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
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."