By Peter Bricks
The majority of Chapter 7 debtors have secured debt in the form of either a car loan or a home mortgage. As such, they have to make the decision whether to reaffirm this debt during the case. Reaffirming in bankruptcy means you have the choice to get rid of the debt, but choose to “keep” it instead.
A debtor typically does this because he believes it is necessary to keep his car or home. This is sometimes a myth, particularly as to a mortgage. Also remember that not reaffirming gives the debtor increased flexibility to move after bankruptcy, if he so chooses.
A reaffirmation agreement must be signed before the case closes. However, once the debtor has chosen to reaffirm, is that decision final? Surprisingly to some, it is not.
Under 11 USC 524, the debtor has the option of canceling a reaffirmation until the later of two events: (1) 60 days after it is filed or (2) upon the debtor’s discharge. As a lot of debtors do not sign or file their reaffirmation agreements until after their meeting of creditors, the discharge can occur less than 60 days after the filing of the reaffirmation agreement.
However, sometimes discharge gets held up, and might not occur for many months after the reaffirmation agreement is filed. In those cases, the debtor gets many months to change his mind.
Why might the debtor change his mind? It could be as simple as the debtor had a change of heart and no longer wants the car he thought he wanted to keep, or perhaps the debtor realized that reaffirming a mortgage was not necessary to remain in the home or get the mortgage modified after bankruptcy.
I have even seen instances where the debtor got into a wreck shortly after reaffirming and the vehicle was now no longer operable. As such, it made no sense for the debtor to reaffirm and then utilize his gap coverage to cover the loss compared to the option of simply rescinding his reaffirmation agreement.
The point is that regardless of the reason the debtor chooses to change his mind, he can still do that if he meets the guidelines above. If it’s too late, then it is forever reaffirmed, and the debtor is stuck with the debt until it’s ultimately paid off, forgiven or collected.
Peter Bricks is a member of the National Association of Consumer Bankruptcy Attorneys (NACBA). He has bankruptcy attorney offices in Woodstock, Jonesboro, Cumming, Atlanta and Dunwoody.
It will be 3 years in November since our BK 7 was discharged. We did not reaffirm our loan and we have been “paying and staying” – we have never been late or missed a payment. Our home was “under water” for many years but may be recovering to the point that there may be some equity in the near future – since the title is still in our name can we actually put the home for sale, satisfy the lien and pocket any profit?
Enjoy your “Q & A” immensely and look forward to your esteemed reply.
You did not say whether your ch. 7 has also closed, which is different than the discharge. However, given that you received your discharge three years ago, I’m assuming your case is closed.
If so, your trustee no longer controls title to your home and it is again in your control. As such, you are still the title owner and can properly transfer title. The bank’s lien will need to be paid off. If, like you say, there are excess proceeds beyond the lien, realtor fee, etc… the profit does belong to you.
I have written a blog on this very topic on bankruptcyblog.org. Please go to the link and read the blog:
http://bankruptcyblog.org/2013/07/08/yes-you-can-still-own-your-house-after-you-file-ch-7/
Since signing the reaffirmation forms, there has been a change in my job situation ….I’ve just found out that the company will be downsizing and I will be out of a job soon. I will not be able to make the car payments. Can I do an amendment to my bankruptcy and add the car?
You can cancel a reaffirmation agreement by the later of 60 days after it is filed or the date the discharge is entered. So without being able to match up the dates, I cannot know if you are beyond the allotted time to cancel.
last month, i went to court for car reaffirmation
agreement.I was confused on how the reaffirmation works. i follow the judge advised ,and said no to the reaffirmation agreement.my daughter who is my co signed was very upset.she say,i should say yes.i want to open my reaffirmation agreement case to change it to yes i agree..what will i need to do?help…
Hi can I cancel my Reaffirmation form that I signed? My case was DisCharged in March of 2018 and I no longer want the car
Most likely you cannot cancel it, but I can’t give you an answer with absolute certainty without knowing more. You can cancel a reaffirmation upon the later of your discharge or the reaffirmation being filed. So it is possible to be post discharge and still within the 60 day window. If you filed your reaffirmation fairly close in time to your discharge, you might still be able to cancel your reaffirmation agreement. You need to review the court docket to get the exact date you reaffirmed.
I have been discharged from my bankruptcy. I signed a reaffirmation agreement for my vehicle which my husband is a signer on as well. I want to recind this agreement and return the car. Will this debt fall on my husband?
I’m unclear whether you filed the bankruptcy by yourself or jointly with your husband. I’m therefore unclear whether he reaffirmed with you or you just mean he signed for the note with you originally and then never filed bankruptcy. If he never filed bankruptcy, he is liable under the terms of the agreement according to your state law and your bankruptcy filing did not change that fact. In other words, everything surrounding your bankruptcy would not change the fact he was and is liable.
I’m also unclear whether you can even still rescind your reaffirmation. You are post discharge apparently so it’s unlikely that you can, but it will depend on which day you reaffirmed it and how long has past.
More than likely you are both liable presently, but again, your post is missing several key details.
My case was closed without a discharge almost two years ago. I recently filed a motion to reopen my case and would like to also rescind my reaffirmation agreement, is that possible?
The judge will almost certainly deny your request to reopen the case on those grounds. Typically the only reason a case can be re-opened is to either avoid a judicial lien or to file the financial management course certificate. Specifically, as to what you want to accomplish, it sounds as if you want to do an end around by 11 USC 524c4, which gives you until the later of the discharge or 60 days after the filing of a reaffirmation to cancel it. You simply are too late to cancel your reaffirmation agreement at this point.
I filed back in March of this year,my discharge happened about a week ago and we had a car loan with a reaffirmation. Am I able to cancel the reaffirmation for the car loan?
My discharge was on October 2 do I have time to cancel a reaffirmation at this time.
You have the later of 60 days after the reaffirmation agreement is filed or your discharge to cancel the reaffirmation agreement. You are clearly past the discharge date, but I don’t know if you are past the 60 day window too.