CHEYENNE, Wyo. – A federal bankruptcy court last week denied a proposed reaffirmation agreement on a credit union car loan, ruling that the member of First Educational CU, who represented himself in the negotiations, did not complete the Chapter 7 Individual Debtor's Statement of Intention required of debtors without lawyers.
The court ruled that the reaffirmation on three loans secured with an outstanding balance of $3,100 by a 2002 Kia was not in the best interest of the member, identified as Chris Mowrey. Under the proposed reaffirmation, Mowrey would repay $12,500 on the three loans secured by the car, valued at just $1,500. "When taking into consideration that the three agreements total a repayment of approximately $12,500 for a vehicle valued at $1,500, the Court cannot find that approval of the reaffirmation agreements are in the Debtor's best interest," the court ruling stated.
The member’s net pay is between $1,400-$1,500 per month. He lives with his girl friend, and between them, they have four dependants. The 2002 Kia is the member’s only vehicle. The member’s monthly expenses are $3,837 and he is current on the monthly payments on all three credit union loans.
According to the court’s ruling, for a reaffirmation agreement to be enforceable, the agreement must satisfy federal bankruptcy statutes, which includes the requirement that if the debtor is not represented by an attorney, the court must hold a hearing to inform the debtor that the reaffirmation agreement is not required and describe the legal consequences. If the court concludes that the reaffirmation is not in the best interests of the debtor or poses an under hardship, the Court may deny a reaffirmation agreement.
The statute states, if a bankruptcy debtor's expenses exceed his income a reaffirmation agreement is presumed to create an undo hardship. If the presumption is rebutted, the agreement may be approved. If the presumption is not rebutted to the satisfaction of the court, the court has the discretion to not approve the reaffirmation agreement.
