Keywords: ride-through . reaffirmation . redemption . surrender .
Secured Debts > Ride Through Secured debt: "Ride Through" still viable after BAPCPA? Can debtor keep keep property by making payments if reaffirmation submitted and rejected by court?41 Cases , IssueID 21 |
||||||||||||
Ch 7 Means Test |
Ch 13 Means Test |
|||||||||||
Topic Description:Before the passage of BAPCPA in 2005, five Circuit Courts had held that a "fourth option" existed in addition to the choices of "redemption" "reaffirmation" and "surrender". Lines of Cases:
Topic Background / Overview: |
Court refused to approve reaffirmation for unsecured debt cosigned with debtor's mother, because reaffirmation would be of no benefit to debtor. Debtor is still free to continue making "voluntary" payments once personal liability is discharged.
Under Kansas law, creditor can repo pickup truck if there is no reaffirmation, even though payments are current.
Court cannot review a reaffirmation agreement if counsel does not execute a declaration in support of the reaffirmation as required by 524(c)(3). Counsel cannot opt out of representing debtor on the issue of reaffirmation. In the past court as allowed it but will not allow it any longer.
Court refused to approve reaffirmation that imposed undue hardship on debtor where loan was $17K on a $16K truck with an APR of 17.5%, and incime from social security and unemployment not sufficient.
A debtor can ride through on a real estate loan, and need not reaffirm.
Ride through not available if debtor fails to state whether he intends to redeem or reaffirm.
reaffirmation rejected because it was untimely filed, creditor cannot repossess as long as payments are current.
"At least where the debtor has not attempted to reaffirm, our decision in Parker has been superseded by BAPCPA."
"Attorney-certified reaffirmation agreements are effective upon filing so long as there is no presumption of undue hardship"
Detailed discussion of current status of "ride Through" opitons
The Court makes two findings. First, under the Third Circuit's opinion in Price[2] and section 521 of the Bankruptcy Code, the debtors' loans may "pass through" the bankruptcy case unaffected if the debtors declare their intention to retain the collateral and continue to make regular payments, which the debtors have done.[3] Second, the Court disapproves the reaffirmation agreement under section 524(m) of the Bankruptcy Code because the presumption of undue hardship has not been rebutted.
Creditor violated automatic stay by reposessing vehicle after bankruptcy discharge even though debtor had taken advantage of "backdoor ridetrhough" (see earlier Baker ruling at 390 BR 424).
Attorney attempts to get clever to allow reaffirmation agreement disaproved, by letting debtor go pro se as to reaffirmation. Court says attorney can't limit his represenation like that. Attorney left with Catch 22, and has to sign off on reaffirmation being in debtor's best interest, in order to file it -- so the judge can reject it.... What's an attorney to do??? And pity the poor confused client trying to make sense of it all.....
The Court finds that, under the Third Circuit's opinion in Price,[2] the Debtors' car loan "passed through" the bankruptcy case unaffected because the Debtors timely entered into a reaffirmation agreement and they are current with their payments. The Court further finds that there was no basis for repossession under Delaware law because the only default that Creditor could assert was based on an unenforceable ipso facto clause. Finally, because the repossession of the Debtors' vehicle was a violation of the discharge injunction, the Court will order Creditor to return the vehicle and will award compensatory damages to the Debtors.
Note: Affirmed at 400 B.R. 136 where court held creditor in violating automatic stay for reposessing vehicle after discharge.)
Court lays out the step by step approach to a "back door ride through" via rejection of a reaffirmation agreement.
