GM Car Owners Lawsuits to be challenged in Bankruptcy Court

The below article was reprinted from the ABI website.  If you own or owned a GM car that lost value due to the recalls this article is relevant to you.


Consumer Law

Prove GM fraud on court, if you can, bankruptcy judge tells lawyers in ignition-switch cases

Posted Jul 3, 2014 12:50 PM CDT
By Martha Neil


Plaintiffs lawyers in dozens of cases filed against General Motors Co. over the diminished value of vehicles because of ignition-switch recalls have been arguing that a bankruptcy-court bar to such liability prior to 2009 should not apply.

That’s because GM allegedly knew about the defect and didn’t disclose it to consumers, eliminating their opportunity to make a potential bankruptcy-court claim, Bloomberg reports.

However, the plaintiffs’ case for eliminating the bankruptcy bar to pre-2009 economic damages would be stronger if they could prove that GM’s then-CEO knew about the ignition-switch issue and concealed it during his testimony in the Chapter 11 case, a bankruptcy judge in Manhattan said Wednesday.

If the CEO “knew about the switch problem and intended to keep it from me, that might constitute fraud on the court,” said U.S. Bankruptcy Judge Robert Gerber. He also told plaintiffs lawyers during the hearing that he wants to see briefing on the issue, the news agency reports.

“I need the ability to do my job, and I want to look at the issues,” said Gerber.

The former CEO said in an email that he didn’t know about ignition-switch problems, Bloomberg reports, and a law firm retained by GM to conduct an internal investigation found “a pattern of incompetence and neglect” but no intentional cover-up by executives.


The New New York Downtown Skyline

The New New York Downtown Skyline

A beautiful view of the new downtown skyline



By John W. Schoen Senior producer

Based on our mail, the financial squeeze that’s left millions of Americans falling behind on their mortgage payments doesn’t seem to be letting up. For some, that presents a stark choice: is it better to lose your house to foreclosure or file for bankruptcy protection?

What is better on your credit report – foreclosure or bankruptcy?

— D.F., Address withheld

Neither option is going to be easy. Generally, a foreclosure will remain on your credit report for 7 years, while a bankruptcy remains for 10 years. But that doesn’t mean foreclosure is necessarily the better option, according to Ray Hooper, Education and Housing Director for the Consumer Credit Counseling Service of Greater Dallas, a non-profit agency that tries to help people facing foreclosure keep their homes.

“A foreclosure is very serious to mortgage lenders,” said Hooper. “They’re going look at a foreclosure more seriously than they will a bankruptcy that doesn’t include the house.”

Before you accept that foreclosure is a foregone conclusion, consider trying to avoid it. If you’re having trouble making payments, or even behind by a month or two, contact your lender before the process goes any further. Even if you’ve gotten an official “notice of default,” saying you’re several months behind, you still have time before the formal foreclosure process begins.

The first question you need to decide is whether you want to keep your house or give it up. If you want to keep it, you need to try to work out a plan to get back on track. This involves either making up for the missed payments – which you can do all at once or try to spread out – or coming up with a new plan. One option is to have the loan modified – at a lower interest rate, for example. Or you can ask for “forbearance,” which basically means the lender suspends payments until you can get back on your feet. If you’re in over your head and bought too much house, though, these options probably aren’t going to help.

So you may have to consider moving. Even if you do lose your house, you don’t want a foreclosure on your record when you go looking for a smaller house or a place to rent. One option is to ask the lender to hold off on foreclosing until you sell. If your mortgage is bigger than your house is worth, your looking at what’s called a “short sale” and you’ll owe money to the lender even after the house is sold. In some cases, lenders will let you off the hook for that amount rather than go through the expense of foreclosing. (But you may not be completely off the hook: you may owe taxes on that amount.)

You can also try something called a “deed in lieu of foreclosure” – which basically means you turn over your house to the lender and walk away without owing anything. But you’ll need to work this out with the lender: you can’t just leave the keys in the mailbox.

