A few years ago I tried a case in the United
States Bankruptcy Court, Eastern District of Virginia, Richmond Division, Judge
Huennekins, that will be of interest to many lenders who hold a security for
their loan. My client was Dominion Credit Union. At the request of the debtor,
and, as part of a settlement where the debtor agreed to pay on the judgment
rendered, I agreed not to state the debtor’s name.
The factual
scenario is as follows: the Credit Union had made a $30,000.00 loan to the
debtor in March, 2006 to purchase a pickup truck from Chambers Auto. The loan
was secured by this pickup truck. There was no co-signer for the loan, nor was
the debtor married. The debtor’s loan application made no reference for the
purpose for which the loan was sought. The debtor listed no other owner or
user. Within two months the debtor became delinquent. The Credit Union ordered
repossession of the truck. The repossession company could not find the truck,
and the debtor offered minimal cooperation, claiming only that another person
had the vehicle and took it out of state. The debtor referenced the name of the
person, Michael Chambers (this name became important years later, but note that
the name of the company from which she purchased the vehicle was Chambers
Auto). The debtor did provide a telephone number for Michael Chambers. The
repossession company made several attempts to repossess the truck, checking at
the debtor’s residence on various days and at various times, but to no avail.
Calls were also made to Michael Chambers. On one occasion Mr. Chambers said
that he was out of state, and, that he was also in the repossession business.
With no luck at repossession, the Credit Union retained me to obtain judgment
against the debtor and try collection. While judgment was obtained for over
$29,000.00 plus costs, interest and attorney’s fees, collection was difficult,
as the debtor was constantly in school and working only part-time. Finally in
early 2010 I found the debtor working a sufficient number of hours to garnish,
and issued the garnishment. As a result of the garnishment, the debtor filed a
Chapter 7 bankruptcy case in March, 2010, seeking discharge of all of her
financial obligations – at this point in her life the debtor had accumulated
some other debt as well, and was finally about to complete her schooling and
become a full time nurse. I advised the debtor’s attorney that I would be
objecting to the discharge of this debt based upon the fact that we had been
unable to obtain the truck since May, 2006, and that we had obviously lost
money due to the debtor’s willful and malicious injury to the Credit Union by
depriving it access to and repossession of the collateral securing its loan
pursuant to Bankruptcy Code Section 523(a)(6). The debtor’s attorney responded
by stating that the truck would be surrendered. Weeks passed without the debtor
surrendering the truck, so I filed an objection to the dischargeability of the
debt. Subsequently the truck was returned, but in horrible condition, having
limited value, resulting in a substantial loss to the Credit Union.
To prepare for
the trial of the case I conducted written discovery and scheduled depositions
of the debtor and Michael Chambers. Depositions were scheduled on several
dates. On the first date both parties appeared (although almost an hour late),
even though I had only subpoenaed the debtor. I excluded Mr. Chambers from the
debtor’s deposition – important because Mr. Chambers tried to “control” the
proceedings. At the debtor’s deposition she stated, for the first time, that
the truck was purchased as a business deal with her brother (although not an
actual blood brother, but someone just like a brother, named “John Jones”). She
and Mr. Jones had a “falling out” and he left with the truck, never to have
contact with him again, and not knowing where either he or the truck was. The
debtor denied telling the Credit Union or the repossession company that Michael
Chambers had it. The debtor admitted that she and Mr. Chambers were now
boyfriend and girlfriend, although she was not sure when this relationship
commenced, although probably within six months of the loan. The debtor admitted
that Chambers Auto was a family business, but that Michael Chambers’ father ran
it. The debtor stated that when it became apparent that she would not be able
to get a bankruptcy discharge without surrendering the vehicle to the Credit
Union, Mr. Chambers (who had a “questionable” past and had “questionable”
connections) “put the word out on the street”, and magically the vehicle was
returned to Mr. Chambers. The debtor also stated that they tried their best to
put the vehicle back in decent shape, but ran out of time. Following the
debtor’s deposition, I tried to immediately take Mr. Chambers’ deposition, but
he and the debtor said that they had no time and had a child care problem. A
new date was set for Mr. Chambers’ deposition. However, he failed to show on
that date. I advised the Court of this lack of cooperation, asked for a
continuance to obtain the necessary evidence to prove my case. The Court
granted the continuance and set a new trial date. I then set a new deposition
date for Mr. Chambers, who, this time did show up, although about an hour late
again. Mr. Chambers’ testimony was similar, but somewhat inconsistent with that
of the debtor in some key areas.
On the trial date
Mr. Chambers’ failed to appear in Court despite subpoena. His deposition was
submitted into evidence, and the Court issued a Show Cause summons against him
for his non-appearance. After hearing all of the evidence, the Court ruled that
the debtor did willfully and maliciously injure the Credit Union by depriving
it access to and repossession of the collateral securing its loan pursuant to
Bankruptcy Code Section 523(a)(6), and awarded non-dischargeability to the
extent of the Credit Union’s reasonable loss based upon the debtor’s conduct.
The lesson of this case: be diligent about repossession efforts, document all
events, and if the debtor deprives you of the security and attempts to discharge
the debt in a Chapter 7 bankruptcy case, object!
