Repossessions of Taxi Medallions by Secured Lenders

Here at Shenwick & Associates, an increasing part of our law practice involves workouts of loans for borrowers with taxi medallions as collateral for the loan.   Over the past three months, we’ve noticed a trend in which the bank or secured lender repossesses the taxi medallion(s) when the loan is in default, instead of allowing the borrower to retain the medallions during workout negotiations.

Under New York law, the security agreement and other loan documents, lenders can repossess taxi medallions, which usually happens on nights or weekends when the cab is not in use.  Typically, the Marshal will crowbar the medallion off the dashboard and take the rate card.  Although the cab is not repossessed, if the cab is subject to a vehicle loan that is in default, the cab may also be repossessed.

Some borrowers have asked us why the lenders repossess the medallions without notice to the borrowers.  New York law and the loan documents signed by the borrower provide that no notice is required for the lender to exercise its remedy of repossession.  And if borrowers were noticed in advance of the repossession, lenders would run the risk of the collateral medallion(s) being hid from the lender!  Accordingly, if you own a medallion and the loan is in default, you may want to park the taxi in a garage or in a location other than on the street.

For borrowers whose medallions are in default, many workouts will ultimately end with surrender or repossession of the medallion.  In certain cases, surrender or repossession of the medallion can end litigation or other collection efforts by the lender.

Taxi medallion loan borrowers and guarantors whose medallion(s) were repossessed still run the risk of a deficiency judgment for the balance of the loan by the borrower or a judgment against the guarantor.  Some lenders may forbear from seeking a deficiency judgment once the medallion is repossessed, but borrowers need to be aware that loan documents allow for that remedy until the statute of limitations has run.  In New York, the statute of limitations for a lender to seek the deficiency balance from a borrower is six years.  In many cases when a lender obtains a deficiency judgment, we negotiate a discounted settlement by threatening bankruptcy or by having the client file for bankruptcy.

Another factor that repossessed taxi medallion owners must consider is relief of indebtedness income pursuant to § 108 of the Internal Revenue Code. Simply stated, if a taxi medallion owner owes a bank $1,000,000 and only repays the bank $500,000, then the tax law provides that they must recognize $500,000 of income on their tax return. Borrowers need to discuss this potential issue with their accountant or tax advisor during settlement negotiations.

For more information about defaulted taxi medallion loans and repossessed medallions, please contact Jim Shenwick.

Fisher & Phillips: NYC Council Passes 6 More Bills Protecting Ride-Sharing Drivers

Nov. 21, 2018 by Seth Kaufman

 

On the heels of the NYC Council passing (and the mayor signing into law) a bill requiring minimum payments for ride-sharing drivers and a one-year freeze on the number of ride-sharing vehicle licenses issued, the NYC Council just passed another six new bills aimed at protecting both taxi drivers and ride-sharing drivers. The bills, approved by the Council on November 14 and expected to soon be signed into law by Mayor DeBlasio, are focused not only on drivers’ pay, but also on the financial and mental well-being of drivers in the wake of a spate of recent driver suicides and some of the more macro-economic issues facing the taxi and ride-sharing industries in NYC.

Two Bills Focused on Drivers’ Pay

Int. No. 1062-A ensures that the risk of loss for a transaction that fails on a completed ride-sharing trip is placed on the ride-sharing service. If a transaction fails for a completed trip, the ride-sharing service must ensure that the driver still receives the entire amount owed for the completed trip. A ride-sharing service that violates the law is liable for a civil penalty of between $250 and $500 for each offense.

Int. No. 1096 requires that ride-sharing services will not make automatic deductions from driver earnings to make payments for the rental, lease, or purchase of a vehicle, unless the automatic deduction is optional and has been chosen by the driver.

Two Bills Focused on Drivers’ Financial and Mental Well-Being

In the last year, eight drivers have committed suicide, with large debt incurred from being a driver cited as the reason. In order to combat this growing crisis, the NYC Council passed two bills. The first would require the Taxi and Limousine Commission to engage in financial education and outreach for drivers concerning financial arrangements relating to taxi medallions and ride-sharing services (Int. No. 1068), and the second would provide financial counseling, mental health services, and referrals to non-profit organizations that could offer additional assistance (Int. No. 1081).

Two Bills Focused on Macro-Economic Issues in the Taxi and Ride-Sharing Industry and Diversity and Inclusiveness

Int. No. 0304 would establish a task force to study the sale prices of taxicab medallions by reviewing sale prices of taxicab medallions and their impact on NYC’s budget, and, within six months, recommending to the Council and Mayor changes to laws, rules, regulations, and policies related to medallions. Finally, Int. No. 1079 would establish an Office of Inclusion within the NYC Taxi and Limousine Commission, which would be responsible for promoting diversity, inclusion, and cultural sensitivity in the taxi and ride-sharing industry.

What’s Next?

