By Stephen Behrends, Jan 7 2018 09:09PM
A while back, I wrote about a recent day in Bankruptcy Court where the attorneys in a majority
of the cases on the docket did not attend the Reaffirmation Hearing with their clients. Could this
happen to you? Of course, if you hire one of the attorneys at Behrends, Carusone & Covington, it
will not! But does everyone have to go to a Reaffirmation Hearing?
If you have a car loan, you will probably have to go to a Reaffirmation Hearing. Does this mean
that car loans always have to be reaffirmed? Furthermore, is this the answer to why these other
attorneys don’t to- because there really is nothing for them to do since the reaffirmation of a car
loan is more or less automatic?
The answers to these questions show why this is maybe the most confusing thing in the typical
basic non-controversial consumer bankruptcy. Many people have car loans and most of them
want to keep their cars. They usually believe that this means that there has to be a Court
approved reaffirmation agreement for this to happen. However, it is much more complicated than
Basically, a car loan is often up-side down from the time you drive the car off the lot. This means
that if you couldn’t pay for it and had to give it back, the lender would sell it for very little, apply
the money from the sale first to the costs of recovering, storing and then selling your car and only
then pay any remaining funds to what you owe. This usually means that you still owe a lot even
though you don’t have the car anymore.
If this happens before you file bankruptcy, the answer is that this remaining debt, called the
“deficiency” is included in the discharge. But what if it is after the bankruptcy case is over? If
you have a car loan, you have to sign a reaffirmation agreement and, if the Court approves it, the
lender could collect the deficiency if you can’t pay for the car after the bankruptcy is over. This
could end up with you being sued and your wages garnished just as though if you had never filed
But if you go to a reaffirmation hearing, the answer result be completely different. I will tell you
how in my next post!