Consumer Debtor’s and the Reaffirmation Agreement Research Paper

Inception of Bankruptcy

Bankruptcy is a path of lawfully affirm lack of ability of an individual or a business to payback their creditors, and Article- 1, Section- 8, and Clause-4 of US Constitution had authorized the Congress to endorse homogeneous Laws for Bankruptcy all over the US. Jones argued that the reaffirmation of a debt by a debtor is finding the way to escape him from the creditor and it is at the very spirit of what that debtor is looking for by filing a bankruptcy proceeding within chapter 7 of the Bankruptcy Code and it is true for all consumer debtors (8). The intention of such consumer debtor is to find a discharge order that would be issued by a Bankruptcy Court after successful completion of the case to have a fresh start. Under the present recessionary economy, it is observed that increasing numbers of reaffirmation agreements are filing in the courts rather than ever before. Thus, it is essential to investigate the reason for such greater than ever increasing reaffirmation agreements and to query whilst the reaffirmation agreement filing is carried out properly and what the consumer debtors are willing to accomplish by filing the case.

The reaffirmation agreement under Bankruptcy Reform Act of 2005 is a new-fangled contract signed between a consumer debtor and creditor that reaffirm the debts as well as personal liability of the consumer debtor from the obligation, which must be approved by the court though there is provision to revoke within sixty days by the consumer debtor. The bankruptcy is the publicly acknowledged procedure under which a debtor or defaulter could be insolvent and his properties would have to be taken by the government of the COR furthermore, in the end the creditors would be paid their unpaid debt. During two major ways, anybody could be bankrupt (Aylward et al 4).

1. Voluntary bankruptcy: Under this category, a debtor would have applied to receiving order from the court against his debt claims through open a case at the high court under the procedures of DP along with DIP (Braucher 7).
2. Forced bankruptcy: Under the forced bankruptcy, a creditor has the scope to apply against the debtor in terms of the CP followed by an adjacent order if he has owed a certain amount of money recognized by the court (GAO 23).

In case of bankruptcy, following categories of assets may not be divided between the creditors (Cooper 56)

• Essential clothes along with basic household things
• Trade appliances containing an indexed quantity of money
• Automobile or car containing an indexed amount of money
• Considering special confines the life insurance or else the donation
• Assured injures along with the reparation fees,
• According to the Bankruptcy Act the sentimental assets
• Considering special confines superannuation payments

Traditionally Who Needs It

In order to get a hold of a fresh monetary beginning the reaffirmation agreement of bankruptcy has showed the legal practice for them who has befallen into an economic insolvency. All of the bankruptcy cases have governed by the federal court under the petition of the federal bankruptcy laws through applying for reaffirmation agreement; the creditors have lawfully rights to create a sort-out plan allowing refund of all or part of the debt (Carroll et al 39 & Larson 7).

In USA, bankruptcy is a complex legal constitution that could trash anyone’s credit scores though many of the states have regulated the bankruptcy cases throughout their own legal parameters and this have defied which categories of property or assets would be consented to keep by the creditors (Williams 29). Though the bankruptcy has become an investigation procedure by court, there have to existed involvements of the bankruptcy trustee, both debtor and creditor and a judge. Alternatively, Chapter 7 or the Chapter 13 has showed approaches for most of the cases though state wise differences have shown and following the widespread outlook for both the Chapters on behalf of the user’s necessity (Zywicki 5).

How Bankruptcy Affects The Person

Before ejection from the bankruptcy, any individual has considered as an undercharged bankrupt and throughout this time, he has affected in following ways. (Dratch 10)

• Cannot employed in reputed organization,
• Cannot use their own name during registration of new trade moreover it also has required to informing people about their bankruptcy,
• Required to handling their isolated properties to a trustee,
• Required to surrender passports, has adopted terms, and conditions for traveling abroad,
• Required to inform the lender about bankruptcy during incurring credit termination the filed amount,
• Required to record of all documents, financial testimonials related to the company as well as trustees (GAO 47).

Historically

In the way of credit, bankruptcy has affected the client in a different way. Minor issues of the credit defaulter have ignored most of the cases and alternatively, bankruptcy has become serious conclusion of the defaulter. For the bankruptcy, a creditor would be discarded for any type of loan, mortgage, or the credit facilities due to his preceding history for a long time more specifically; it might be for a decade. Furthermore, the debtors have significantly justified a creditor’s history during risk computing (Blazy, et al 62).

Credit Score

Credit report by the probable lenders has rather dangerous than claim amount collecting through credit scoring. Removal of the claimed accounts have existed in the file for more than 7 years and in this time these accounts have an significant role in computing credit scores. Most commonly used credit score terms are in below:

1. 8-year credit history: credit card users for the 8 years have currently scored 680 but a bankruptcy report would be fallen it 130–150 (Martin 3).
2. 10-year credit history: the bankruptcy bureau would have the scope to apply the Chapter 13 to report successfully but the appropriate managing of credit card would be brought maximum 2 years decent.
3. 15-year credit history: 15 years credit card users have currently scored 780 but for the defaulter it would have turned into only 220–240.

