Expert: Los Angeles Bankruptcy Lawyer Leon D. Bayer - 3/12/2011

Question
My wife file chapter 7 bankruptcy in California, but I did not file. My wife and I were both listed as debtors on the auto loan with Toyota Financial. The auto had $6,000 of equity in the vehicle based on a written offer by CarMax. My wife affirmed the auto loan on her bankruptcy.

However, three days before the discharge date during the automatic stay, Toyota repossessed our car. Toyota told us they do not reaffirm auto loans and when someone files bankruptcy they repossess the car.  The fact I did not file was irrelevant. Toyota then stated that if we had lived in a non-community property state they would NOT have repossessed the car.

The problem we had was threefold: 1) we could not sell the vehicle until after the discharge date; 2) we could not re-finance the vehicle until after the discharge date and 3) we were told that the Trustee owned the vehicle during the automatic stay.

After the vehicle was repossessed, Toyota Financial wanted the full loan amount of $16,000 plus repossession fees to get the car back, and no one would refinance a vehicle they could not see or inspect. In addition, Toyota relocated the vehicle 80 miles away from our home.

The attorney we used to file my wife's bankruptcy stated that there was nothing he could do since Toyota would have eventually repossessed the vehicle anyway. The fact we could have sold the vehicle to CarMax for $6,000 more than we owed to Toyota Financial on the discharge date was meaningless. The fact Toyota took the vehicle during the automatic stay was irrelevant since Toyota could argue that the discharge date was only three days away and Toyota simply made a good faith mistake.

Now my wife and I both have a repossession on our credit report in addition to her bankruptcy, and since Toyota has stated they are going to sale our vehicle at a “wholesale auction” means we will likely get little or no money from the sale of our vehicle once sold at auction.
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Does this scenario seem accurate to you?

Is there anything we can do? Most likely the vehicle is gone, but can we do anything about the repossession on our credit report and the lost equity in the vehicle.

Answer
Dear Damon,

It sounds like you have a real jerk for a lawyer. I think your lawyer lied to you. If he really said, "there was nothing he could do since Toyota would have eventually repossessed the vehicle anyway," then why didn't he tell you that BEFORE he filed the case? I strongly suspect your lawyer is covering up for something that he failed to do correctly.

At my California bankruptcy law firm we do reaffirmations with Toyota virtually every day, including reaf's where there is a co-signer, with NO problems. In fact I have a stack of them in my briefcase that I brought home to work on this weekend, including several for Toyota. In fact, Toyota's attorneys always prepare the papers themselves and send them over to me! I think we can safely say that Toyota loves to do reaf's on car loans, in California and in every other state!  

You say your wife reaffirmed the loan in her bankruptcy. You can read about the reaffirmation process in my Bankruptcy Guide at http://www.debt-relief-bankruptcy.com/faq-browse11-11/bankruptcy-guide.asp I suggest you read all three parts.

I have a bad feeling that while you think your wife reaffirmed the loan, that an actual reaffirmation did not really take place. If it really was reaffirmed correctly, then you have legal recourse that we can discuss in another posting, provided the payments were current and the vehicle was insured.

If you want to call me on Monday with your wife's case number, as a favor to you I will check the court docket to see if it really was reaffirmed. If it was, I will share further suggestions with you. My number is 800-477-3111. If your lawyer messed up, then there are things you can do about that!

If you or other readers want to keep up with my blog postings about life in and out of bankruptcy, you can follow my blog at http://www.bankruptcyblogger.org/ and my personal web site at http://www.debt-relief-bankruptcy.com  and A Human Guide to Bankruptcy at http://www.thebankruptcyguide.net/