[CLBS] Reaffirmation and reopening a bankruptcy case

[Randal French]

Section 524(c)(1) requires a reaffirmation to be filed before the granting of a discharge.  I am not aware of any provision of the code that allows a court to allow a reaffirmation after that time, or would make a reaff filed after the discharge to be enforceable.  You could prepare and file a reaffirmation with all signatures and then find out later whether it is or is not enforceable.  I doubt that you would be prevented from filing such an agreement, although the lender must sign it too.

In the worst of all worlds, the lender would treat the agreement as enforceable, report to credit reporting agencies that it was enforceable, allow the debtors to keep the car and make the payments as though it were enforceable and then sue when there is a default.  No default, no issue because everyone got what they wanted.  

If there was a later default, the debtors might return to bk court and defend on the basis that the reaff was filed too late to be enforceable.  If that ever happened, the lender has no justification to rely on a reaff clearly filed after the deadline.  The debtors "induced" the lender to rely on the reaff and benefitted by being allowed to keep the car and make payments that the lender was not otherwise obligated to accept, so they ought to be held liable for the balance.   I think the scale tips to the debtor, but I think that would be a tough battle.

If the debtors want to avoid paying for that additional litigation, they would be far better off to replace the car.  But, humans are frequently less than rational.  

Good luck.

-----Original Message-----
From: CLBS [mailto:clbs-bounces at admws.idaho.gov] On Behalf Of Tyler McGee
Sent: Thursday, May 15, 2014 9:01 AM
To: Bankruptcy list
Subject: [CLBS] Reaffirmation and reopening a bankruptcy case



Debtors filed a Ch. 7 several months ago, despite my advice they stated their intent to reaffirm a vehicle loan in which they were upside down equity wise. Bank of America didn't send a reaffirmation right away, at the debtors request I sent them a letter requesting a reaffirmation agreement, they still never sent one. The bankruptcy closed and now the debtors really want to reaffirm so that it is reported on their credit. (I've already talked to them about getting rid of the car because its upside down, they don't like that option.) The Bank is now telling them that they have to reopen the bankruptcy in order to reaffirm. My question is...with the disfavor the court generally has with reaffirmation agreements and the timing deadlines, is a judge going to allow the debtors to reopen the case just so they can get a reaffirmation? Has anyone dealt with this?

Tyler J. McGee

ROY, NIELSON, BARINI-GARCIA & PLATTS
P.O. Box 487
Twin Falls, Idaho 83303-0487
Phone: (208) 734-4450
Fax:  (208) 734-4452

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