More on Reaffirmation Agreements

I had a short very enlightening conversation on reaffirmation agreements with a bankruptcy judge at the 9th Circuit Judicial Conf last week.  The conversation started with my comment at the program I was doing that I don’t sign – ever – the attorney declaration in 524(c)(3).  The conversation was about the consequences of not signing it.  I now have a new way of looking at the whole process.

Section 524(c) states that a reaffirmation agreement is not enforceable unless:

(3) such agreement has been filed with the court and, if applicable, accompanied by a declaration or an affidavit of the attorney that represented the debtor during the course of negotiating an agreement under this subsection, which states that—
(A) such agreement represents a fully informed and voluntary agreement by the debtor;
(B) such agreement does not impose an undue hardship on the debtor or a dependent of the debtor; and
(C) the attorney fully advised the debtor of the legal effect and consequences of—
(i) an agreement of the kind specified in this subsection; and
(ii) any default under such an agreement;

(5) the provisions of subsection (d) of this section have been complied with; and
(6) (A) in a case concerning an individual who was not represented by an attorney during the course of negotiating an agreement under this subsection, the court approves such agreement as—

(i) not imposing an undue hardship on the debtor or a dependent of the debtor; and
(ii) in the best interest of the debtor.

So far so good.  If I sign the declaration, the agreement is enforceable.  If I don’t, it’s unenforceable.  Can’t the court approve it anyway?  That is certainly what I and I’m sure 99% of consumer bankruptcy lawyers think.  But the debtor is still “represented by an attorney” – me – so (c)(6) doesn’t seem to apply.

Section 524(d) says:

(d) *** the court may hold a hearing at which the debtor shall appear in person.  At any such hearing, the court shall inform the debtor that a discharge has been granted or the reason why a discharge has not been granted.  If a discharge has been granted and if the debtor desires to make an agreement of the kind specified in subsection (c) of this section and was not represented by an attorney during the course of negotiating such agreement, then the court shall hold a hearing at which the debtor shall appear in person and at such hearing the court shall— [make certain findings].

It seems that if I represent the debtor during the reaff negotiations (which I do), the court cannot “hold a hearing.”  And the agreement is not enforceable since I did not sign the declaration.  Whoa!

It’s likely neither here nor there.  Most judges as far as I know do not approve the reaffs anyway.  The thinking is that the debtor did what the code requires and therefore the automatic stay is not lifted automatically under 362(h)(1)(a).  That section says that the stay is lifted if the debtor does not  ”enter into an agreement of the kind specified in section 524(c) applicable to the debt secured by such personal property.”  The debtor did that!  It’s not the debtor’s fault that I refused to certify that the reaff will not be a hardship to this debtor I probably just met.   So the reaff agreement is not enforceable, the discharge applies to the debt and the automatic stay is not automatically lifted.

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