not do correct.

Hey guys, while we're talking about GPSs and bankruptcies past time, that's who I use. All my GPS is I go exclusively wireless with everything. It makes my installs easy. If I get the car approved and I'm going to carry the note in house, my guys just really quickly can toss a wireless GPS right inside the headrest or the fricking console or the wherever, wherever. Super easy.

That's right. And yeah, great products. We use wired and wireless and they're wonderful products. They don't ever let you down unless your installer lets you down, which happens every once in a while.

That could happen. And I did see a press release from them. They haven't told us this, but it looks like they're coming out with a Gen 3 Encore device that actually has a wired plug in it, I think is what I saw. So it's like it's a wireless unit, but then you can also get the boondoggle to hook into it. And I don't know if that means you can hardwire it in and it'll run off the battery forever. And the second they unplug the sucker, it jumps over to a wireless mode and then it'll just keep tracking even though they think they threw it in their trash can. I don't know. So call the guys at Pastime, check into that version 3 encore device.

Yeah, one quick thing though. They. They released a email yesterday. Passtime does more than just GPS as y'. All. They. They help keep us safe with the CFPB and all these people. And so they released a email, a short white letter yesterday. So check that out if you hadn't.

Already seen it too.

A lot of good information.

Great. Back to the episode.

Right? It's if you are disabling a car because of no insurance, then you might get away with that. But if you are disabling a car trying to get paid, that would be a stay violation. So what I mean by that is when somebody files bankruptcy, this concept called the automatic stay goes into effect and it freezes collection actions. And if you read if you just Google bankruptcy 362, then it will tell you what you can't do. And one of the things you can't do is to repossess the car. Now, there's a relatively new case out there that says if you have a vehicle, like you've already repossessed it, for example. It used to be that if somebody called Luke and said, hey, I just filed bankruptcy, you need to give me my car Back then Luke would check and make sure the car had insurance and give it back. There's a new law that says, no, we're not going to make you do that. You actually can keep the car. And, and it's a really weird provision of the law because what it does is says, okay, well you can keep it. And then if the debtor wants to get it back, then the debtor has to ask you for what we call turnover. And that just means the debtor's asking for it back. And if you don't give it back, then the debtor's recourse is to sue you for turnover. So it's really just this up in the air law right now about the law is you can maintain the status quo and then you have the turnover. So it puts you in a position almost of saying, I'm not going to give you your car back, you're going to have to sue me. And so then you sue and then what? You know that, that's the question right now is we don't know then what because.

And that's, and that's if you, if you repossess and then, then somebody files.

Correct, correct, correct. So back to your question about the GPS situation. I think that if, if you have the GPS on the vehicle and you disable use of the vehicle and your reason for doing that is to try to coerce payment and the bankruptcy has already been filed and the stay is in effect, you would get in trouble for that.

Yeah, that's a bad idea. So my question would be, we know that once it's filed, we have that, that stay. We can't have any collection actions. Right. We can't call them, we can't text them. Basically no contact with the debtor at that point. Does, does tracking their gps, is that considered collection action if we just want to keep tabs on them or if our GPS is automatically tracking every 23.

Hours.

Is that a no?

No, I would take a position that that would be okay because I think that is preservation of your collateral. That is not trying to collect a debt. You know, I mean, you just want to know where is my vehicle? You know, my car loan says it can't be driven out of state or something like that. And then, you know, hey, they're in mon. I feel like my collateral is at risk, you know.

Yeah. Did it go, did it end up in a tow yard?

Right, right. So I don't think that's as big of a deal that, that's not really impacting payment.

I think a lot of us, I think a lot of us creditors, I think we're scared of bankruptcy. I think we're scared of the bankruptcy courts and the trustees and the bankruptcy attorneys, and they call and they, they yell and scream at you because you repossessed a car and their customer just filed and you're going to be held in contempt and all these big fancy words that they threaten us with. But if you have your ducks in a row, I mean, it seems like a lot of it is kind of.

