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May 2, 2008

Reaffirmation Agreement Must be Approved Before Entry of the Discharge

Its scary what you don't know. 

In re Engles,  ---- B.R.  ----, 2008 WL 555009  (Bkrtcy M.D. Okla, Feb. 2008)

Issue:   Can the bankruptcy court “temporarily” vacate the discharge on the debtor’s motion for the purpose of permitting entry of an order approving a reaffirmation agreement?            

Holding:      No.      

Judge Terrence Michael

The debtors executed a reaffirmation of a debt on a vehicle.  They sent it to the lender, Regions Bank.  “For reasons unknown to the parties, the Agreement was apparently delayed in reaching its destination and was never filed with the Court.”  The discharge was entered and the car repo’ed.  The debtors then moved the court, under FRCP60(b), to vacate the discharge for the purpose of entering an order of reaffirmation.  The car had equity and the debtors, at all times, were current with the monthly payments.  The court denied the motion. 

“Because of the serious consequences associated with reaffirmation-that the debtor will remain liable for an otherwise dischargeable debt-strict compliance with the terms of § 524 is mandatory.  Based on the plain language of § 524(c)(1), which mandates that an agreement must be made before the granting of the discharge in order to be enforceable, the execution of a reaffirmation agreement after the granting of the discharge renders that agreement unenforceable as a matter of law.”

As to vacating the discharge, the court said that under Section 727(d) and (e), only “the trustee, a creditor, or the United States trustee” has the ability to revoke a debtor's discharge.  As to the equitable power of the court to vacate the discharge, “[A] bankruptcy court's supplementary equitable powers under [section 105] may not be exercised in a manner that is inconsistent with the other, more specific provisions of the Code.”

May 2, 2008 in Other Circuit Briefs | Permalink


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If after CH7discharge a court denies a reaffirmation agreement for car loan, can I lose the car even if I am current on payments?

Posted by: Don | Feb 19, 2009 12:31:35 PM

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