On September 23, 2009 the United States Court of Appeals for the Fourth Circuit heard the case of DaimlerChrysler Financial Services Americas, LLC, v. David Douglas Jones; Kirsten M. Jones ; the judgment was decided on January 11, 2010. The case involved David Jones who had filed Chapter 7 bankruptcy in 2006 while still owing on a loan to Daimler Chrysler for his vehicle. Since Mr. Jones had not signed a reaffirmation agreement in regard to his vehicle, but instead submitted a statement of intention to continue payments, Daimler Chrysler obtained an order lifting the bankruptcy stay based upon the vehicle installment contract’s bankruptcy clause. The clause made it clear that the loan would automatically be in default upon the filing of a bankruptcy. Not too long after obtaining the order to lift the stay, Daimler Chrysler repossessed the vehicle. They did so despite having accepted an additional payment from David Jones after Chapter 7 bankruptcy had been filed. This caused Mr. Jones to sue Daimler Chrysler in bankruptcy court on the grounds that West Virginia law required official notice be given to him prior to repossession, and also claiming that formal reaffirmation agreements were not required under the 2005 Bankruptcy Reform Act.
The U.S. Court of Appeals, Fourth Circuit, reversed the lower courts, which had sided with Mr. Jones. The appeals court held that the option to retain the vehicle and make payments was not permitted under the 2005 Bankruptcy Reform Act, except by consent of the lender. In as much as there had been no reaffirmation agreement filed, Daimler Chrysler was free to repossess the vehicle any time after forty-five days from the section 341(a) meeting of creditors. The appeals court also rejected Mr. Jones’ claim that Daimler Chrysler had accepted his intention to “retain and pay” by receiving his single electronic payment; this was found to be ambiguous and the court refused to find that Daimler Chrysler’s action was evidence of its acceptance of “retain and pay.”
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Kevin D. Heupel, Colorado Bankruptcy attorney, 303-955-7570, COBankruptcyHelpEmail, free-consultation form.
