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.     

 

 

 

  

 

Pay Day Loan Companies Are Cunning!

Lots of people seeking help from a bankruptcy lawyer to file a Chapte 7 (eliminate unsecured creditors) or a chapter 13, have one or more payday loans.  Payday loans are difficult to deal with for both the client and the bankruptcy lawyer.  The companies that offer these loans seem to know every trick in the book to continue  receiving payments, as well as avoiding having their addresses known so they cannot be notified of a bankruptcy filing.  The only way to prevent such a lender from collecting on their loan is to close the bank account upon which the lender collects its funds.  Merely having a zeo balance does not seem to work, inasmuch as many people have accounts that have overdraft protection or at the least, will incur a charge for every returned check.  Closing their bank accounts presents a few challenges to many clients for reasons such as automatic withdrawals for monthly payments and/or direct deposits of checks. If you are going to stop these folks from collecting, you must promptly close your account and open a new account at a different bank.