While it’s possible to work out one of these solutions with your lender on your own, you may have better luck with the help of someone who specializes in the process. A good attorney who knows real estate law can help, but you may not be able to afford that. A credit counselor (from an accredited, non-profit agency, not the slime balls who spam you with bogus promises of making your debts “go away”) is another option. Lenders are more likely to go along if a competent third party is there to help smooth the process.

If all else fails, you may have to consider allowing foreclosure to proceed – or filing for bankruptcy. But like most aspect of personal finance, there’s no “one-size-fits-all” guidelines for which is the least bad alternative. There are different ways to file for bankruptcy, and not all of your debts have to be included (for more, see the next page.) So even if faced with bankruptcy, you’ll need advice from someone – either a good credit counselor or a bankruptcy attorney – who can walk you through the choices you’ll face.

How many years apart can you file bankruptcy in Georgia?
–D.D., Address withheld

While it’s not an easy option, bankruptcy is becoming more common. Some 391,000 individuals turned to the bankruptcy courts for help getting out from under debt during the first half of this year, according to the American Bankruptcy Institute. That’s up nearly 50 percent from the first half of 2006. While that’s down from levels seen before changes in the law in 2005 made it harder to file, the ABI said the number of filings is expected to continue to increase.

“Continued pressure on housing markets, combined with high consumer debt burdens, will lead more households to consider bankruptcy as an option to their financial problems,” the group said in a recent press release.

While the bankruptcy process in the U.S. is governed by federal laws and handled by a system of federal bankruptcy courts, state laws regarding consumer debts and the disposition of property also come into play. There are also different types of bankruptcy filings. No matter which course you take, the filing stays on your credit record for 10 years. That makes it very difficult to get any type of loan during that period; the loan will be more expensive if you can get one.

The two most common forms of personal bankruptcy are called Chapter 7 and Chapter 11. (About 60 percent of those who file for bankruptcy use Chapter 7, most of the rest use Chapter 13.) Under a Chapter 7 filling, you get to keep certain property (this is where state laws vary), but the rest is turned over to a court-appointed trustee who sells your stuff or gives it to lenders to satisfy your debts. Under a Chapter 13 filing, you pay back your debts under a plan worked out by the court. The trustee collects payments, pays off your debts and makes sure you stick to the plan.

If you own a business, you may want to consider a Chapter 11 filing. This let’s you stay in business, as long as the court and the people you owe money to approve of the plan to pay off your debts. If the court decides a trustee needs to be appointed, the trustee takes control of your business and its assets.

Not all debts can be wiped clean – even if you ask for a “discharge.” The list includes alimony and child support, taxes, court fines and most student loans. New debts, taken on after the discharge, aren’t included. And if the judge finds out you’ve lied or committed fraud, your discharge can be denied.

You can also choose which debts you want to have discharged while you keep paying off others. You might want to work out a payment plan so you can keep your car, for example. To do this, you have to sign a “reaffirmation agreement,” which says that you promise to pay off that debt. If you don’t pay it back, the creditor can send it to a collection agency like any other debt.

If you’ve filed a Chapter 7 bankruptcy and gotten a discharge, you’ve got to wait 8 years before you can do it again. There are different limits on filing for Chapter 13, depending on whether you’re trying to get debts discharged.

Whatever you decide to do, you’ll probably want some help. (You can do this alone, but we don’t recommend it. Start with a good credit counselor or bankruptcy attorney. Get references, ask lots of questions, and don’t sign anything until you’re sure you understand fully what it says.


What is the difference between a chapter 7 and chapter 13 bankruptcy?

A chapter 7 bankruptcy filing is a “liquidation” bankruptcy that allows you to discharge your debts that are listed on your petition.  After filing, you will not be required to repay any of the listed debts with certain exceptions.  A chapter 13 bankruptcy filing,  requires you to enter into a repayment agreement in which you pay back a portion or the entire amount of what you owe under much more favorable terms and conditions.  Debtors can file a chapter 13, as opposed to a chapter 7, when they do not pass the means test or are attempting to keep their home and/or other property and repay any mortgage arrears.  The bankruptcy attorney will take your information and advise you of the best option for you going forward!