Who Are the Consumer Debtor

Carroll et al (2007) pointed out that the Bankruptcy Code has at all times would impose the requirements those necessarily be complied earlier than filing a reaffirmation agreement which is applicable aligned with the debtor post-discharge background.

Carroll et al (2007) also explained that the BAPCPA of 2005 has appreciably amended the whole reaffirmation procedure and the conditions essential for the implication of reaffirmation agreement and attempts to identify who are the consumer debtors and the issues that make them capable to deal with reaffirmation agreements under the BAPCPA 2005.

Requirements to qualifying for Reaffirmation Agreement

Under Subsection- 524(c) of BAPCPA 2005, the Bankruptcy Code clearly indicated that the reaffirmation agreement would be enforceable for Consumer Debtor:

• Those who has already applied from reaffirmation agreement previous to have granting for the discharge beneath the sections 727, 1141, 1228 as well as 1328,
• The consumer debtor who receives the disclosures mentioned in the subsection (k) at the time of his signing the agreement or before,

The consumer debtor has filed the agreement with the court as well as attends by a statement or official declaration of counsel that mentioned:

• The consumer debtor reaffirmation agreement performed by the debtor from his clear understanding and willingness and voluntary involvement
• The consumer debtor does not feel any imposed or unwarranted poverty on him or his dependents
• The consumer debtor has the opportunity to consult and negotiate with his attorney for his better understanding about the legal effect and outcomes of reaffirmation agreement (Butler 9)

American Bankruptcy Institute

Treatises of American Bankruptcy Institute are applied in research, practice and court verdict and it also provide education on bankruptcy where the Chapter 7 has worked for liquidation and this bankruptcy appearance has made scopes for the creditor to be ejected their debts by exchanging or sacrificing their properties. This module has applied only for them who have a small amount of assets or have no assets, small amount of earning or have earned nothing but have scores of debt. Alternatively, the Chapter 7 would be effective for the consumer bankruptcy as well as not having any valuable assets and the trustee would be strived to selling those. (Weil 2)

The bankruptcy would have removed many embellishments for instance, make isolated from all of the home equity or the household products and services. Fr the ultimate discharging the Chapter 7 has taken 3 – 5 months to opening file and anybody would allowed to do this only one time within 6 years. (Votolato 9)

Treatise: Collier on Bankruptcy

Treatises of Collier on Bankruptcy is the pioneer discloser to explaining Bankruptcy cases which are used by the practitioners legal researchers and even judges to interpretation the dilemmas of implication of Bankruptcy codes. For instance:

In the Case No. 03-5417-3P7 Creditor Dr. Nucci, R. had applied for Administrative Expense against the debtor Mary E. Zell. The fact demonstrates that the debtor had taken treatment from Dr. Nucci after a road accident. After having the medical services from the creditor, the Debtor applied for her Chapter 7 Bankruptcy Petition. Dr. Nucci’s medical services value amounted total US$ 7,380.70 and kept the services rendered remain unpaid. It was difficult under the Chapter 7 and even any creditor of Debtor’s assets filed another objection to Dr. Nucci’s submission of reaffirmation agreement and to overcome such dilemma, thus the Eleventh Circuit has interpreted the state of affairs with § 503 (b) by using Collier on Bankruptcy (Warren 22).

Collier on Bankruptcy pointed huge explanation of legislation epically the chapter 13 has widely recognized as the debt adjustment where individual has approved for a short time to impeding of the legal affairs in terms of refunding the debts within installments throughout 3 – 5 years. Moreover, the chapter 13 would also effectual for those who have wished to liberate their mortgaged home or the car loans as soon as possible. It has to be noted that, 90 % of the bankrupt filing has opened due to car loan or for the home mortgage. Alternatively, the chapter 13 has made modes to reform people’s debt as well as has amended loan interest rates. (US Court 7)

Treatise: Norton’s on Bankruptcy

Norton’s on Bankruptcy has facilitated the consumer debtors for not represented by an attorney at some stage of negotiating a reaffirmation agreement and even the court hits upon that the agreement may not compel a gratuitous hardship upon the debtor otherwise any dependent of the debtor ensure the best concentration on the debtor. Norton’s on Bankruptcy identifies such findings are not necessarily required where the debts are consumer debt and protected with valid property (Thomson Business 2).

ABI has established the Judge Norton Award for the bankruptcy trumpent judges for their excellence identified upon their career efficiency and lifetime achievements which has determined themselves as the pioneer of researcher educator, writer as well as scholar. The Norton Bankruptcy Treatises has established with Norton Bankruptcy Library that consists with a number of legal resources to assist for any bankruptcy law expansion, research dilemmas, practice, code of rule and even legal dictionary, advice, and handbook (Thomson Business 2).

