Exemption Bill Removes Repossession Threat

What Congress took away ten years ago, the California legislature may give back if SB 308 becomes law.

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.

The return of ride-through is just one of the long needed provisions of Senator Bob Wieckowski’s bill to improve California exemptions.

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