[CLBS] Reaffirmation

[Randy French]

Susan

You raise good questions.

It is the bankruptcy judge, not the trustee, who reviews and approves or
rejects reaffirmation agreements.  Judges usually if not always reject
reaffirmation agreements that show that the debtor cannot afford to make all
the payments that the debtor is proposing.  

The Debtor could file an amended schedule I and J to show that he can make
all the payments that he is proposing to make in the budget.

The reaffirmation agreement just makes the debtor personally liable on the
debt again, and waives the discharge as to the debt being reaffirmed.  That
would be important if there was not sufficient value in the property to pay
the debt secured by the deed of trust and all senior deeds of trust in full
at foreclosure.  If there is sufficient value, then  your client does not
care about a reaffirmation agreement.  If there is not, then he would prefer
to have a reaffirmation so he could sue the debtor for the deficiency
assuming that the debtor defaults.

If payments are current or are brought current on the loan owed to your
security, then your client may not have grounds to declare a default.
Lenders secured by personal property such as cars do take the positon that
the discharge of personal liability on a car loan is a default so they can
repossesses the car immediately after the deadline to reaffirm passes, if
the debtor does not reaffirm.  I had not been aware of lenders secured by
real property doing that.  I have seen such lenders become difficult to deal
with and refuse to provide information and sometimes refuse to provide a
debtor with 1099s or loan statements showing that all payments have been
made on time.  

For your client, you and he may not care about the reaffirmation so much as
you care about the debtor making payments.  You may not be as flexible as
you would be if the debtor was personally liable on the debt and could be
sued for a deficiency.  But so long as the property is properly insured and
maintained, and the debtor pays on time every time, and the property values
are hopefully more than the total of the debt secured by the deeds of trust
and are going up, then you may not care much about the reaffirmation and
about immediately foreclosing..  

If your client does not like the guy and does not trust the guy, if the
value does not comfortably exceed the total debt secured by the property, if
payments are not current or become delinquent in the future, if the debtor
is committing waste or does not keep insurance in place, then  all bets are
off and your client may want to start that foreclosure.

Good luck.


Thanks.
Randy French

Law Office of Randal J. French, P.C.
Attorneys at Law
P.O. Box 836 
Boise, ID 83701 
(208) 859-6881

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-----Original Message-----
From: CLBS [mailto:clbs-bounces at admws.idaho.gov] On Behalf Of Susan R.
Wilson
Sent: Monday, August 21, 2017 5:40 PM
Cc: clbs at admws.idaho.gov
Subject: [CLBS] Reaffirmation

Hi All,

I don't practice bankruptcy law, so I appreciate any thoughts and guidance
from those who do. I have a client who is a creditor - he is a lender who
has a deed of trust on real property of the debtor. My client was
considering a reaffirmation agreement to allow the debtor to reassume the
Note.  However, he has recently received information that the Debtor's
budget shows expenses in excess of the income without even considering the
expenses involved in reassuming the debt.  

Does a Trustee look at that budget and then potentially deny the
reaffirmation agreement, even if my client the creditor agrees, because the
budget doesn't have room for the reaffirmation?  If my client decides not to
do the reaffirmation agreement - then does he just get the property back
(like a deed in lieu of?) or wait until the bankruptcy is done to proceed
with foreclosure?

Thanks for your wisdom!

Susan


Susan R. Wilson
Attorney at Law, PLLC
208 S. Main St. Ste 2
Moscow, ID 83843
sw2 at moscow.com
208-882-8060
866-221-9397 (fx)
 
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