2.) Will I be required to appear before a judge?

No, if filing a Chapter 7 case, you will meet only with me (always) and the trustee assigned to your case at the Meeting of Creditors where he will ask you questions for a few minutes. I will prepare you for the types of questions beforehand and you be completely ready when you appear before the Trustee.

3.) Home Foreclosure–Can a bank still take my house?

When you file Bankruptcy, all creditors are subject to an “automatic stay” including actions such as foreclosures and sheriff’s sales.  The stay prohibits creditors from taking any action to compel payment on the claim.  But, a creditor (bank) can still go into court (make a motion) and ask the bankruptcy judge for a “relief from stay”.  If the motion is granted the creditor can proceed with court action to foreclose.  We can discuss home foreclosure and the many options available to keep your house inside and outside of a bankruptcy filing in greater detail at the FREE consultation.

4.) Can I pick and choose which debts are to be part of my bankruptcy?

No, you must list all of your debts and assets in your bankruptcy petition. Debtors are not allowed to select which creditors they pay back except, under certain circumstances, you may voluntarily pay back a creditor (reaffirm a debt).  This must be agreed to and will be a part of the bankruptcy process.  Under these circumstances, the reaffirmed debt continues after the filing and the discharge of all your other dischargeable debts.  Also, and significantly, some of your property is exempt (you are entitled to keep the property based upon certain statutes) from a bankruptcy estate.   The Courts have determined that the debtor is able to keep certain types of property in order to allow such person some basic needs (including, value towards your automobile and home).  It is vital that you confer with a bankruptcy attorney to determine what, if any, of your property you may exempt.  This is another vital component to the process of filing bankruptcy and, if mistakes are made regarding exempt property, you may seriously impair your financial well being going forward.

5.) Can I change my Chapter 7 to a Chapter 13 and vice versa?

Yes, in most cases you are permitted to switch by making a “motion to convert.”  Certainly, this would be appropriate if you can no longer afford your chapter 13 plan payments.  If so, you would want to convert your filing to a chapter 7 in order to discharge the debt. A trustee can also make the motion to convert to a Chapter 13 filing should he determine that you have money to pay back some of your debts-this should rarely occur as long as you have a bankruptcy attorney carefully review your situation. However, this is why it is absolutely necessary to disclose everything to your bankruptcy trustee.  There must be no surprises at the time of the Creditors Meeting.

6.) Do my spouse and I have to file jointly?

No, the decision to file individually or jointly depends on your specific circumstances.  situation.  Usually:

  1. If only one spouse owes all or most of the debt then only that spouse should file.
  2. If both spouses owe the debt and want to file a Chapter 7 then both can file.
  3. If you’re trying to stop a foreclosure then only one spouse who is on the title to the home needs file a Chapter 13 (It should be noted that each person is entitled to exemptions and, as a result, depending upon your circumstances, it may make sense to have both spouses file together).

However, each situation requires careful consideration and should be assessed by consulting with a bankruptcy attorney.

7.) Will other people (friends, family) find out that I filed for bankruptcy?

It is a matter of public record when any bankruptcy is filed.  But,  usually only your creditors are notified that you filed. Others should not know unless you tell them or they do a search in the public court records.

8.) What does reaffirm mean?

This means you would become personally liable for a debt again even though you could discharge it in the bankruptcy filing. Sometimes you may choose to reaffirm a debt such as a car loan.  The bank may require you to do so or they can repossess your car, even if you are current with the payments. Bankruptcy may be considered a default under your loan terms and some financing companies may repossess the vehicle.