What Are Reaffirmation Agreements

American Bankruptcy Institute

According to the 11 U. S. C., subsection (c) of the Section 524 amendment has required the court approval in order to consent the bankruptcy reaffirmation or reconfirmation agreements. Following are the central inevitability of this agreement (Butler 2009).

• Debt claims of a debtor have not to surpass the endorsed amount during appeal for reaffirmation.
• According to the prerequisites of the title 11, the lien would be enforced.
• During the reaffirmation, any legal representative charges should not be inserted to the prime debt quantity. convoy
• Movement of the reaffirmation movement approval has convoyed through essential deed manuscripts or all of the interconnected precautions deeds or by the liens in addition, faultless adjacent of the evidences.
• During execution of the requested consents, the defaulter should to make available all of the required data or information.
• Finally, the deed ought to convey all of the significant necessities as said by the subsection (c).

Why Do You Re-Affirm Debt’s in Bankruptcy

Necessities of reaffirm debt under bankruptcy have worked for the long decades due to a positive development of the existing procedures or in another term reaffirmation agreement has enlarge the return of the creditors in bankruptcy. However, there have several uncertainties for the recommended legislation in future. Moreover, the recommended legislation has employed scores of reserves, ambiguous goals, and objectives. In additionally, it would not have optimistic scopes to practice in apprehensive of the creditors. Losses have occurred increasingly for the credit cardholders and under the existing system, there have a strong potentiality that the collective liquidation for the charged-off credit card lending would be crossed $ 60 billion with in the subsequent three years. More than 42 credit card industries in abroad has appraised that 10 % of the applicants under the constitution of the Chapter 7 would have turned to the Chapter 13, the credit card industry would be successfully saved more than $ 100 million. Finally, most of the Attorney has stated that though cardholders have doubt about the importance of savings under the present legislation facts but files have open by the households due to their descend economic conditions (Furletti 30).

What Does It Mean When You Re-Affirm a Debt in Bankruptcy

Whenever anyone has filed a bankruptcy case under the constitution of the Chapter 7, his mortgaged home and the car would be never re-affirmed as well as has liable to pay for his both assets home and car. Now a question, did these assets has involved in the procedure of bankruptcy (Taylor 3)?

Under the bankruptcy petition followed by the Chapter 7, list of all of the debts would be a significant introduction to open a bankruptcy file therefore, all of the debts would be discharged by court. However, if anybody would have wish to debt reaffirmation then the debt would have required continuing the bankruptcy discharge. People would be re-affirmed by the unsecured creditors therefore the debt would not be bankruptcy discharged by court. Additionally, Judge of the bankruptcy has assured to sign on the debt re-affirmation deed if the creditor would not be represented an Attorney on behalf of his case (Kibris & Kibris 44).

According to the 11 U. S. C. § subsection (c) of the Section 524, the bankruptcy code has obliged that the enclosures of the re-affirmation deed has to recommend the debtor that the recommended agreement would not be entailed throughout neither the bankruptcy nor the non-bankruptcy regulation. Moreover, the legal advisor of the debtor ought to recommend his client about the legal consequences of the bankruptcy deed involving a debtor under this type of agreement. Alternatively, hearing of the reaffirmation code would have valid whilst the debtor or defaulter could not represent his own Attorney at some stage in the deed’s negotiation. Furthermore, the debtor might be refunding any of the debt willingly and the reaffirmation agreement would not be essential (Kibris & Kibris 11).

In terms of debt financing, home and car have typically most secured and consequence of this the lenders have preferred both home and car while deciding to provide loan. Home mortgage or the car loans have easily abolished liability of the bankruptcy through refund of the claimed amount. However, in case of the debt reaffirmation, the creditors would like to recover their loans easily through sold of the home or car if the re-affirmation file would not be opened (Warren 7).

Finally, after long time of the bankruptcy filing many of the creditors have mystified that how they would continue their installments for the home mortgage or the auto loan. In terms of the debt discharged, the creditors have not required paying any of his/her installments but might be loose ownership of his property.

What Happens When You Re-Affirm a Debt in Bankruptcy

After examining the preceding of similar cases, the judge would determine the present case in order to entitle either it would follow the Chapter 7 or the Chapter 13 more specifically, identification of the suitable solution in terms of the refunding or by the instantly discharged of the debts. All of these circumstances have executed by the old legal constitutions but now modern legal affairs have scrutinized bankruptcy scores in decision-making. Person who has capable to refund 25 % of his debts filing under the chapter 13 would be best solution for him. However, in case of the Chapter 7, personal attributes have also significantly considered for the 25 % refund potentiality to the creditors for example, health issues, accommodation scores, creditor’s life expectancy, income scale etc. are included.

