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FOR IMMEDIATE RELEASE
September 03, 1997
SEARS TO REPAY BANKRUPTED CUSTOMERS $125 MILLION


Olympia —September 3, 1997 - Washington Attorney General Christine Gregoire today announced that Sears, Roebuck & Co. will pay almost $4.9 million to the state and 4,450 Washington consumers under a $290 million multi-state settlement.

The state’s investigation confirmed that for at least ten years Sears obtained “reaffirmation agreements” from its customers who filed Chapter 7 bankruptcy and then failed to file the agreements with the bankruptcy court as required. These so-called “agreements” are written contracts by which a Chapter 7 debtor agrees to pay a particular debt even though the amount would be dismissed in bankruptcy.

“These agreements are supposed to be voluntary, but Sears pressured people into signing by threatening repossession of their goods,” said Gregoire. “ Once they signed they were lead to believe they were obligated to pay, even though the debt had been discharged in the bankruptcy.”

Because Sears failed to file these agreements with the court, as required, the practice went undetected for years. Reaffirmation agreements are valid only if they are voluntary, filed with the bankruptcy court and subject to review by the court.

Nationwide, Sears has agreed to repay at least $125 million in compensation to customers who have already made payments; forgive an estimated additional $125 million in improperly obtained consumer debt; pay more than $35 million in civil penalties, costs and fees to the states; contribute $5 million to a special education fund; and change its collection practices.

According to Gregoire, in addition to repaying an estimated $3.8 million to Washington consumers, Sears will pay the state general fund $1,034,458 in civil penalties and $30,000 in costs and fees for violating U.S. Bankruptcy Code and state consumer protection laws.

Customers affected by this settlement, either identified by Sears or through the settlement claims process, will receive the following compensation:

  • Have any “reaffirmed” debt stricken;
  • Reimbursement for all monies paid to Sears on account of the reaffirmed debt, including all finance charges, penalties and 10% interest; \
  • Be charged no interest on purchases made since their bankruptcy;
  • Be eligible to receive a pro rata payment based upon the amount of payments they made on an unlawful debt.

Sears customers who believe they are entitled to compensation under this settlement should contact the settlement administrator at 1-800-529-4500 for information on how to file a claim.


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