Monday, May 30th, 2011
I have written before about the pros and cons of entering into a reaffirmation agreement with one or more of your secured creditors. On the plus side, reaffirming a secured debt gives you a degree of certainty – you are once again in a contractual relationship with your creditor. You know how much you are supposed to pay each month and you know the payoff balance, interest rate and terms of the agreement.
Further, you may be able to negotiate a more favorable deal when you reaffirm. Other than cars, secured creditors are often not set up to liquidate used merchandise and since you already have possession of the property (collateral), many lenders are happy to negotiate more favorable terms with you so they can avoid the hassle of recovering and disposing of property. This negotiation option is less true with motor vehicles, because there is an active used car market, but the negotiation option can work well when you are dealing with furniture or electronics.
Reaffirmation can also help you rebuild your credit because you are re-assuming personal liability for payments, and regular, timely payments usually will be reported as positive information to the credit bureaus.
On the other hand, when you reaffirm, you are re-obligating yourself personally to pay an installment note. If you should default, you are fair game for all collection activities including wage garnishment.
Reaffirmation Must be in Writing, Signed by You and the Creditor and Approved by the Bankruptcy Judge
At least once or twice a month, I get an email from a frustrated individual who has received his bankruptcy discharge, and has continued to make monthly payments, but sees no mention at all about these payments on his credit report.
It is not enough that you checked the "reaffirm" box on your bankruptcy Statement of Intention. You and your creditor have to complete a formal reaffirmation agreement. These agreements usually consist of about 10 pages of legal speak and your attorney has to document that your budget can handle the reaffirmed payment. Your attorney also has to sign the reaffirmation agreement and assert in writing that he thinks that reaffirmation is in your best interest.
Usually, reaffirmation agreements are prepared by the creditor or creditor's attorney. Sometimes lenders simply will not cooperate – they may not have any objection to accepting your payment and leaving you alone regarding possession, but they may forward a reaffirmation agreement to you.
I have also seen situations where lenders fail to file the signed reaffirmation documents on time and the reaffirmation agreement does not get court approval even though the debtor and his attorney did everything they were supposed to do.
If you and your attorney confer and decide that reaffirming a particular secured debt makes sense for you and that you can afford the reaffirmed payment, you should encourage your lawyer to quickly and aggressively request a reaffirmation agreement from your creditor. Once your case is discharged and closed, it is difficult and expensive to try to re-open a closed case solely for the purpose of reaffirming a debt.
Posted in Attorney, Creditor, Post bankruptcy credit rebuilding, Reaffirmation and negotiation, a, activities, aggressively, agreement, agreement , and, assert, chapter 7 reaffirmation agreements, collection, complete, documents, entering, file, formal, forward, garnishment reaffirmation, including, keep and pay, negotiation in bankruptcy, possession, quickly, reaffirmation, request, sign, signed, the, time, wage | Comments Off
Thursday, April 15th, 2010
Earlier this month I received a call from a Chapter 7 client that I had represented several years ago. He is attempting to refinance his house and has discovered that a judgment creditor has a lien for several thousand dollars. The creditor was listed on the case, but neither he no I knew that there was any judgment.
I directed him to visit the county courthouse and pull the file for this case. He did and he reports that the return of service shows that his wife was served by a sheriff's deputy. His wife has no recollection of being served. We did list the creditor on the bankruptcy petition but because we did not know that there was a judgment, we did not file a motion to avoid the judgment lien. What can he do?
There are a number of lessons you can learn from this man's experience. First, you should always obtain copies of credit reports from all 3 credit bureaus prior to filing bankruptcy. In Georgia, you can get a free credit report from each of the 3 main credit bureaus twice a year. Online, you can go to annualcreditreport.com and download your reports. Because credit reports obviously contain sensitive information the annualcreditreport.com system will ask several questions to identify yourself. These are usually multiple choice questions – for example, the system may say "your credit report shows that you previously lived on one of the following streets: (a) Oak Street (b) Thompson Street (c) Ivers Road (d) none of the above.
If you are unable to answer these questions, the system will instruct you to mail away for your credit reports – here is a link to a page on my website with the credit report request letters.
Credit reports are helpful because they will usually show pending lawsuits as well as the names, address, account numbers and debt amounts for most of your creditors. Obviously I can't require all bankruptcy clients to bring me credit reports but it sure helps avoid "forgotten" creditors or judgments.
As far as what we can do, there are a couple of options. First I want to make sure that service of process was correct. If you are served with a lawsuit in Georgia, the sheriff's deputy (or private process server) has to complete a document called a "return of service" that states when a party was served and by whom. Section 9-11-4 of the Official Code of Georgia provides that service on an individual must be made on the defendant himself, or "by leaving copies thereof at the defendant´s dwelling house or usual place of abode with some person of suitable age and discretion then residing therein."
In this case, if the sheriff's deputy served my client's wife, then service is most likely valid.
However, I sometimes see situations where the return of service is unclear as to who was served or even situations where the return of service is blank. In these cases, a defendant can "collaterally attack" the judgment on the grounds that service was not made and he did not know about the lawsuit.
If it turns out that service is valid, my client will have little choice but to negotiate a settlement of the real estate debt. Interestingly the Chapter 7 discharge would eliminate any personal liability he might have for this debt, but the liability remains as to his real estate.
My experience has also been that judgment creditors will become more amenable to negotiation the longer a real estate lien remains unpaid. Here, my client could forego a refinance (or threaten to to forego a refi) and use the argument that the judgment creditor might have to wait for years to get paid as leverage to negotiate a reduced payoff.
Posted in Chapter 7, Chapter 7 issues, Credit, Negotiation, Post bankruptcy credit rebuilding, a, amenable, avoid, bankruptcy and judgments, client, deputy, estate, forego, judgment, lawsuit, letters credit, lien, lien , longer, my, or, post-bankruptcy, private, process, real, refinance, remains, report, reports, request, served, server, the, threaten, unlisted judgment creditors, unpaid , wife | Comments Off
