A couple who obtained bankruptcy protection from creditors have failed in their challenge to Ford Motor Credit Co.'s debt-collection practices.
A federal appeals court torpedoed a lawsuit by David and Karen Pertuso, who accused Ford Credit of improperly soliciting reaffirmation agreements.
Under such voluntarily agreements, debtors under bankruptcy protection from creditors can obligate themselves to continue paying under their original contracts.
Secured creditors such as Ford Credit still can repossess collateral from those who fail to pay, whether or not they have signed a reaffirmation agreement.
The Pertusos sought a refund of what they paid on their Ford Windstar after they filed their bankruptcy petition, based on their allegation that Ford Credit failed to follow bankruptcy-law procedures properly.
The company denied any violations.
The Pertusos financed the Windstar through Ford Credit, the 6th U.S. Circuit Court of Appeals in Cincinnati said. In 1996, they filed for Chapter 7, owing $18,950 on the minivan. They and their lawyer signed the reaffirmation agreement that allowed them to keep the Windstar.
They made all of their payments, the court noted.
The Pertusos filed a complaint in U.S. District Court in Detroit, challenging the way Ford Credit solicits and handles reaffirmation agreements. U.S. District Judge Denise Page Hood dismissed the lawsuit, which sought class action status.
The appeals court unanimously upheld Hood's decision, ruling that the Pertusos have no legal standing to bring some of their claims.
It also rejected their argument that Ford Credit violated a section of the U.S. Bankruptcy Code that prevents creditors from seeking to collect debts while a bankruptcy case is open. To the contrary, it said, the law authorizes reaffirmation agreements.
This is the only lawsuit the company has faced concerning its reaffirmation agreements, Ford Credit spokesman Dan Jarvis said.
The implications of a contrary ruling would have applied to other creditors in bankruptcy cases.
The Pertusos' lawyer, Thomas Meites, said, 'We have no comment. The case is pending.'
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