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Reaffirmation of Debts- A written agreement between the debtor and a creditor entered into prior to the issuance of a discharge, wherein the debtor agrees to make payments on the debt owed to that creditor. If the debtor fails to make payments, the debt is still due and owing even after discharge. In order to avoid abuses, reaffirmation agreements must be made prior to discharge, must be voluntary and the court or the debtor's attorney must explain to the debtor that they do not have to enter into such an agreement, the debtor must be advised of the legal effect of the agreement, the agreement must clearly advise the debtor of their right to rescind the agreement within 60 days of its being filed with the court, the agreement must not place an undue hardship on the debtor and be in the debtor's best interest, and it must be filed and approved by the Court. It is usually better practice not to enter into a reaffirmation agreement unless it is absolutely necessary to preserve non-exempt property. BAPCPA changes the requirements to reaffirm a debt on secured property. Section 521(a) (2) (A) states that a debtor must file with the court, within 30 days of filing the case, a statement of intention to reaffirm a debt secured by property of the estate. The act provides that the debtor may not retain the secured property unless the debtor reaffirms the debt. Failure to reaffirm the debt can lead to the termination of the automatic stay with regard to that debt. See 11 U.S.C. § 521,524; Fed. R. Bankr. Pro. 4008. Redemption- The right a debtor may exercise against secured creditors in Chapter 7 or 13 cases to redeem certain personal property by paying the creditor the current replacement value in the property as of the date of the bankruptcy filing without deduction for the cost of sale or marketing. Its purpose is to prevent secured creditors from getting an unfair advantage out of proportion to the value of their security. However, it is only available to individual debtors, it can only be used in cases of dischargeable consumer debts secured by tangible personal property, the property must have been either exempted by the debtor or abandoned by the Trustee, and it is not available with respect to real property or intangible liquid assets. The debtor must file a Statement of Intention with the court within 30 days of the filing of the case declaring their intention to reaffirm or redeem the secured property. 11 U.S.C. §722; Fed. R. Bankr. Pro. 7001. Regular Income- Only a debtor with regular income is eligible to file a Chapter 13 Case. Regular income includes wages, government benefits, alimony or support, and any other type of reliable and consistent income. If income is not from a source such as employment, the debtor may have to prove the income is reliable and consistent. 11 U.S.C. §109(e). Schedules- Schedules A-J are documents that support the bankruptcy petition and must be filed with the court. They provide detailed information about the debtor's assets and liabilities, including the debtor's real and personal property, the property claimed as exempt, and the debtor's creditors, income, and expenses. In an emergency, the petition can be filed with the court without the schedules, but the schedules must be filed within 15 days or the case will be dismissed. Fed. R. Bankr. Pro. 1017. Secured Debt- A debt secured by the debtor's property through a mortgage, lien, or perfected security interest. Secured debts must be listed separately on Schedule D and paid in full to the extent of the value of the security in a Chapter 13 Plan. |
Bankruptcy Glossary of Terms
Part 8 of 9