The reaffirmation agreement constitutions might be provided following aid for the sufferer (Mecham & Ralph 27)

• Made an ejection against the all or a segment of the debts in terms of discharged therefore self-assurance has motivated for a new economical beginning.
• Made scope to repay the debt by impeding legal affairs against home mortgages or the car loans
• Made an opportunity to taking back the auto or car or the mortgaged properties for a short time
• Impeding remuneration embellishment, debt assortment aggravations as well as analogous creditor proceeds just before assemble debts
• refurbish or stop termination of the utility services
• Consent to challenging against the claim of creditor who has consigned to deception or by demanding to gather supplementary than anybody actually be obligated.

Following are the negative influences of the reaffirming a debt under bankruptcy (Kibris & Kibris 17)

The bankruptcy could be resolve all of the monetary dilemmas, and not be effective for everyone. Limitations of these processes are:

• A threat toward the financial security of the creditors
• Expulsion of the several conditions as for example, unusual medical conduct, support for the child, refund orders by court, allowance, student loan facilities, tax adoption, illegal fines etc.
• Raise defend against the creditor’s debt cosigners in case of his friends or the family members have applied for credit additionally have forced to refund full or the portion of the loan.
• Absences of the facts behind bankruptcy while file has been opened (US Courts, 4)

Re-Affirm an Auto Loan

• Positive Ramifications: The creditor’s has gotten liberalization from debt claims along with the omnibus harassment, moreover; auto or the car would be returned to its owner temporality (Primo & William 6)
• Negative Ramifications: After the bankruptcy file, the debt would be further claimed though it has already discharged.

Re-Affirm a Home Mortgage

1. Positive Ramifications: home or the real estate property has provided optimal security in terms of mortgage against credit and has sound scope to redeem bankruptcy obligations.
2. Negative Ramifications: It has complicated legal step that tactfully would have adopted additional claims than the authentic debts

What Happens When You Do Not Re-Affirm a Debt in Bankruptcy

According to chapter 7, a debtor who does not agree to reaffirm a debt then the court may order to liquidate the assets of the debtor through the trustee to pay the creditors full or partial of their investment. In such a case, the debtor may get exemption of some of asset, which he or she can retain. There are many assets, for which the creditor’s lien and some of the assets are under mortgage in nature that has right to the creditors. So, a case files under chapter, the debtor loss the right on the property and in such a case the debtor can proceed with chapter 11 for seeking adjustment of the loan through the decreasing the amount of payment or extending the time of payment but this specially applicable for business organization. In case of personal debt, the debtor can seek adjustment plan for the debt under chapter 13. The advantage of chapter 13 is that it gives the chance to readjust the debt through repayment plan without sacrifice the right on the property.

Under chapter 7, the individual can apply for relief if the debtor will not dismiss by the court for any other bankruptcy before 180 days of current filing and the debtor must take counseling from the attorney about the case and court may order a mean test to verify it. The reason is to allow the honest debtor for a fresh start (US Courts, 1).

The debtor can get discharge of debt under chapter 7 and if the discharge ordered then the creditors cannot take any action regarding collection of debt. The trustee will examine the document required and most of the case the court approves the discharge according to the report of the trustee. The trustee arranges a confrontation meeting with the creditor where the creditors and trustee ask question to the debtor. If the debtor did not intend for reaffirmation then the debt will automatically discharge. However, not all the properties would be discharged, as some the property has lien of the creditor where debt repayment plan will introduce if reaffirmation not take place.

Non-Reaffirmation of an Auto Loan

Positive Ramifications

Non reaffirmation of an auto loan has some positive effect on the part of the debtor as he may use the option of “ride through” by which the debtor fail to pay the car loan and file petition in the bankruptcy court, the debtor will continue to pay the installment and possess the right on the car. Because reaffirmation can have a hardship on the debtor involved in bankruptcy, he or she has loosened the ability to pay the loan. On the other hand, reaffirmation is a new contract by with the burden on the debtor will be decreased. If the debtor able to redeem the loan he or she do not need to reaffirm the loan or the debtor may surrender the collateral by which he can get relief from the loan. In case of reaffirmation, the amount of payment may be higher than the present value of the car which certainly loss the debtor.

Negative ramifications

Non-reaffirmation of car loan has some bad affects and among them repossession by the creditor is the worst one. The car may be the main income source of the debtor and lose of it may stop the regular income of the debtor. Through reaffirmation the debtor may able to make a consistent income and thus able to repay the loan. Another negative impact is that it will crate problem for further loan proceeding of the debtor.

