If you filed bankruptcy listing a car loan, you had to make a decision as to what you were going to do about that loan. Do you surrender the car, pay off the loan, or reaffirm the debt? There are a lot of factors to consider here in choosing an option.
Paying off the loan is often not practical, so that leaves the other two. After weighing all the factors, you may have decided to reaffirm the loan by signing a reaffirmation agreement or surrender the car.
Risks of Reaffirming the Debt
Signing this agreement results in the loan surviving your bankruptcy discharge, and your liability for the reaffirmed debt continuing on. This is a big step, and the bankruptcy code seeks to be sure that this is the right thing for you.
Part of this is a determination that reaffirming the debt will not create a financial hardship. The problem is that in most cases people filing bankruptcy can't live on their monthly income because their monthly expenses exceed it; they are deficit spending. This creates a presumption of undue hardship which then draws scrutiny from the court.
Can an Attorney Sign Off on a Financial Hardship?
It is under these circumstances that your attorney is being asked to "sign off" on the deal, stating that he or she feels you can still afford the payment. This is no big deal if the budget deficit is about $100 or less, and/or there are only a few payments left on the loan.
In this case, some belt tightening could close the gap. However, oftentimes the deficit is several hundred dollars. Under these circumstances it is clear that you really cannot afford the loan, and the attorney cannot in good conscience sign it.
Can You Reaffirm If the Attorney Doesn't Sign?
If this is the case, you can still file the agreement without his or her signature, along with your explanation as to how you believe you can afford it despite the budget deficit. The court will then schedule it for a hearing.
In New Jersey's Camden vicinage the judges hold this hearing without requiring the presence of your attorney and just want to make sure that you understand the consequences of your actions and that it does not present a financial hardship.
What If the Judge Doesn't Approve It?
Even if the judge does not approve it, you are still okay; the fact that you signed and filed the agreement satisfies the exercise of reaffirmation. Also, if the agreement is not approved, then you may well be even better off!
The bank cannot repossess the car for failure to reaffirm the loan (you did) or for failure to pay if you keep the payments current. Then, even if they do repossess it later for nonpayment, they can't come after you for any deficiency after reposession sale because the loan was discharged by the bankruptcy!
Your attorney is there to protect your rights and to be sure that you get the financial fresh start you need. His or her not signing the reaffirmation agreement may well be his or her attempt to help you, and maybe put you in an even better position.
So What Do I Do?
If you live in southern New Jersey and are considering filing bankruptcy, please feel free to call me at 856-432-4113 or contact me through this site for a free consultation in my Woodbury office to discuss your case.
If you are looking for more information about bankruptcy, then download my free book,Top Questions People Ask About Filing Bankruptcy in New Jersey.