"Further, at the hearing, it became clear that one of the Debtor's primary reasons for entering into the Reaffirmation Agreement is her concern that, if the Court disapproved the Reaffirmation Agreement, the Lender could exercise the creditorrelief provisions of Sections 362(h), 521(a)(6) and 521(d) by, among other 193 things, declaring a default under the ipso facto[2] provision of her loan contract and repossessing the vehicle notwithstanding the fact that she remains current on the loan. The Court finds and concludes that the Debtor has complied with the requirements of Section 521(a)(2) by timely stating her intention to reaffirm the loan and by timely entering into the Reaffirmation Agreement with the Lender. Therefore, the provisions of Sections 362(h), 521(a)(6) and 521(d) do not apply, and the automatic stay remains in place with respect to the vehicle, the vehicle remains property of the estate, the Debtor is hot obligated to turn over possession of the vehicle, and the Lender may not exercise remedies as a result of default under the ipso facto provision under the loan agreement. Stated otherwise, where a debtor timely complies with Section 521(a)(2), the mere fact that the Court does not approve the reaffirmation agreement does not trigger the creditor relief provisions of Sections 362(h), 521(a)(6) or 521(d), Accordingly, the Debtor's concern that the Lender may invoke the creditor-relief provisions of Sections 362(h), 521(a)(6) or 521(d) if the Court disapproves the Reaffirmation Agreement is not warranted, and is not sufficient to overcome the presumption of undue hardship."
"The Debtor complied with the requirements of the Bankruptcy Code by timely filing her statement of intention and timely entering into a reaffirmation agreement with the credit union that holds a security interest in her car. That reaffirmation agreement will not, however, be approved because the Debtor's net monthly income is less than her expenses and because the car is worth less than what she owes on it. Despite the changes made to the Bankruptcy Code by the Bankruptcy Abuse Prevention and Consumer Protection Act ("BAPCPA"), a debtor may still, under certain limited circumstances, retain a car even without a court approved reaffirmation agreement. This is such a case."
section 521(a)(6) does not require reaffirmation agreement to be approved
"ride through option not available after BAPCPA. No protection by stay. but "although Congress technically eliminated the "fourth option," as now there are consequences for failing to obtain a right of continued possession through redemption or reaffirmation, as applied to consumer transactions, in Kansas the creditor's remedy of expiration of the stay in many cases will be illusory, because the conditions to declare a default and obtain possession of the collateral will not be present under Kansas law when the 352*352 debtor remains current on the obligation and there is no other basis for finding significant impairment" (BUT See Hall v Ford Motor Credit co. LLC, (Kansas S.Ct 2011)
Main 3rd Circuit authority before BAPCPA.
Main 1st Circuit authority before BAPCPA. - NOT allowing ride through.
Main 9th Circuit authority before BAPCPA. - Allowing ride through.
Main 2nd Circuit authority before BAPCPA. - Allowing ride through.
Main 5th Circuit authority before BAPCPA. - NOT allowing ride through.
Main 11th Circuit authority before BAPCPA. - NOT allowing ride through.
Main 4th Circuit authority before BAPCPA. - Allowing ride through.
Main 7th Circuit authority before BAPCPA. - NOT allowing ride through.
Main 10th Circuit authority before BAPCPA. - Allowing ride through.
Main 6th Circuit authority before BAPCPA. - NOT allowing ride through.
A debtor can ride through on real property but disagreeing about the role of the court in approving a reaffirmation on a real property loan for an unrepresented debtor.
Pro se debtor's reaffirmation of mortgage was of no benefit so court delayed entry of discharge so she could rescind the agreement. because, persuant to In re Price, 370 F.2d 362 (3rd cir 2004). Because debt was secured by real property, court could not rescind the agreement, but debtor could, so court allowed 60 days for her to do so if she wished.
Court will not reaffirm mortgage because ride through is still valid for mortgages and reaffirmation would not be in debtor's best interest. Fact that lender is demanding reaffirmation to get a loan modification does not change result. Court will reaffirm the modification once it has done, but it will not reaffirm original debto as a condition of the loan modification.
Under Kansas law, creditor can repo pickup truck if there is no reaffirmation, even though payments are current.
Court cannot review a reaffirmation agreement if counsel does not execute a declaration in support of the reaffirmation as required by 524(c)(3). Counsel cannot opt out of representing debtor on the issue of reaffirmation. In the past court as allowed it but will not allow it any longer.
