Does Ex's bankruptcy reset the SOL clock for a 7+ year old repo'ed car?

[wiles01]

My ex and I got divorced in 2001. As part of the divorce decree, I was responsible for the house, she got the car.

In 2002 she defaulted on the loan for the car and it was repo'ed.

I was contacted once in 2003 regarding the loan from the credit company and informed them of the situation (that's how I found out the car had been repo'ed) and have not heard from them since.

I just got a call yesterday from the credit company wanting to arrange payments for the defaulted/repo'ed car loan. I told them everything I said above and the lady informed me that my ex had declared Chapter 7 bankruptcy which is why they were contacting me regarding the delinquent loan now.

The SOL for written loans in Kansas is 5 years and 4 years in Texas where the loan company originates from. As far as I would say, the SOL clock has long expired since I'm sure the last payment and car repossession was in 2002.

My question is, does her bankruptcy reset the SOL clock on the loan back to me?

[OhioFiler]

The SOL should not reset for you. Tell them to sue you if they want to collect, send them a cease and desist letter and drink a nice cool Friday afternoon cerveza with lime.

[BKDefender]

The answer is NO - a bankruptcy does not reset the SOL. Generally the 5 year SOL is calculated based on the last debtor/user initiated transaction. So if it was repo'd in 2002, the 5 year SOL expired sometime in 2007.

They can still call you about a debt though but they're not going to be able to sustain a lawsuit against you for an SOL time barred debt.

--William

[tigergem]

That's funny because when I got divorced in 2004 I really got the short end of the stick (yeah yeah - didn't we all?) and HIS LAWYER called me afterward and told me... you know... if you really want to get even with him, go file Ch 7 bankruptcy. I should have listened THEN... I wouldn't be here NOW.

Of course that has absolutely nothing to do with SOL. Sorry to hijack your thread.

[BKDefender]

If you have an indemnification clause in your divorce decree, that says if one party does not pay their assigned joint debt that the non-paying party agrees to indemnify the other party for having to make the payments to avoid defaulting on the card, then filing bankruptcy does not make the debt go away. In fact it can make all of your discharged debt spring right back to life after your discharge. How? You're no longer personally liable to the credit card companies but you now have a liability to your ex-spouse for him/her having to make your payments and him/her getting a domestic-support-obligation judgment against you for your portion of the debt you agreed to indemnify him/her against.

How fun is that?
I typically recommend that if a couple is currently in divorce proceedings and both want to file bankruptcy that they should consider explicitly denying indemnification. That way if one of them doesn't follow through with filing bankruptcy that person voluntarily assumes all liability of all of the debts. It's a good motivation to follow through with their dual bankruptcy plans.

--William

[tigergem]

So... BKDefender... just curious... can the finance company go after my ex for the balance of a secured debt listed as unsecured under my cram down on my Ch 13? My unsecured creditors are getting less then 1% under my plan.

[BKDefender]

Are you referring to a cram-down of a car loan for a car that you bought more than 910 days prior to filing Chapter 13? If not, then what debt are you referring to?

--William

[tigergem]

Are you referring to a cram-down of a car loan for a car that you bought more than 910 days prior to filing Chapter 13? If not, then what debt are you referring to?

--William

A vehicle loan yes. A very large and very expensive vehicle loan, that came with a 15 year loan term @19.95%. I got custody of the beast and the financing for it in the divorce. Crammed the $50k + balance down to under $10k at 3.5%, thank you very much. The judge didn't even blink at my Motion to Value Collateral. Can they go after him for the amount that isn't paid as unsecured? As I said my unsecured creditors are getting less than 1% under my plan.

[BKDefender]

What kind of vehicle has a 15 year term at 19.95%? Wow.... I just finished resolving a problem with a client who had their car repo'd and they had a 20% loan - I'd not seen interest rate that high on a car loan until then.

Bankruptcy discharges YOUR personal liability on unsecured debt, so obviously they cannot come after you for it. In a cram-down the secured debt is 'bifurcated', i.e. split into a secured portion that you have to pay in your plan and an unsecured portion that gets lumped in with your remaining unsecured debts. Once you're done the discharge injunction blocks them from coming after you for the debt.

All of this you already know.

Because the injunction only stops them from coming after YOU for the debt, any other party who is liable for the debt and who also does not have a discharge injunction order is fair game for collecting any unpaid balance on the account after your case has been discharged, dismissed, or converted to a chapter 7. Hopefully, in your case, you'll complete your payment plan and get the discharge.

During the pendency of your case though, the section 1301 co-debtor stay prohibits the creditors from going after your co-debtors while you are in bankruptcy so they have breathing room until your case is done.

--William

[tigergem]

What kind of vehicle has a 15 year term at 19.95%? Wow.... I just finished resolving a problem with a client who had their car repo'd and they had a 20% loan - I'd not seen interest rate that high on a car loan until then.


--William

A vehicle. Not a car. And I guess I got a bargain after all, because I just did the math...the total of payments made already plus interest paid and my down payment plus payments made under the Ch 13 plan comes to just about $1k less than what the original price of the widget was in the first place.

Thank you William, you made my day with your answer. But I am venturing to guess that by the time my plan is complete my ex will also be protected by SOL. I don't know I haven't looked it up.

Now. My remaining question is: They DO have to release title to me on completion of my plan, correct?

[BKDefender]

They are required to release the title to you upon completion of the plan. If they don't, it is a violation of the bankruptcy discharge injunction. i.e. the only reason they would hold it is if you haven't paid the balance owed, and they cannot require you to pay a balance if the cram-down was confirmed in your plan.

--William

[tigergem]

Cool William, thank you. That helps me. A lot.