When the Bankruptcy Code was amended in 2005, Congress gifted the car finance industry with a plum: those who filed bankruptcy could no longer make their car payments after bankruptcy and count on keeping their cars.
Instead debtors were faced with giving up their bankruptcy discharge as to the car loan or giving up their car to the lender.
Without a reaffirmation agreement, bankruptcy filers had to worry that they’d come out some morning and find their car repoed, even when the payments were current.
Hardly seems fair, but, hey, this was the auto lobby and Congress.
Keep and pay may return
The California Assembly takes up a bill this month that would prohibit car lenders from declaring a car loan in default just because the borrower filed bankruptcy.
The borrower has to keep paying for the car if she wants to keep it, but she doesn’t have to give up the bankruptcy discharge of the car loan to do so.
Other standout changes proposed by the bill include:
- A $5000 exemption for the inventory, cash, or receivables of a sole proprietor
- Elimination of reinvestment provision that makes the homestead vanish if you don’t buy a new house
- Protection for alimony or family support to the extent necessary for support
- Wiping out the need for one spouse to get the other’s permission to use California bankruptcy exemptions
- Increasing the exempt value of a car to $6000
Of course, monied interests and those who make their money selling the assets of debtors oppose these improvements in California exemptions.
The first test of SB 308 in the Assembly is expected June 30th in the Judiciary Committee. The bill has already passed the California Senate.
The members of the Judiciary Committee are:
- Mark Stone
- Donald Wagner
- Luis Alejo
- Ed Chau
- David Chiu
- James Gallagher
- Cristina Garcia
- Chris Holden
- Brian Maienschein
- Patrick O’Donnell
You can find your assembly representative here. Voter input on S.B. 308 has to be in by June 25th.
Got an opinion? Get in contact.