Non-Reaffirmation of a Home Mortgage

Positive Ramifications

Mortgage is one kind of debt for the real property, which is collateral for a mortgage loan. If the debtor fails to pay the monthly payment of the mortgage and file petition for reaffirmation agreement, he or she has the option beside the reaffirmation. The debtor may ask the court for exemption of the property and take a loan repayment schedule under chapter 11. According to the chapter, the debtor may continue his or her payment after the bankruptcy case filed and possess the property. The debtor can redeem the loan through selling the property, which will be profitable as the value of the real property is increasing. Reaffirmation may put a burden on the debtor and he or she may further fail to pay the loan.

Negative Ramifications

The main problem of not applying for reaffirmation agreement is the possibility for the recovery of the property by the mortgage company. Because of non-reaffirmation, it is harder for the debtor to continue his or her right on the property. The creditor company also likes to reaffirm the loan, as it is a hassle for the company to sell the collateral. On the other hand, if the debtor redeem the debt through the selling of the property, certainly he or she loss his or house and it will be a much difficult situation for the debtor. Discharge will not possible for the real property and this property has the lien of the creditor.

Procedures of Reaffirmation Agreements

Overall

Reaffirmation agreement is considered as an agreement where the debtor gives up his right to discharge from some debt where the debtor personally and materially liable to the creditor again to retain his property or relationship and the law encourage the agreement with the dischargeable debt. As oppose to the legal right to discharge from some debt or liability, the federal court take serious caution against violation of the terms and conditions of the law and impose strong punishment against the violation of the terms and condition of the agreement. Mecham described the procedures of the reaffirmation agreement are as follows (1-29):

• The agreement must not be enforceable through the bankruptcy law but can enforce by contract law (Bankruptcy law 1) and the amount of debt against which the agreement takes place, must contain fully or partially dischargeable debt.
• The reaffirmation agreement may contain term and condition lesser than the original contract, which has defaulted by the debtor. The term and condition of the agreement should understand and agreed by both debtor and creditors, and this agreement must in written form.
• Reaffirmation agreement must apply before the discharge of the debt and statute indicates at least agreement not necessarily in written form should make before discharge in the court. Agreement after the discharge is void.
• Under the reaffirmation agreement, the debtor can take 30 days time as the discharge appears before the declaration. If the discharge declares then the case, need to be reopening to make the reaffirmation agreement.
• The disclosure of the reaffirmation agreement must be through the clear statement and non-comply with this requirement made the contract void (Votolato, 2).
• In case of agreement, the debtor must headed by a counsel and the counsel declare that the debtor know everything of the contract and voluntarily enter into it. The debtor also ensure that he or she understand the effect of the agreement through his attorney.
• Under the state law, the creditor does not have the right to contact with the debtor because of the reason of Automatic Stay and the counsel of the creditor cannot send any formal and informal letter to the debtor.
• The debtor has the legitimate power to rescind the reaffirmation agreement after the entry of the discharge or the within 60 days of the contract. So the creditor must fill the agreement in court otherwise the 60 time will not start and keep the debtor to a position to rescind the agreement.
• The court would examine the understanding of willingness of the debtor and make a hearing for it when debtor comes without counsel.

After completing all these procedures, the debtor should make reaffirmation agreement with the creditors in the court. To do the agreement the court provides a form where both the party signed with the details and signed by the counselor and attorney of both party debtor and creditor.

Chapter 7

People most of the time file case under chapter 7 for the unsecured debt like the credit card, bill of medical etc. but it also possible to file case under chapter 7 for secured debts like home, cars, jewelries etc.

Reaffirmation of Secure Debt

Whenever a debtor enters into the reaffirmation agreement, the chance for discharge of the debt is automatically diminish because the debtors agreed to pay installment of debts according to the agreement. Ones the Reaffirmation agreement become permanent then the debtor can change or withdraw the contract with sixty day of the contract otherwise the contract get valid and if the debtor fails to pay installment of the debt then the creditors can repossess the collateral and attempts to sell the assets to realize the debt. Usually reaffirmation agreement comply with the original contract but most of the cases the value of the assets reduce over time so that the debtor can negotiate with creditors for price adjustment but the creditors are basically reluctant to adjust the price of the land as the price of the land increases over time. The value of motorcycle, car, furniture etc frequently adjusted against the original price. In addition, to reaffirm a secured debt few conditions must be followed such as the debtor must hold a current view in both agreement and payment and the reaffirm installment must comply with the best interest of the debtor.

Reaffirmation of Unsecured Debt

Most of the time reaffirmation of unsecured debt is not successful for the reason that the creditors cannot faith on the debtor because of no collateral is associated in the debt. In case of credit card reaffirmation, the company will not continue the account of the debtor though the debtors want to reaffirm for using the credit card.

In case of reaffirmation, the most important thing is that the lawyer has the responsibilities to declare the agreement for the best interest of the client. However, sometimes the lawyer can deny to doing so if he identify that the ability of the debtor does not comply with the repayment of the debt. For instance, in re Goodman, the attorney refuse to certify the debtor that the affirmation is on her best interest and the debtors raise the issue on court but the court decided not to approve the agreement as the attorney follow his professional duty.

