Bankruptcy

Reaffirmations: Threat or Menace? or Let Them Eat Steel!

By Joseph McDaniel, Esq.

They weren't required in the 9th Circuit prior to the passage of the evil 2005 Bankruptcy Amendments.

Now, the option of staying current and retaining isn't a legal option, but it's a practical option in many cases.

I've never had a mortgage company try anything funny as long as a client stayed current.

But automobile financing is different. About half of folks who lend on cars have started demanding reaffirmations, or they want the car back.

My preference is that we let the car companies eat steel; here's your car!

But some clients have only five payments left. For them, reaffirmation on a car is clearly a pretty good decision.

The problem with reaffirmations is that they re-establish personal liability on a car, so if the debtor, post bankruptcy and post reaffirmation, loses a job and can't make car payments, the car is picked up at 3am by Big Lou and The Hook, and the debtor, post discharge, now gets stuck with a BIG deficiency judgment.

So reaffirmations are agreements I hate, and on the other hand, I'm not quite as dumb as I look (that's not, after all, possible). If a client doesn't have a source of dough to buy another car for cash, and if the car isn't totally upside down, I'll help the client through the reaffirmation if the client asks me to do so.

Note: if the amount owed on the car is thirty thousand dollars, and the car is worth five thousand dollars, even if the client really wants to reaffirm on the car, I'm going to have to be convinced.

A lot. Seriously.

Because I want my clients to get the biggest possible bang for the buck out this not-so-much-fun-as-you-think process.

NOTHING HERE CONSTITUTES LEGAL ADVICE RE A CHAPTER 7, CHAPTER 13, CHAPTER 11, OR CHAPTER 12. FIND AN ARIZONA BANKRUPTCY LAWYER WHO IS BOARD CERTIFIED IN BANKRUPTCY LAW, AV RATED, AVVO 10 RATED, ON SUPERLAWYERS, OR JUST VERY EXPERIENCED AND A FORMER CHAIR OF SOME BANKRUPTCY SECTION OR COMMITTEE. NOTHING HERE MAY BE USED AS LEGAL ADVICE IN CONNECTION WITH ANY BANKRUPTCY, WHETHER THAT BANKRUPTCY IS IN PHOENIX, GLENDALE, TEMPE, MESA, SCOTTSDALE, OR ANYWHERE ELSE.

Full post as published by Arizona Bankruptcy Attorney Blog on July 23, 2009 (boomark / email).