1. TIADA 2017 ANNUAL CONFERENCE & EXPO
Repossession and Bankruptcy:
The Nitty-Gritty
By Michael W. Dunagan, Attorney
Jameson & Dunagan, P.C.
Hyatt Hill Country Resort
San Antonio, TX
July 23-25, 2017

2. Why Follow Repo Rules? Class Action Suits
Aggresive Plaintiffs’ Attorneys
Repossession Triggers Anger
OCCC Audits
MVD Audits
Criminal Penalties and Civil Damages
CFPB Scrutiny

3. Damages Actual damages, or
Statutory damages - amount of finance charge plus 10 per cent of principal
$500 on certain violations
Personal injury damages when breach of the peace occurs
Punitive damages
Fines for violating bankruptcy stay

4. The Legal Basis of Repossession
What is Self-Help Repossession?
Repossession is Not Theft
Is Prior Notice Required?
The Danger of Waiving Strict Compliance
The Effect of Acceleration

5. When Can I Repo? Valid security interest OCCC Dealer Finance License
Default
Types of default
When to send cure letter prior to repo
Acceleration

6. Do I Have to Give Advance Notice?
Under Texas law, no advance notice is required if debtor is in default.
However, some courts have held that a creditor may have waived strict compliance by accepting late and/or partial payments in the past.

7. What is Waiver?
A creditor’s actions (accepting late/partial payments) may alter terms of contract.
Suddenly repossessing and accelerating without notice may be seen as unfair.
Use of “cure” letter before repo is better practice.

8. What is Cure Letter?
Cure letter gives debtor notice that late/partial payments won’t be accepted in future.
Debtor given opportunity to bring account current.
CFPB uses fairness standard in applying UDAAP.

9. Breach of Peace and Other Limits
Types of breach of peace
Physical force
Uniformed officer
When is repo complete?
Servicemembers Civil Relief Act
Bankruptcy stay

10. Creditor Liability Sanchez vs. Mbank case Due diligence in selection
Use hold harmless agreement
Use arbitration agreement
Insurance coverage

11. Post-Repo Procedures Secure property Return personal property
Choose method of disposition
Commercial reasonableness
Right to redeem
Charging repo fee

12. Disposition Methods
Signed Waiver (Voluntary Acceptance of Collateral in Satisfaction)
Strict Foreclosure (Non-Voluntary Acceptance of Collateral)
Private Sale

13. Obtaining Signed Waiver
When to use
Proper form
Must be totally voluntary
Legal significance
no notices necessary
release from claims and suits
acknowledge receipt of personal property
deficiency is waived

14. Debtor’s Signed Waiver Upon Voluntary Return
Agreement to Accept Collateral in Full Satisfaction of Indebtedness
___________________, 20_____
To: (Name of Secured Party)
RE: (Description of vehicle), and Motor Vehicle Installment Contract
dated ________________________, ______
I (we) have voluntarily returned the above-mentioned vehicle, which is collateral under the above-referenced contract, to you. I (we) consent to your acceptance of the collateral in full satisfaction of the remaining indebtedness, and I (we) relinquish all rights to the vehicle. I (we) waive my (our) right to notification of disposition of collateral and my (our) right to require disposition of the vehicle under Section 9-620(e) of the Uniform Commercial Code. I (we) release you from any claim or liability, in tort or breach of contract, violation of the Texas Consumer Protection Act/Deceptive Trade Practices Act, the Texas Finance Code, or any federal law or regulation. You agree to release me (us) from any liability with regard to our obligations under the Contract, and agree not to pursue any deficiency against me (us).
I (we) have removed all personal property from the vehicle.
____________________________________
(Debtor)
(Co-Debtor or Guarantor)
Accepted:
(Secured Party)
(From Texas Automobile Repossession: A Lien Holder’s Legal Guide, copyright 2015 by Michael W. Dunagan)

15. Strict Foreclosure (Acceptance of Collateral in Satisfaction)
Easiest method of disposing of repos
No payment of surplus and no post-sale accounting
Proper notice form
60 per cent rule
20- day holding period – ownership reverts
Balance forgiven – no credit reporting of deficiency

16. Private Sale Difference between public and private sale Notice letter
Retail or wholesale
Sale at wholesale auto auction
Any surplus must be paid –
Any deficiency can be sought
Post-repossession accounting

17. Post-Repossession Accounting After Private Sale
Post repossession accounting form
When it must be sent?
To whom must it be sent?
What info must it contain?
Penalties for non-compliance

18. Using the Courts Sequestration: the process
due process requirements
limitations
justice courts
costs
Seeking criminal prosecution

19. Related Issues Personal property Accessions
Valid mechanics lien trumps security interest
Use of tracking devices

20. Repossessing From Mechanic
Mechanic lien is a possessory lien
Release of vehicle or private use waives mechanic lien
Involuntary repossession from mechanic’s premises does not waive lien

21. Bankruptcy Issues for BHPH Dealers
Avoid selling to bankruptcy candidates
Bankruptcy trumps repo rights
The automatic stay
Pre-petition repo
Fixin’ to file
What to do when the bankruptcy notice arrives

22. Avoid Being Victim of “BR Planning”
Current and prior bankrupts are bad risks
Require listing of all debts on credit apps
Ask magic questions on credit apps:
“Are you planning on filing bankruptcy?”
“Have you consulted with an attorney about filing bankruptcy?”

23. The Automatic Stay
Creditors can take no action outside of bankruptcy court
Severe penalties for repossession after bankruptcy filed
“Lifting” the automatic stay is goal of creditor

24. Pre-Filing Repossession: Can I Keep It?
Courts consider bankruptcy stay as controlling repossessed vehicle not yet legally disposed of
Courts will order return of vehicles
Exception: If 20 days have passed after strict foreclosure notice, bankruptcy stay has no affect
Lesson: Send notice promptly and dispose of vehicle as soon as legally permissible

25. Fixin’ To File
If b/r petition not filed, there is no automatic stay – OK to repo
Debtor may file immediately after repo (see Pre-Filing Repo above)

26. What Do I Do When the Bankruptcy Notice Arrives?
Any notice is legal notice (don’t ignore)
Remember that bankruptcy stay trumps right to repo
Flag account -- Make no contact with debtor
Consider retaining counsel to get stay lifted if value of vehicle justifies expense