In the Chapter 13 bankruptcy case of Janssen, Richard D.; In re (Janssen v. Chase Home Finance LLC)
, the bankruptcy ruled against a debtor who changed his mind about an oral creditor/debtor settlement agreement.
The details of the bankruptcy case:
After he received a Chapter 13 discharge, the debtor sued Chase Home Finance alleging that the lender failed to abide by the terms of his confirmed plan. On March 9, 2009, approximately six months after filing the complaint, the debtor's counsel withdrew because the debtor failed to accept Chase's settlement offer. On Oct. 21, 2009, the debtor and his new attorney went to Chase's Philadelphia office to depose one of the lender's employees. Instead, the parties engaged in three hours of settlement negotiations during which time the debtor and his attorney conferred several times in private. The meeting concluded with an oral settlement agreement. However, the next day the debtor informed his attorney that he was not satisfied with the settlement terms. He subsequently refused to sign a written agreement prepared by Chase. Chase then filed a motion to approve and enforce the settlement agreement. The court granted the motion to the extent that the court determined that the parties reached an enforceable agreement. The debtor said he believed that he would not be bound by the agreement's terms until he signed a written agreement.
Unfortunately for the debtor, his assumptions were wrong. The bankruptcy court found that the oral agreements made between the debtor, creditor and attorney were intended to be final and that the debtor was bound by the oral agreement although he did not sign the written agreement. The bankruptcy court also noted that the creditor carefully recited the terms of the agreement to the debtor orally and that the debtor agreed to those terms. But the most importantly, the bankruptcy court noted that since the debtor did not specify that he had the right to withdraw from the agreement until it was signed that it seemed that they had come to a final agreement during the oral negotiations. Therefore, the bankruptcy court enforced the oral settlement agreement between the debtor and creditor.