Reaffirmation Hearings in a Bankruptcy Case

Even when a debt can be discharged, a debtor may want to repay the debt because s/he wants to keep property or continue to use property.  For example, most people want to keep their cars because they need the cars to go to and from work or school.

Filing a Reaffirmation Agreement

To promise to pay a debt, a debtor must sign and file a reaffirmation agreement with the court.  The court will hold a reaffirmation hearing, where the creditor, debtor appears to discuss the terms of the reaffirmation agreement.  The court may question the debtor for wanting to keep an asset because when assets are kept, they may not be sold to creditors, and some assets incur expenses that could be saved for paying off creditors.  For example, a car requires insurance and maintenance.  If a person has more cars than there are people in his/her family to drive them, the court may ask the debtor to give up the assets.

Requirements of a Reaffirmation Agreement

Reaffirmation agreements must be voluntary, not place too much of a burden on the debtor or his/her family, be in the debtor’s best interests, be cancellable anytime the court issues a discharge or within 60 days after the agreement is filed with the court, whichever gives a debtor the most time. 

For bankruptcy cases filed with the US Bankruptcy Court, Northern District of California in Oakland, CA, the reaffirmation hearings are public.  Anyone can attend the hearings.  The cases are listed in a calendar, and the court calls the cases one by one.  A reaffirmation agreement is not legally binding until the court approves it. 

Failure to Repay Reaffirmed Debt

If a debtor reaffirms a debt and fails to pay it, the debtor owes the debt the same as though there was no bankruptcy filing.  The debt will not be discharged.  The creditor may take the asset and sell it at fair market value, and the debtor held responsible to pay the difference in what is owed and the sales price.  If a creditor lets a debtor keep an asset to use it while making payments, the debtor may do better not to reaffirm.  If the debtor defaults when s/he does not reaffirm, s/he does not need to owe the difference between the debt owed and the market price.

When a debt is not discharged after a reaffirmation, the creditor may place a lien on the debtor’s property.  The creditor can also sue for a collections judgment.

Rinne Legal helps people with bankruptcies, estate planning, and loan modifications in Contra Costa County, Sacramento County and Solano County. Rinne Legal has offices in Walnut Creek, Fairfield, Sacramento and Elk Grove. Contact Rinne Legal for a free consultation.  These blog posts are for informational purposes only and not intended nor should be construed as legal advice.  These blog posts may be considered attorney advertising in some states. Prior results described on blog posts do not guarantee similar outcomes in future cases.  There is no intent to create an attorney-client privilege or relationship with anyone accessing information on this blog.  Authors posting on this blog are not obligated to reply to any emails seeking legal advice.  The information contained on this blog is not intended to be a solicitation.