Auto Loans in Limbo

Bankruptcy lawyers have their eyes on several cases before the Ninth U.S. Circuit Court of Appeals that have the capacity to alter the relationship between auto-loan creditors and debtors. The most prominent of these cases will test whether a type of policy known as a ?ride-through? is still valid in consumer bankruptcy law, says John C. Colwell, an attorney for the Debt Relief Legal Clinic in San Diego. (In re Dumont v. Ford Motor Credit Co., 383 BR 481 (9th Cir. BAP 2008) (pending as appeal No. 06-00980-JM7).)
      In a ride-through, Colwell explains, a consumer undergoing bankruptcy can retain his or her car if all outstanding payments are current. The case before the Ninth Circuit concerns Antoinette Dumont, who was up-to-date on her loan for a 2003 Chevy Cavalier when she filed a petition for Chapter 7 bankruptcy. Ford Motor Credit repossessed the Chevy in the middle of the night, arguing that the auto-loan contract specified filing for bankruptcy as a breach of contract.
      Under preexisting federal law, repossession under such circumstances is prohibited. But under BAPCPA, the right of creditors to do so lacks case law for precedent and is unclear. The Dumont case, the first of its kind in the nation to reach the appellate level, will begin to provide some of the case law.
      ?Because of poor drafting, the new law is not clear,? says Colwell. ?And I don?t know what to tell little old ladies if they ask, ?Are they going to take my car if I file for Chapter 7?? ?

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