And honestly, that's the reason you have to have relationships with bankruptcy attorneys in town is because you need to find someone like Jane who, who works our side of the bankruptcies to kind of weave you through that, that jungle that is bankruptcy. I've got two last questions. If I did this, if I did decide, or my collector for some reason ignored the bankruptcy tag on, on the account and started collecting it again, or I had a new collector, what is that? What can the bankruptcy court do to me as, as a dealer if for some reason we, we did contact someone?

Well, I think that you have, if you know about the bankruptcy, you know, that's kind of the first step. And then if you took action that violated the stay, that's the second step, even if you didn't know it violated the stay. And there's some recent case law that says that the debtor's attorney really shouldn't just slap you with a lawsuit if that happens, that the debtor's attorney should try to work it out. So, I mean, I typically will call the, you know, creditors attorney and write a letter. You know, like I. Medical professionals, like hospitals are notorious for somebody files bankruptcy and they still are trying to collect the debt. And so I'll typically call the medical provider or I'll write a letter. I like writing a letter because then if they don't stop, then I've got something in writing that says that I, I tried. So I, I think that's what should happen is that somebody should reach out to you and say, you know, hey, your collection company is trying to collect this debt. You need to stop them. And I think that even if they did file a lawsuit against you, and it's almost a no harm, no foul type situation, I didn't mean to do it kind of thing, or this, you know, this is just a slip in the crack sort of thing, I don't think the judge is going to be inclined to just slap you with a big contempt fine. I think that the judge is going to see what efforts you took to make sure that didn't happen. Oh, this is a one time thing. You usually are behaving in cases, you.

Know, but, but if I, but if for some reason I repossess somebody's car who was in bankruptcy, how bad is that going to be?

So that kind of goes back to what you were saying about your local attorney. Because I've seen sometimes to where like if, if you do something that you really shouldn't have done and then you have an attorney that can kind of get along with the debtors council. I mean, you know, some debtors counselors are really easy to work with, some you cannot get in touch with. And so some of it depends, I think, on like the relationship, because sometimes people are like, oh, yeah, I've had cases with Luke and he doesn't usually do that. So. Well, we'll give a pass on this one. Yeah, but if it was a situation to where, I don't know, maybe the debtor was out some money, you know, the debtor had to get to work and had to take Uber or something on the curb. Yeah, yeah, they might want a little.

Station as a creditor. I think what we need to do is we put so much of our ego in it and it's like, oh, we got the car. And then we try to like dig in and be like, no, I'm not, You know, and it's like, no, no, no, you got your hand caught in the cookie jar.

It's business, right?

Get that car back to him as quick as possible. You're going to pay for the repo. You're going to pay to have it towed back to their house. And maybe some sort of a, yeah, I'm sorry, let me pay for your Uber or let me, you know, try to make this right. You just got to know that you tried. Whether you did it knowingly or whether you did it accidentally, you got to make that right as quick as possible. And I think you're probably less likely to get sued by their, you know.

And the last thing that I want to put to rest that we see on these message boards and everything. Bankruptcy law is bankruptcy law, right, Jane? It doesn't vary by state, correct?

That's correct. There are some local rules that the bankruptcy courts put into play that are going to differ from district to district. But the bankruptcy laws in general are federal laws that are going to apply all over the country. And then you have state laws that are going to come into play in certain situations after the bankruptcy. So, you know, for example, a redemption period might be different in Florida than It is in South Carolina. Yeah.

All right, Jeff. That's great, James.

Seriously. So we know that you practice law in South Carolina. So if South Carolina dealers want to get a hold of you and learn more, or if, I guess, any dealer in any part of the country wants a referral from you to their state, because even though it is a federal law, attorneys are still only licensed to practice in certain states, right? So for you, South Carolina, how did these dealers get ahold of you? How can they reach out to you and learn more?

Thanks. My Telephone number is 803454, 1983 and my email address is Jane, which is J A N E at M B M L A W S C dot com.

And. And one quick thing. Jane is a superstar in the world of bankruptcy law, okay? She's won all these awards. Check her out on LinkedIn as well, because she knows what the heck she's doing. And I promise you, if you're having issues, she can get you to the right people.

Thanks, Shane.

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