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Reaffirmation Denied Because Of Lack Of Income

Posted By admin || 10-Apr-2009

There's an interesting Chapter 7 Bankruptcy case (Sawyer, Kim E.; In re,) where a debtor attempted to reaffirm a debt; but was denied the reaffirmation because she lacked income and failed to prove how the debt would be paid

The details of the Chapter 7 bankruptcy case:

The Chapter 7 debtor asked the court to approve the reaffirmation of $26,331 owed to HSBC Auto Finance. The debt was secured by the debtor's 2007 Dodge Caliber, which the court found to be worth $16,000. The agreement disclosed that the debtor's monthly expenses exceeded her income by $175.

The debtor told the bankruptcy court that her non-filing spouse (who is not co-signer on the car loan) would pay the debt. But the bankruptcy court denied the reaffirmation because the debtor failed to prove that she or her husband had sufficient income to repay the debt. But the bankruptcy court added that the denial of the reaffirmation should not be interpreted by the car loan creditor as a go ahead to repossess the vehicle as long as there was no payment default.

There's one thing about this Chapter 7 bankruptcy case that is very troubling. The debtor really would not benefit from reaffirming this debt. If the court allowed the reaffirmation she might be more vulnerable depending on someone else (even a husband) to pay it on her behalf. Debtors should be very cautious about reaffirming debts especially if they cannot afford to repay them and must depend on someone else to make those payments.

Categories: Chapter 7 Bankruptcy
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