Case Overview
A Chapter 7 debtor wanted to keep the commuter vehicle (22 months remaining on the loan) and proposed a reaffirmation agreement. The lender’s initial offer kept the original 18.9% APR.
Legal Issues
Reaffirmation under 11 U.S.C. §524(c) requires (1) a written agreement, (2) execution before discharge, and (3) no undue hardship. Without counsel, the court must hold a fairness hearing under §524(d). Courts scrutinize ability to pay closely.
Song Law Firm’s Strategy
- Re-drafted Schedules I/J with a realistic post-bankruptcy budget. At the original rate, monthly surplus < $50 — the basis for an undue-hardship argument
- Framed the alternative for the lender: failed negotiation means the debtor surrenders the vehicle, and the lender absorbs repossession loss
- Proposed: rate 18.9% → 9.9%, term unchanged at 22 months, $2,000 principal reduction
- Filed Reaffirmation Cover Sheet (Form 2400A) with the adjusted terms and a §524(c)(3) attorney statement, waiving the fairness hearing
Outcome
Lender accepted. Debtor kept the vehicle, rate cut in half, $2,000 principal reduction, monthly payment $310 → $245. Approved on the §524(c)(3) written statement without a fairness hearing.
Practice Takeaways
- Reaffirmation is a negotiation lever — lenders also want to avoid repossession loss
- Re-drafting Schedules I/J quantifies undue hardship — basis for a rate cut
- An attorney §524(c)(3) statement can waive the fairness hearing
This case is an illustrative composite reconstructed from anonymized facts across multiple matters. Individual outcomes depend on facts and applicable jurisdiction; please consult a qualified attorney. NJ RPC 7.1. Prior results do not guarantee similar outcomes.
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