Court refused to approve reaffirmation that imposed undue hardship on debtor where loan was $17K on a $16K truck with an APR of 17.5%, and incime from social security and unemployment not sufficient.
A debtor can ride through on a real estate loan, and need not reaffirm.
Ride through not available if debtor fails to state whether he intends to redeem or reaffirm.
reaffirmation rejected because it was untimely filed, creditor cannot repossess as long as payments are current.
Court refused to approve reaffirmation for unsecured debt cosigned with debtor's mother, because reaffirmation would be of no benefit to debtor. Debtor is still free to continue making "voluntary" payments once personal liability is discharged.
"At least where the debtor has not attempted to reaffirm, our decision in Parker has been superseded by BAPCPA."
"Attorney-certified reaffirmation agreements are effective upon filing so long as there is no presumption of undue hardship"
Detailed discussion of current status of "ride Through" opitons
The Court makes two findings. First, under the Third Circuit's opinion in Price[2] and section 521 of the Bankruptcy Code, the debtors' loans may "pass through" the bankruptcy case unaffected if the debtors declare their intention to retain the collateral and continue to make regular payments, which the debtors have done.[3] Second, the Court disapproves the reaffirmation agreement under section 524(m) of the Bankruptcy Code because the presumption of undue hardship has not been rebutted.
Creditor violated automatic stay by reposessing vehicle after bankruptcy discharge even though debtor had taken advantage of "backdoor ridetrhough" (see earlier Baker ruling at 390 BR 424).
Attorney attempts to get clever to allow reaffirmation agreement disaproved, by letting debtor go pro se as to reaffirmation. Court says attorney can't limit his represenation like that. Attorney left with Catch 22, and has to sign off on reaffirmation being in debtor's best interest, in order to file it -- so the judge can reject it.... What's an attorney to do??? And pity the poor confused client trying to make sense of it all.....
The Court finds that, under the Third Circuit's opinion in Price,[2] the Debtors' car loan "passed through" the bankruptcy case unaffected because the Debtors timely entered into a reaffirmation agreement and they are current with their payments. The Court further finds that there was no basis for repossession under Delaware law because the only default that Creditor could assert was based on an unenforceable ipso facto clause. Finally, because the repossession of the Debtors' vehicle was a violation of the discharge injunction, the Court will order Creditor to return the vehicle and will award compensatory damages to the Debtors.
Note: Affirmed at 400 B.R. 136 where court held creditor in violating automatic stay for reposessing vehicle after discharge.)
Court lays out the step by step approach to a "back door ride through" via rejection of a reaffirmation agreement.
"Further, at the hearing, it became clear that one of the Debtor's primary reasons for entering into the Reaffirmation Agreement is her concern that, if the Court disapproved the Reaffirmation Agreement, the Lender could exercise the creditorrelief provisions of Sections 362(h), 521(a)(6) and 521(d) by, among other 193 things, declaring a default under the ipso facto[2] provision of her loan contract and repossessing the vehicle notwithstanding the fact that she remains current on the loan. The Court finds and concludes that the Debtor has complied with the requirements of Section 521(a)(2) by timely stating her intention to reaffirm the loan and by timely entering into the Reaffirmation Agreement with the Lender. Therefore, the provisions of Sections 362(h), 521(a)(6) and 521(d) do not apply, and the automatic stay remains in place with respect to the vehicle, the vehicle remains property of the estate, the Debtor is hot obligated to turn over possession of the vehicle, and the Lender may not exercise remedies as a result of default under the ipso facto provision under the loan agreement. Stated otherwise, where a debtor timely complies with Section 521(a)(2), the mere fact that the Court does not approve the reaffirmation agreement does not trigger the creditor relief provisions of Sections 362(h), 521(a)(6) or 521(d), Accordingly, the Debtor's concern that the Lender may invoke the creditor-relief provisions of Sections 362(h), 521(a)(6) or 521(d) if the Court disapproves the Reaffirmation Agreement is not warranted, and is not sufficient to overcome the presumption of undue hardship."
