There is one exception that was written into the law regarding reaffirmation agreements and those pertaining to credit unions states Willow Springs bankruptcy lawyer. Credit unions had a strong lobby during the bankruptcy reform act and credit unions are not subject to the presumption of undue hardship situations. Here is the example. An individual might be behind on their budget. They might have more going out in expenses than they do have coming in as income. And the line items on the reaffirmation agreement might show an actual inability to make that payment going forward.
However, in an individual bankruptcy case, the reaffirmation agreement contains a special section which pertains to credit unions. If the reaffirmed debt is part of a credit union lender, then the court does not have the ability to check whether or not there is a presumption of undue hardship. The credit union lobby basically got around the consumer protection element that applies to all other finance companies that are not credit unions. So it really is kind of an unfair situation where the credit unions can get their reaffirmation agreements through the court system without any problem where another lender, who is not a credit union, is subject to the scrutiny of the bankruptcy judge and the judge may or may not approve an agreement unless the budget shows that the debtor has the ability to pay without a presumption or an actual undue hardship.
So the reaffirmation agreement is kind of a tricky area in that you’ve got different items and different issues depending upon the types of bankruptcy. Vehicles have to be reaffirmed as the debtor wants to keep the item going forward. Mortgages, which don’t have to be reaffirmed under the bankruptcy code, however many mortgage lenders will send the reaffirmation anyway trying to get debtors and debtor’s attorneys to sign. You have the presumption of undue hardship situation where if the debtor is showing a negative income per month, the court may hold a hearing to see whether or not the debtor can make those payments. And then you have the credit union situation where the credit unions are not part of the consumer protection element and no matter what the budget is, if the debtor wishes to sign a reaffirmation agreement with the credit union, then the court must accept that credit union and that reaffirmation agreement and it becomes binding upon the debtor, the finance company and it is approved by the court.
Be certain to consult with and accept the bankruptcy advice of your attorney. Your attorney will have a greater understanding of the reaffirmation process and should be able to guide you in your decision.