Chapter 11

Reaffirmation is not possible for individual to fill a case under the chapter 11 and it is eligible for mostly business organization, which want to run its business to pay to the creditors and survive with his or her family. It is an alternative to the reaffirmation in case of chapter 7. In general, chapter 7 is eligible for the individual person with consumer debt in nature but in case of chapter 11 the business organization like Partnership Company are file the case. Reaffirmation is not possible in chapter 11 because after the amendment of 2005, this chance was abolished under this chapter. For instance, according to Katz, recently a well-known restaurant of green in New York City named Tavern, which operates for 75 years file a case under chapter 11 in US Bankruptcy Court in the Southern District of New York to continue the lease of the land and get extension of 20 years (1). To pay the debt amount it auctions the name of the company and still doing its business through the protection of chapter 11.

The special feature is the plan of recognition, which implies that the debtor prepares a plan for the debt repayment and seeks the approval of the creditor. This recognition plan must be with the petition made by the debtor and the petition is voluntary or involuntary. The following document required for the petition.

• A complete schedule of debtor’s assets and liabilities;
• Schedule of the current income and expenditure of the debtor;
• A list of the contract executed and the lease property
• A list of total financial transaction of debtor

There are some rules regarding chapter 11, which are following:

• Without government, anyone including various form of business is eligible for the case;
• To start the case a petition must be filed by the debtor.
• As the case starts, the debtor will get full possession on his property and get the opportunity to plan for loan repayment.
• During the petition, the debtor acts as a trustee of the bankruptcy and had the right to protect the property.
• The debtor before preparing the recognition plan can sell any property and even sell after filing the case to satisfy the creditor lien.
• The court forms an unsecured credit committee and notice the creditor to be a member of the committee and this committee approved by the court for running the case.
• The debtor can apply for small business creditor for which no credit committee will form and he gets maximum 300 days for proceeding.

Chapter 13

Chapter 13 is eligible for those who cannot file a case under chapter 7 due to some specific reasons, such as, high income level who want to keep the asset whereas under this chapter immediate liquidation do not take place, who do not want to discharge the debt immediately and finally who do not want to make themselves as bankrupt. It requires to com[ply for at least three to five years framework and within this time the debtor will need to repay the debt under this chapter and in this way debtor will not loose its assets. According to a case of Associates Commercial Corp. vs Rash ET ux Rash, purchase a truck through the debt from Associates Commercial Corp (ACC) where the truck was collateral of the debt. However, Rash file a bankruptcy case under Chapter 13 and made a repayment plan, which not approved by ACC and the valuation by Rash also objected by the ACC and claimed for replacement value. Rash decided to cram down options to pay the creditors accordingly and the Court has approved the plan.

According to Larson, Chapter 13 of bankruptcy act may deals with the repayment of the debt to the creditors through the recognition of the financial status of the debtors (1). For implication of chapter 13, the debtor must have the income, which exceeds the living expenses of him, or her and the payment may be partial or full. The debtor required to meet with counsel for the detail understanding and preparing of disclosure at least before the six month of filling the case in the court. There are some other issues, which are relevant before the starting of reaffirmation agreement.

• The debtor must meet with the financial analyst to prepare the financial statement and debt repayment schedule for filling case and make the detailed plan for repayment
• Under chapter 13, the debtor gets the advantages of automatic recovery like other chapters.
• After filing the case of repayment, the court employ trustee for the repayment and the trustee have the full right to the asset of the debtor;
• Finally, the debtor who files case under chapter 13 may urge to dismiss the petition and after that debtor need to pay full amount to the creditors. It may happen due to the intention of the debtor to buy some time from the court

Can Re-Affirmation be revoked after 60 days? May a Re-Affirmation be Revoked Greater to 60 Days

United State bankruptcy court argued that reaffirmation agreement comes in question after filing a case under bankruptcy court for bankruptcy of the debtor. Reaffirmation is an option to the debtor to pay the debt to the creditor by the way of making a contract between the debtor and the creditor. Before the discharge of debt by the court, the intention of reaffirmation must declare by the debtor within 45 days of the first meeting with the creditor or after termination of the automatic stay. After making the reaffirmation agreement in court the debtor can revoke the agreement within sixty day of the completion of the agreement. The debtor needs to send a latter to the creditor that he or she does not need the reaffirmation contract. Therefore, in general it seems that the revocation should make within the sixty day of the agreement and the revocation must propose by the debtor.

According to 11 U.S.C. 524(c) (2) (A), the debtor who wants to revoke the agreement must made within the 60 days of agreement or until the discharge, whichever is later can revoke the agreement. Therefore, if the date of discharge is after sixty days of the contract made then the debtor can revoke the agreement after sixty days. Again, the notification and intention of revoke must make by the debtor to the creditor and he or she also notifies it to the attorney for further caution.