"The Debtor complied with the requirements of the Bankruptcy Code by timely filing her statement of intention and timely entering into a reaffirmation agreement with the credit union that holds a security interest in her car. That reaffirmation agreement will not, however, be approved because the Debtor's net monthly income is less than her expenses and because the car is worth less than what she owes on it. Despite the changes made to the Bankruptcy Code by the Bankruptcy Abuse Prevention and Consumer Protection Act ("BAPCPA"), a debtor may still, under certain limited circumstances, retain a car even without a court approved reaffirmation agreement. This is such a case."
section 521(a)(6) does not require reaffirmation agreement to be approved
"ride through option not available after BAPCPA. No protection by stay. but "although Congress technically eliminated the "fourth option," as now there are consequences for failing to obtain a right of continued possession through redemption or reaffirmation, as applied to consumer transactions, in Kansas the creditor's remedy of expiration of the stay in many cases will be illusory, because the conditions to declare a default and obtain possession of the collateral will not be present under Kansas law when the 352*352 debtor remains current on the obligation and there is no other basis for finding significant impairment" (BUT See Hall v Ford Motor Credit co. LLC, (Kansas S.Ct 2011)
Main 3rd Circuit authority before BAPCPA.
Main 1st Circuit authority before BAPCPA. - NOT allowing ride through.
Main 9th Circuit authority before BAPCPA. - Allowing ride through.
Main 2nd Circuit authority before BAPCPA. - Allowing ride through.
Main 5th Circuit authority before BAPCPA. - NOT allowing ride through.
Main 11th Circuit authority before BAPCPA. - NOT allowing ride through.
Main 4th Circuit authority before BAPCPA. - Allowing ride through.
Main 7th Circuit authority before BAPCPA. - NOT allowing ride through.
Main 10th Circuit authority before BAPCPA. - Allowing ride through.
Main 6th Circuit authority before BAPCPA. - NOT allowing ride through.
A debtor can ride through on real property but disagreeing about the role of the court in approving a reaffirmation on a real property loan for an unrepresented debtor.
Pro se debtor's reaffirmation of mortgage was of no benefit so court delayed entry of discharge so she could rescind the agreement. because, persuant to In re Price, 370 F.2d 362 (3rd cir 2004). Because debt was secured by real property, court could not rescind the agreement, but debtor could, so court allowed 60 days for her to do so if she wished.
Court will not reaffirm mortgage because ride through is still valid for mortgages and reaffirmation would not be in debtor's best interest. Fact that lender is demanding reaffirmation to get a loan modification does not change result. Court will reaffirm the modification once it has done, but it will not reaffirm original debto as a condition of the loan modification.
All Cases A to Z
If you're not familiar with what "case law" is, and how to use it, check out Chapter 7 of Nolo's LegalResearch: How to Find and Understand the Law for a guide to how to read through a case to get the parts that matter.
Also, you need to be familiar with the concept of "jurisdiction." Here are some helpful links:
When you read a case, check to make sure that the case's decision applies to your local district. Do this by looking at which court has decided the case -- either the U.S. Supreme Court, a court of appeal (listed here in large type), or a district court (listed in small type). Your local district court judge is not bound to follow the opinion of judges from other district courts, but often they look to these cases for advice. Your local district, however, is bound to follow decisions in cases from it governing circuit court. You'll see fairly few Supreme Court case here, but those cases are also binding on all districts."
NO! NO! NO! This is a start for your research. New cases are constantly being decided. I update this when I have time. This is only a fraction of the actual published opinions out there. Dozens of cases are handed down nationwide every week. I catalog interesting ones when I have time. They are meant to serve as a starting point for your research -- NOT as a comprehensive listing of the current state of the law.