Reaffirmation Agreement: What Happens If My Bankruptcy Lawyer Refuses To Sign It?

06 Jun Reaffirmation Agreement: What Happens If My Bankruptcy Lawyer Refuses To Sign It?

Let’s say you file chapter 7 bankruptcy, and you want to keep paying your vehicle loan and thereby keep your vehicle. The bank sends your bankruptcy lawyer a “reaffirmation agreement,” which is apre-printedofficial form issued by the bankruptcy courts. It states that you are continuing to pay the monthly payments on your car loan, and the remaing balance, monthly payments, and other termsare filled in. The reaffirmation agreement contains places for the signatures of the bank, your lawyer, and you. Signing the reaffirmation agreement results in the debt surviving the chapter 7 bankruptcy discharge, and your liability for the reaffirmed debt continues on,unaffected by the discharge of debts.

The problem is that your lawyer might refuse to sign it.

Yes, you read that right: your lawyer can refuse to sign the reaffirmation agreement. You might ask, how can this be? Isn’t the lawyer on your side? Why would he or she refuse to let you reaffirm on a debt, when you have the right under the law to do so?

Lawyer certification that you can afford the future payments on the debt

The problem is that the reaffirmation form contains a certification by thelawyer that (1) the reaffirmation is a fully informed and voluntary act by the debtor, (2) in the lawyer’s opinion, reaffirming the debt will not create a hardship on the debtor orany dependent of the debtor, and (3) the lawyer has fully explained the binding nature of the reaffirmation and the consequences of default.

It’s the second point that your lawyer may have a problem with: certifying to the court that the reaffirmation is, in effect, a good idea, and you can afford the payments to be made under the reaffirmation agreement.

In fact, the official reaffirmation agreement form requires that the debtor summarize his or her monthly expenses from Schedule I and J of the bankruptcy petition, showing how the debtor can afford the reaffirmed payments. Typically, a chapter 7 case’s Schedule I and J show just the opposite; they show that the debtor’s monthly budget is “negative” and that the money for reaffirming a debt simply isn’t there.

This means it is common for a bankruptcy lawyer to feel that he or she cannot, in good conscience, make the certification to the court in the reaffirmation agreement that the debtor can afford to keep paying on the debt.

The solution is a simple one: the lawyer need not sign the reaffirmation

The lawyer’s unwillingness to sign the reaffirmation agreementdoesn’t have tocreatea conflict between the debtor and his or her bankruptcy lawyer. This problem has an easy solution: the bankruptcy lawyershould help the debtor to carefully fill out the entire reaffirmation agreement, with monthly budget figuresmatching up exactly with the figures already used in Schedules I and J of the bankruptcy petition.

Although this might seem to doom the reaffirmationto being labelled as “unaffordable” by the court, the way to address this is to simply explain, on the line provided in the reaffirmation form, why the debtor feels that he or she can afford the payments, notwithstanding the figures in his monthly budget on Schedules and J.

For example, the debtor could state: “I can afford these car payments because I have no other way to get to work except in this car, and I will find a way to adjust my other expenses to make thepayments on this reaffirmed car loan.” This way, the court will know that the debtor has devoted careful thought to exactly how the car payments are to be made in the future.

And here’s the clincher –although the reaffirmation agreement contains a place for the lawyer to sign, and thereby certify that his client can afford the payments, the lawyer’s signature is not required. The bankruptcy courts have anticipated that a lawyer might sometimes feel that he or shecannot sign a reaffirmation agreement for a given client. Therefore, thecourts allow a reaffirmation agreement to be filed without the lawyer’s signature.A court hearing is then scheduled, at which the lawyerexplains why the debtor feels he or she can afford the payments on the debt. The court can then approve the reaffirmation agreement without any need for the lawyer to sign or certify anything.

This solution does requires a court hearing, but that’s what your lawyer is there for, going to court with you and explaining your legal position to the judge. A reaffirmation hearing is brief and it only requires that you and your lawyer tell the judge why reaffirming on the debt is necessary and reasonable for you. This isn’t a high hurdle to jump over, in most cases.

Filing a reaffirmation agreement without your lawyer’s signature is commonplace, and it usually results in bankruptcy court approval of the reaffirmation. This approach nearly always achieves the goal of allowing the reaffirmation to be approved, while permitting the lawyer to participate without making a certification the lawyer is unable to make.

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Craig Andresen is a Minnesota bankruptcy attorney who represents both consumers and small business owners in chapter 7 and chapter 13 cases. With thirty years experience, Mr. Andresen is a frequent speaker on the topics of stopping mortgage foreclosures, and stripping off second mortgages in chapter 13. His office is located in Bloomington just across the street from the Mall of America. Call his office at (952) 831-1995 for a free consultation about protecting your rights using bankruptcy.
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