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Ever since the bankruptcy laws changed in October of 2005, debtors have had to make a choice about what they are going to do with their car loans. Are they going to pay them off (hardly practical in most cases), reaffirm them (their debt to the bank would not be discharged), or turn in the car? However, what happens when the debtor decides to surrender the car, but the bank won't come pick it up?
Since this change in the law there has been a pattern of banks not repossessing vehicles that have been surrendered in bankruptcy. This may be due to the cost of repossession and sale, but it might also be an attempt to coerce payment from the debtor.
In the 1st U.S. Circuit case of Pratt v. GMAC, the debtors had surrendered the car, but GMAC determined that the cost of repossession outweighed any money that might be realized from repossession sale. However, when the car stopped running, and the debtors wanted to junk it, GMAC refused to give them the title free of the lien, so that they could do so.
The court ruled that the bank's refusal to release the lien amounted to coersion that violated the terms of the debtors' discharge and awarded them damages! Although this ruling is only authoritative in the First Federal Court District (MA, RI, NH, ME, and PR), debtors here in New Jersey (3rd Circuit) should still consider the option of pursuing the bank for damages as well as holding the bank in contempt for the refusal to repossess.
Another possible solution is to make a motion to compel the bank to accept your redemption of the vehicle for $1. The bankruptcy code allows you to retain a vehicle where you pay off the lienholder the actual value of the vehicle in one lump sum. If they have not repossessed it, you can argue that the car is worthless and thus they should accept $1 in return for a release of lien on the car!
New Jersey law allows a repair garage to assert a lien on a vehicle for work done. This lien is actually superior to that of the bank! Assuming they would work with you, you could take the car in for an oil change. When you do not pay, the repair shop can invoke a mechanics lien and sell the vehicle after first notifying the bank, who has the option of paying the charges. If the bank doesn't pay, then perhaps the vehicle can be sold back to you for the price of the oil change!
If you find yourself in this situation, you should consult with your attorney about what to do under these circumstances. You deserve not only a fresh start from a bankruptcy; you deserve some closure as well.
Looking for more information about bankruptcy? Get the answers to the most frequently asked questions by downloading my free book, Top Questions People Ask About Filing Bankruptcy in New Jersey. It will give you the answers you need all in one place. Then call me at 888-857-8418 or contact me through this site for an appointment for a free consultation to discuss your case.