How Repossessions Affect Re-Affirmations; How Re-Affirmations Affect Repossessions

Repossession is the right of the debtor in any property own by him, which is subject to lien by the creditor for paying the debt in case of bankruptcy of the debtor. When a debtor file a case of bankruptcy, he or she has three option which are debtor may redeem the debt through selling property, debtor may give up the possession to the creditors for debt realization or debtor may enter into a new contract with the creditor for loan repayment which known as affirmation agreement. When bankruptcy case files in the court, the debtor gets the right of automatic stay and after that, he needs to meet with the creditor to settle the debts. Through the affirmation agreement, the debtor gets repossession in the property.

The repossession given to the debtor due to the affirmation agreement is because if the debtor loose the property right his or her income from the property will close and he will not able to pay according to the reaffirmation agreement. It gives by the court to debtors for a new start of the business through the property and it will also beneficial for the creditor because creditor can’t realize the amount of actual debt by selling the collateral and it is also not useful for the creditors business purpose.

Reaffirmation also affects the repossession positively because the debtor seeks for reaffirmation for repossession of the property, as it may be his way of income. Through repossession, the debtor may continue his or her business for survive and repay the loan.

Past View Prior to 2005

Aylward and others argued that Prior to 2005, the debtors liquidation to the creditor which is relevant to reaffirmation agreement described in chapter 7 under which the debtor can only repay the debt to the creditor without performing any agreement. The procedure that needs to follow by the debtors is filing a petition in the court for the settlement of the debt through the bankruptcy (Aylward 3). When the debtor files petition, the person need to attach some documents including the income statement of the debtor, the cost of living of the debtor, the list of creditors and their claims and finally the properties possess by the debtors. Then the debtor fill the form provided by the court and applied for the exemption of the property. After the court notify the creditor and make a sitting of debtor with the creditor or creditors. The debtor can change the petition from chapter seven to chapter eleven for exemption. Finally court appoint trustee to liquidate the asset, which are not exempt (Aylward 3). At last, court made the discharge the personal liability from the debt by which the creditor cannot force personally for debt recover.

Current View 2005 to Present

9th Circuit Dumont vs. Ford Motor Credit Company

Martin argued that the case of Circuit Dumont vs. Ford Motor Credit company start when Dumont purchase a car from the Ford company where the company insert a clause that if Dumont involves in bankruptcy case she would consider as default (1). After that in 2006, she filed petition in court for bankruptcy and valued the car as $8288 though the actual price was $5800 and she continued payment of $335.78 per month. Ford offer reaffirmation to Dumont but she did not accept it, as the result, Ford company possess the car by appealing. Dumont reopens the case of bankruptcy to prove that Ford on fault against discharge and continued to pay the installment. However, court did not find fault in Ford’s action and finally the debt was affirmed. Here the question is whether the defaulter can make the payment for the collateral when it is under water.

According to chapter 7, the debtor must clear her intention regarding the settlement of a debt with collateral. There are four options for her, firstly, she can surrender the collateral, secondly she can redeem the collateral, thirdly, she can make reaffirmation, and finally, she can use the option of “ride-through” by which she can retain the possession of the car and pay the installment of debt. Without of being defaulter by failing to pay installment, the creditor can’t repossess the car due to automatic stay. The option is popular to the debtor because they can use the car though the debt amount surpasses the present value of the car. On the part of the creditors, they may feel that the amount paid is less than the depreciation value of collateral. Before the existence of BAPCPA all Circuit including the nine Circuit gives the opportunity to the debtor to go through “ride-through” option but after the commencement of BAPCPA the debtor has no right to hold their property unless settle the debt by any option excluding the “ride-through”. Frequently contradiction takes places regarding this law and congress still not able to reach final settlement of the issues of “ride-through”.

According to Bankruptcy Receivables Management, Appellant vs. Charles Lopez¹¹, Charles, and Julie Lopez brought a diamond ring under the debt of Samuels Jewelers Inc. and the ring served as the collateral of the debt. After that Lopez file a bankruptcy case under chapter 7, where she seeks reaffirmation from the creditors but Samuels exchange its right on jewelry to BRM. BRM send offer for reaffirmation to Lopez but she ignores to do so. As a result, the debt discharged under chapter 7 in 9^th circuit court. BRM offers the reaffirmation to Lopez under new consideration and file in court to enforce the agreement. So, the 9^th circuit did not approve here on the ground that the discharged debt could not reaffirm.

Three recent cases

Re Booker

In re Booker debtors filed a petition in 2008 for relief under Chapter 7 of the Bankruptcy Code but in 2009, the US Court dismissed this case pursuant to § 707(b)(3) because this section considers financial condition and bad faith of Debtors and Court also held that Debtors have capacity to pay significant percentage of their unsecured debt.