These six new bills, along with the new laws passed by the NYC Council in August, demonstrate that NYC is determined to increase regulation of all aspects of the taxi and ride-sharing industry, from pay to economics to discrimination. NYC has often been at the forefront of employment regulation (for example, its Earned Sick and Safe Time Act), so It is important for businesses to monitor these developments as they could serve as a roadmap for other jurisdictions to regulate the ride-sharing industry, or even for NYC to regulate other gig businesses.
 

© 2018 Fisher & Phillips LLP.  All rights reserved.

Credit repair services

Here at Shenwick & Associates, as an adjunct to our bankruptcy and debtor/creditor practices, we also offer credit repair services.  Although the three major credit reporting agencies (Experian, Equifax and TransUnion) (“CRAs”) have received positive press recently for implementing the National Consumer Assistance Plan (NCAP) in March (which, among other things, prohibits reporting of medical debts until after a 180-day waiting period and prevents traffic and parking tickets or fines from appearing on credit reports), clients still complain about receiving credit reports that are riddled with errors, particularly after a bankruptcy filing.

The first step in the process is to obtain a copy of the credit report from each of the three CRAs.   AnnualCreditReport.com allows you to request a free copy of your credit report every 12 months from each CRA.  Credit Karma also provides individuals with free Equifax and TransUnion credit reports. Credit reports need to be carefully reviewed and any erroneous information marked with a clear explanation of what is incorrect.

Once we have copies of the credit reports, we can analyze them and prepare letters to the CRAs requiring that errors on credit reports be corrected pursuant to federal law and/or New York State law.  CRAs are governed by the federal Fair Credit Reporting Act and the New York Fair Credit Reporting Act. These statutes detail the consumers’ rights to dispute information on their credit reports and how long negative information can remain on their reports.

Once we mail the CRAs a letter disputing the erroneous information, it usually takes about a month for the CRA to investigate the dispute and send the consumer the results of the investigation.  We then advise the client to obtain another credit report and review that credit report for errors. We’ve often found that it takes two or more letters to fully correct erroneous information.  Another option is to add a one hundred word personal statement to your credit report.

For more information about our credit repair services, please contact Jim Shenwick.

Proofs of claim in bankruptcy

Here at Shenwick & Associates, our clients are both debtors and creditors. When a person or entity files for bankruptcy protection (such as in the recent Sears bankruptcy), we’re often contacted by creditors who are seeking to protect their claim against the debtor. Usually, this requires the filing of a proof of claim. In this post, we’ll examine some of the basics of filing proofs of claim.

1. In the context of a chapter 7 case, claims and proofs of claims are not usually a factor, since most chapter 7 cases are “no asset cases” (there will be no assets for the chapter 7 trustee to distribute from the debtor’s bankruptcy estate after the debtor’s personal property is exempted). However, if the chapter 7 trustee does find assets in the bankruptcy estate (so creditors can have some recovery on their claims), the chapter 7 trustee will file a notice of assets and request to set claims bar date (which will trigger the bankruptcy court to send a notice to all creditors listed in that bankruptcy case, and proofs of claim must be filed by the “bar date”).

2. In the context of a Chapter 11 case, § 1111(a) of the Bankruptcy Code provides that a proof of claim is deemed “filed” for any claim that appears in the schedules except if it is listed as disputed, contingent or unliquidated. Therefore, to know whether to file a proof of claim, an unsecured creditor must examine the debtor’s bankruptcy schedules to determine how their claim was scheduled, i.e., whether it was listed as disputed, contingent (the claim is dependent on another event) or unliquidated (the claim amount is uncertain). Many creditors will just file a proof of claim when they receive notice of a bankruptcy filing.

3. Therefore, unless a creditor’s attorney or a creditor can obtain the schedules by going to court or through PACER, the better practice is to file a proof of claim as soon as possible. The best practice may be to file a notice of appearance and a proof of claim as soon as an attorney is retained to represent a creditor in a chapter 11 case. If an attorney or a creditor does not file a proof of claim early in a case, then they must file the proof of claim on or before the “bar date.” If the proof of claim is not filed by the “bar date,” then that creditor is barred from receiving a distribution in the case, unless the creditor was listed in the debtor's schedules as not having a claim that’s disputed, contingent or unliquidated.  Creditors should review the instructions for preparing a proof of claim.

4. Once the proof of claim is signed, and backup (which will evidence the amount of the claim, such as invoices, a spreadsheet or collateral for the claim if the claim is secured, such as a mortgage) is attached to the proof of claim, the proof of claim should be filed with the bankruptcy court. It can be uploaded to the claims register for the case via ECF (Electronic Case Filing) or sent to the bankruptcy court by Federal Express or another delivery service with a short letter of direction requesting that the clerk file the proof of claim. In cases with many creditors (“megacases”), the bankruptcy court may require that the debtor retain a claims agent to process the proofs of claim instead of the bankruptcy court.

Anyone who has questions regarding the filing of proofs of claims or creditors’ rights in bankruptcy cases should contact Jim Shenwick.