Diamond Speaks His Mind on Bankruptcy and Related Topics

Why Some Reaffirmation Agreements Are Approved And Others Are Not?

A reaffirmation agreement is a contract that is used in a Chapter 7 Bankruptcy case that must be approved by the Bankruptcy Judge, in most cases without a court hearing.  In general, the purpose of this agreement is to agree to repay what is owed to a creditor, in almost all cases the debt is secured by something that the debtor bought and wishes to keep.  A good example would be an automobile.  If the Debtor wishes to keep the car and still owes money on the car, he/she must agree to continue to pay for the car. 

A reaffirmation agreement is sent to the Debtor's lawyer by the Creditor, who then obtains the client's signature and then must certify that the reaffirmation agreement is in the debtor's best interest and does not present an undue hardship, as set forth in the bankruptcy code.  The document is then filed with the Court and approved by the Judge without a hearing.  However, as with all things in life, there are exceptions that would trigger a hearing before the Bankruptcy Judge, at which time the client, through his/her attorney would have to justify the reaffirmation agreement. 

One example, is that the debtor's budget filed as part of the paperwork that started the bankruptcy case does not demonstrate that the debtor would have the money to pay for the car the debtor wants to retain.  In this case, the debtor would have to find a way show the Judge that the payments could be made without creating undue hardship. 

Another example, would be the debtor wishes to reaffirm an unsecured debt and the debtor's lawyer is unable to certify the reaffirming the debt is in the debtor's best interest.  In this case the Judge is going to want to know what makes this particular unsecured claim different from the other unsecured claims, that he should allow the debt to be reaffirmed.  Justifying this type of reaffirmation usually requires demonstrating to the Judge that there is something unique about either the debt or the relationship between the debtor and the creditor.  An example of a reaffirmation agreement that I presented to the court was a situation in which the debtor had a career in the military and served his country honorable for a long time and had retired in El Paso to be close to a large military base as well as a military hospital.  He had always shopped on post and had always had a military credit card allowing him to make credit purchases on post.  His argument was simple -- He had always shopped on post and always had a military credit card and that the use of this credit card was not a contributing factor to his bankruptcy.  In short, he wanted to continue to do what he had been doing for over thirty years.  When I finished arguing the debtor's position the judge did not hesitate in making a ruling.  He stated:  "I come from a military family and I understand the special relationship that exists between this person and this particular creditor.  I further understand that not to allow this debt to be reaffirmed would be a life changing event for this retired person.  The Reaffirmation Agreement was approved by the Court.     

 

 

 

  

 

Credit After Bankruptcy?

 My general rule of thumb is a person will be able to obtain a credit card on reasonable terms after two (2) years of your bankruptcy discharge.  Now you can acquire an FHA loan to buy a house after two (2) years from your bankruptcy discharge. Take time in choosing your new credit card and mortgage because terms and conditions vary from company to company.  FICO scores are important to some while others value how long it's been since you were past due on any obligation.

Here are a few simple rules to follow to restore your credit:

• 1. Obtain a copy of your credit report within 90 days after your bankruptcy has been discharged. Make sure that all discharged debts have been removed from your credit report. If you don't want to do the required leg work - contact your bankruptcy attorney.
• 2. Be sure to keep your current debts (obligations) current and paid on time.
• 3. Start a savings program so that you can have a down payment available when you are ready to purchase a house.
• 4. New credit card charges should be paid in full each month.

These simple rules will allow you to improve your FICO score, prove you are responsible in paying your obligations, as well as demonstrate you are fiscally responsible by keeping your obligations low and finally have the ability to make a reasonable down payment on a house.

So, you can have credit cards and qualify for a mortgage to buy a house after discharged from your BANKRUPTCY.