Van Ness

In the recent case, Van Ness Creditor seeking injunctive and extraordinary “in rem” relief and his ultimate aim was to obtain possession of debtor’s residence though existing law like Chapter 7 of the Bankruptcy Code does not provide this specific relief and this petition was based upon jurisdiction of the court’s general equity (Buchbinder 243).

Brooks Hamilton

In the case of Brooks Hamilton, sanction of suspension imposed on attorney due to abuse of discretion and in order to find out a proper sanction for Chapter 13 debtor’s attorney who made frivolous argument, Court should consider the following issues, such as:

• It should identify whether the duty was violated by the Clint, ordinary people, legal procedure, or the professional conduct.
• If Attorney infringe duty, Courts observe whether he/she acted intentionally, deliberately, or negligently,
• Whether his misconduct caused any serious or potentially serious injury,
• Finally, Court will scrutinize the aggravating circumstance to ensure justice (Skeel 189)

Practices, Procedures, Advice, & Thoughts

Strazynski arranged a meeting in bar to hear and discuss about various issues of the court such as the decision of the judges and chief deputy clerk also included in the meeting. This meeting was chaired by Strazynski giving the chance to the attorneys to express their feeling about the judgment and maximum participation ensured by telephone invitation (Starzynski, 1-6).

• Strazynski creates a system whereby every person including the lawyer taught directly to him about the system of judgment, behavior of the staff and other issues related to court;
• The date of hearing and other issues related to the case published in the website and the client can check it there and if not found, they can contact to the chamber;
• The hearing and control room equipped with the digital audio recording system where all the sound is recording to hard drive. Therefore, if anyone thinks that his or her say is off the record, the person must request for cutting the record otherwise the person must of the microphone before saying off the record.
• Sometime, Strazynski go through the reaffirmation agreement because the court says if the attorney of the debtor declares that the debtor agreed to sign reaffirmation agreement. Most of the time, the affirmation agreement crate a burden for the debtor and should not proceed on reaffirmation;
• Whenever part of the case is performed by the different attorney, they share the fees and this sharing is personal not the matter of the bank;
• Recently the use of paper in filing is less and the filing should make on the right side of the file because filing in right side indicates that the file for clerical use. The filing in right side directly proceed for pleading and shown in ACE docket;
• The client should take action fast if the responsible person dealing the case informs to do so;
• The judgment is equal for everyone and no one can show much familiarly with the judge because everyone must get the same attention especially for the persons who are not regular in this court. During the hearing enter into the chamber and talk with the staff or other person of the chamber familiarly must avoid;
• One signature for an order is enough and fax signature is valid in this regard. Therefore, when someone sends order need not to put multiple signature and addition signature page is throwing in the basket.
• Those things, which the client wants, to exhibit must include in the record.
• If debtor wants to remove confirmation hearing of chapter 13 from schedule, he or she must notice to the concern party and inform court for not hearing and giving reason behind it;
• If any case has settled then the party should inform the court.

2nd Circuit Views

Anon described that, the second circuit will analyze one issue regarding the retention of property by the debtor when one follows other options open to choose. Generally, the BAPCPA dictates that the debtor must choose options like surrendering the collateral, redeem the collateral, or enter into the reaffirmation agreement. However, the question is that without choosing any option from those, can the debtor retain the property by paying the debt in installment or not. It is a matter of contradiction and the second circuit holds the decision of the previous case and allows the debtor to retain the property until he or she continue to pay the loan (Weil & Manges 1). This decision actually favors the debtor and it implies that when a debtor files a bankruptcy case in the court, he or she can repossess the collateral through the payment of the debt continuously. It is a situation when the debtor is not filing the bankruptcy petition and using his or her collateral as usual. Other circuits also follow the same decision and the second circuit decided not to change this unless the new decision made on this issues.

Another issue regarding the reaffirmation in second circuit is the dilemma faced by the attorney concerning the declaration of the debtors accent that the debtor may say the reaffirmation would pose a hardship on him or her and as a result, the attorneys reluctant to make this declaration.

Future predictions

Zywicki argued that the most apparent affect will fall on reaffirmation agreement, and under the present recessionary economy has affected on the emerging economies and not that much on the established economies like Europe and America (1). The basic process of reaffirmation remains the same and the process is round to the party like debtors, creditors and the bankruptcy professionals. The emerging countries follow the law of the developed countries and the law will be more liberal than before. The chapter 11 has already refused by many business organizations and individual for which the existence of the chapter has questioned. The world will not adopt uniform rules rather it will converge with one another. On the view of the creditor, they would want to introduce contractual or other mechanism, which will reduce the risk, cost and time for recovering debt than the legislative one. The US states burdened by debtors may strict the law, and the states with less number of debtor may liberalize the law., some country will relax the law to attract the debtor for expanding more and achieving economic growth but some country may hard the rule for retaining the money as it makes the free flow of money.

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