Disclaimer: Use of this website creates no attorney-client relationship between you and Mark S. Grodberg. This website is for the purpose of providing information, principally about Mark S. Grodberg’s practice areas and should not be construed as legal advice.  Please contact an attorney to obtain specific information regarding your specific rights and obligations.
MCC Member Business

Its time to admit that you did not pick Connecticut v. Kentucky, but does it matter, its all fun

I’ve entered many NCAA college basketball pools in which I picked the teams that I was absolutely sure would go onto the next round.  On each occasion, I had a few wins and a few losses, but never did I pick each and every upset.  How can you?  Every tournament has its surprises.  So, did anyone pick these two teams to play in the finals.  If you did, you are a soothsayer.  No matter who you picked in this tournament, it has been fantastic to watch.  Drama to the maximum.  It just goes to show that even though amateur sports are not truly amateur there is something about the energy of college sports that extends beyond professional sports.  Whoever you pick in the finals its certain to be entertaining and dramatic–good luck to both teams.


Warren Buffet, March Madness and financial responsibility

Today, Warren Buffet can breath easier as his offer to pay a billion dollars to anyone who has a perfect bracket for the college basketball tournament is already moot. That’s right, his pool (reported to be 15,000 deep) of “bracketeers” has no one remaining without at least one loss. Again, proving that this man has great insight and simply knows how to play the odds. That should come as no surprise to anybody that is familiar with his background and skillset. Nonetheless, it demonstrates the absolute futility to playing long odds when hoping for a big financial payoff. Please don’t get me wrong, you need to be “in it, to win it”. But, spitting in the eye of the odds is no way to plan for the future. With that stated, many of us utilize a similar method, but significantly less risky one in planning for our retirement. Investing in 401(k) plans and direct investment in the stock market is a form of gambling, but one for which there is a track record for growth for the most part. Nonetheless, as has occurred, there are occasions when the bottom drops out and significant variations of loss have occurred. The key is to carefully review all of your options and then make a calculated and thoughtful determination. With this in mind, it makes sense to take the $1-20 spent regularly on lotteries and put it into a investment for the future. You will be amazed how quickly this money may grow.

A quick disclaimer to modify my comments above. I am not an investment expert or analyst and these comments contain opinion and not investment recommendation. Always, confer with an expert in the field of investing before committing your hard earned money in the stock market, or other forms of investment. Best of luck.

To file bankruptcy or use alternative options

Bankruptcy is often the right choice for you, but not always.  In some circumstances, you may choose alternatives instead of or before you file.  First, some of your debts may be invalid and you can challenge them.  In that regard, you may have a legitimate basis for the non-payment of your debts.  For example, if you hired a contractor to do work at your home, but he failed to do so as agreed to in the contract, you may challenge your obligation to pay under the contract.  There are many circumstances where your debt obligation may be in question based upon an improper agreement or other issues related to the performance of both parties.  It is best to consult with an attorney if you believe that you may have a basis for challenging your duty to pay any creditor.  Depending upon the size of the debt it likely would be worthwhile to at least meet with an attorney for a free consultation.  Moreover, in many circumstances, the attorney may be able to negotiate a settlement in satisfaction of a portion of the debt.  However, if there are many debts, a Chapter 7 bankruptcy filing may be best. 

Another alternative is to negotiate directly with your creditors to determine whether you can settle for a portion of the entire debt in several payments.  Furthermore, you may negotiate lower monthly payments, a lower interest rate and a discount on the full amount.  However, these negotiations often take time, persistence and a great deal of patience as you will need to speak with the right people who have the authority to make these decision.  The best thing to do is to skip right past the first person who answers the telephone and ask for a supervisor or the department that negotiates repayment.

Another alternative to immediately filing bankruptcy is to work with a debt loan consolidation Company.  They will negotiate for you to reduce your interest rate and your monthly payment.  However, there is a cost associated with this–they will charge you a monthly fee that will continue for the entire time that you are in their program.  It is important to calculate whether the amount you save is significant enough to cover the monthly payment to the debt consolidation Company.

Additionally, you may check with State and City agencies to determine whether there are programs that can assist you with housing, utilities, health and other assistance.

It is important to note that all of these options may be discussed with your attorney in a free initial consultation.  During your consultation, you will be able to determine which direction makes the most sense for you.  Most importantly, your attorney must be looking out for your best interest.

Mark S. Grodberg/MSG Attorney at Law