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Repossessions: 8.1.1 Relevance of Bankruptcy to Repossessions

Bankruptcy can be an important tool for dealing with repossessions and monetary obligations to secured creditors. Not only does a bankruptcy filing create an automatic stay that will stop a repossession and other collection activities from going forward, but also it may allow a debtor to obtain the return of property which has already been seized.

Repossessions: 14.3.6.2 RTO Tactics for Gaining Entry into a Consumer’s Home

The breach of the peace standard poses problems for RTO companies who must obtain the consumer’s permission to seize the goods. One RTO tactic is the “switch-out.” An RTO representative tells the customer that the appliance is being picked up for necessary repairs or maintenance or is being upgraded, when in fact it is being repossessed.

Repossessions: 14.3.6.3 Principal’s Liability for Breaches of the Peace

When faced with an incident of wrongful repossession, many RTO dealers will attempt to accuse their employee of unforeseen misconduct. While most RTO companies have written policies that prohibit the use of force during repossession, it should be possible in most cases to prove that the employer is liable because it knew or should have known that force, threats of force, and other illegal behaviors are commonly used and approved during repossessions.

Repossessions: 14.3.6.4 Potential Tort and UDAP Claims

Unauthorized entry and other breaches of the peace may give rise to a tort claim, which may allow punitive damages.357 The RTO company’s breach of a statutory duty may be a tort,358 a breach of the peace is a tort,359 and the seizure may amount to conversion because seizure is only authorized if there is no breach of the peace.

Repossessions: 14.3.6.6 Application of the Servicemembers Civil Relief Act and State Counterparts

The Servicemembers Civil Relief Act prohibits RTO companies from using self-help to retake the leased items if a servicemember buyer paid a deposit or installment prior to entering active duty.365 The rental company has the right to seek a court order to retake the goods, but the Act has various protections for servicemembers in litigation.366 Many states have similar or broader laws protecting servicemembers.367

Repossessions: 14.3.6.7 Bankruptcy Stay

When a debtor files bankruptcy, the automatic stay prevents an RTO company from retaking the rented items.368 A creditor that repossesses the property in violation of the automatic stay may face actual and punitive damages.369

Repossessions: 14.3.6.8 Discrimination

There is some evidence that RTO dealers treat delinquent customers differently based on their race.370 African-American customers may experience more rapid repossession and may be less likely to have late fees waived than white customers.371 The Equal Credit Opportunity Act (ECOA) arguably applies to RTO transactions.372 If so, RTO dealers cannot treat customers differently post-default based on prohibited grounds.

Repossessions: 14.3.7 Consumer’s Right of Reinstatement

Article 2A does not provide for a right to cure or to reinstate, but RTO statutes in effect in most states provide a right to reinstate.376 A consumer might not want to reinstate an RTO contract because the contract so often is a bad deal. In addition, the right to reinstate can be viewed as just a gimmick to allow RTO companies to assess additional late charges.

Repossessions: 14.3.8 RTO Company and Consumer Liability After Repossession

Once the RTO good is repossessed, the RTO firm retains the good, and most likely rents the same appliance to a new customer, perhaps on the same rental terms. The question then arises as to what liability the consumer has to the RTO company and whether the RTO company which has kept the consumer’s built-up equity has to return anything to the consumer. If Article 9 applies, such liabilities are examined in , supra. This subsection assumes Article 9 does not apply.

Repossessions: E.1 Sample First Set of Interrogatories

Federal Rule of Civil Procedure 33(a) and certain state rules of civil procedure limit the number of interrogatories to twenty-five including subparts. This limitation may be avoided only by leave of the court with written stipulation of the parties. Nevertheless, because most repossession litigation is in state court, this sample set includes more than twenty-five interrogatories.

Repossessions: E.2 Sample Document Request

Automobile Creditor,

Plaintiff

v.

Consumer,

Defendant

Case No.

FIRST REQUEST FOR PRODUCTION OF DOCUMENTS

Pursuant to Rule 34 of the Federal Rules of Civil Procedure [or other appropriate state procedural rule], Defendant requests that Plaintiff produce the documents, electronically stored information, or other materials listed hereinafter for inspection and/or copying at the office of the attorney for Defendant on [specify date and time].

Repossessions: E.3 Sample Supplemental Interrogatories for Dealer Only Auto Auction

A typical method to dispose of repossessed automobiles is through an automobile auction whose rules permit attendance only by dealers. These are additional sample interrogatory questions designed for cases in which the response to the first set of interrogatories indicates that the vehicle was resold at such a dealer only auction.2

Automobile Creditor,

Plaintiff

v.

Consumer,

Defendant

Case No.

DEFENDANT’S SECOND SET OF INTERROGATORIES TO PLAINTIFF

Repossessions: E.4 Sample Second Document Request

Automobile Creditor,

Plaintiff

v.

Consumer,

Defendant

Case No.

SECOND REQUEST FOR PRODUCTION OF DOCUMENTS

1. Produce each and every document which you identified or described in response to Defendant’s First Set of Written Interrogatories.

2. Produce each and every document upon which you relied in the preparation of your Reply to Defendant’s Answer and Counterclaim in this action.

Submitted by,

Attorney for Defendant

Consumer Bankruptcy Law and Practice: 3.1 General Explanation of Chapter 7 Bankruptcy

When most people think of bankruptcy, they think of the type of bankruptcy provided for in chapter 7 of the Code—a liquidation proceeding sometimes called straight bankruptcy. This type of bankruptcy has by far been the most popular type of proceeding for individuals. Although the percentage of debtors choosing chapter 7 has diminished somewhat since enactment of the Code because of the advantages that chapter 13 offers, chapter 7 continues to be the chapter most frequently utilized, and it remains a lifeline for up to a million consumer debtors each year.

Consumer Bankruptcy Law and Practice: 3.2.1.3 Effect of Prior Bankruptcy Cases on Eligibility to File

One limitation exists on the broad right to file under chapter 7. An individual is not eligible to file a petition if, within the preceding 180 days, (1) they were the debtor in a bankruptcy case dismissed for willful failure to abide by orders of the court or to appear before the court in proper prosecution of the case or (2) they requested and obtained voluntary dismissal of a bankruptcy case following the filing of a request for relief from the automatic stay provided by section 362.20

Consumer Bankruptcy Law and Practice: 3.2.1.6 Dismissal for Abuse and the Means Test

Although not an eligibility requirement, section 707(b) permits a bankruptcy court to dismiss a chapter 7 case, after notice and a hearing, if the court finds that granting relief under chapter 7 would be an abuse of its provisions. Section 707(b) applies only to debtors whose debts are primarily consumer debts. A means test, found in section 707(b)(2) of the Code, determines whether there is a presumption of abuse based on the debtor’s ability to repay creditors. This test does not apply to debtors whose income is below certain standards.

Consumer Bankruptcy Law and Practice: 3.2.2 The Initial Forms

Although the bankruptcy filing process may seem intimidating at first, a voluntary case is actually started by the debtor69 filing a simple eight-page petition, which includes a statement of compliance with the prebankruptcy credit counseling briefing requirement,70 along with a statement of the debtor’s Social Security number or lack thereof,71 and, if applicable, an initial statement about any prepetition eviction judgment entered against the debtor.