GMAC / Ally Financial v. Lazrovich Class Action Settlement

GMAC/ALLY FINANCIAL REPOSSESSION CLASS ACTION SETTLEMENT

Ally Financial Inc. fka GMAC v. Lazrovich matter, filed in the
Santa Clara County Superior Court, Case No. 111CV195659

You may have questions about the settlement. If you are concerned about potential tax liability or want to discuss what you can do, please contact my office at 858/270-7000. I will be happy to answer any questions, or email me at This email address is being protected from spambots. You need JavaScript enabled to view it.

The Notice says you may have tax liability for the deficiency balance and any refund you receive.

Under California law if Ally Financial Inc. or GMAC, Inc. sent you a defective "Notice of Our Plan to Sell Property" after it repossessed your vehicle, then you never owed the deficiency, and GMAC/Ally was not entitled to any money on the balance of the contract after the repossession. However, in this case GMAC/Ally does not admit the Notice of Intent was defective

In the Class Notice Ally says:

"Ally denies the claims and contends the Notice of Intent provided the class members with sufficient information and thus complied with California law."

The Class Notice also says:

"Class counsel are not tax attorneys and you are advised to seek separate legal advice on matters of taxation."

However, Ally/GMAC’s lawyers have claimed that debt cancellation and debt forgiveness are taxable. They have said:

A discharge of debt is treated as earned income and so may have tax implications for the borrower.

The class notice says:

"Ally will forgive and stop all efforts to collect the remaining deficiency balances as more specifically described below."

Ally’s lawyers have also said:

[A] discharge of debt would likely cause each class member to incur additional income and hence tax liability. Even class members who have paid on their deficiency balances and are thus eligible for a refund, ... will suffer a net loss if the amount of extra tax they must pay exceeds the amount of the refund they may receive."

The settlement requires you and the entire class to give Ally, a "release". That means you waive any claims you may have against Ally forever, even if the IRS charges you tax on an invalid deficiency. The Class Notice says on page 3:

"A release means you can’t sue or be a part of any other lawsuit against Ally about the claims or issues in this Action ever again."

If you are concerned about potential tax liability or if you want to discuss what you can do, please contact my office at 858/270-7000 and I will be happy to answer any questions, or email me at This email address is being protected from spambots. You need JavaScript enabled to view it..


San Diego Lemon Law Center | The Law Office of Michael E. Lindsey
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General Information Only

The information in the San Diego Lemon Law Center pages is for general information only and is not intended to be taken as legal advice. If you have a specific legal question or problem, please feel free to contact us or you should promptly consult with an Attorney handling such matters in your area for advice.