• Reaffirmation and the Advantages for Credit Unions
  • October 10, 2014 | Author: Joseph M. McCandlish
  • Law Firm: Weltman, Weinberg & Reis Co., L.P.A. - Grove City Office
  • For many creditors, when a debtor files a Chapter 7 bankruptcy, getting the debtor to sign and return a reaffirmation agreement is only the first challenge.  Depending on the debtor's financial situation, a hearing may be held at which the debtor would need to prove he or she can make the payments.  In some situations the court can disallow the reaffirmation agreement.

    Credit unions have an advantage - the debtor's budget should not be a consideration.  Although 11 U.S.C. § 524(m)(1) requires courts to review reaffirmation agreements "if the debtor's monthly income less the debtor's monthly expenses...is less than the scheduled payments on the reaffirmed debt", that provision "does not apply to reaffirmation agreements when the creditor is a credit union".  11 U.S.C. § 524(m)(2).

    So, if a debtor or debtor's attorney explains that the debtor's budget will not allow the debtor to reaffirm, it may be worthwhile to have your credit union's attorney get involved and explain the applicable law accordingly.

    If your credit union's uniform procedure is to deny a debtor's membership benefits if a debtor causes a loss to the credit union, this may also be a good time for the credit union's attorney to explain the additional advantage of reaffirming the debt - that the debtor may enjoy the benefits of being a member of the credit union if the member's debt is reaffirmed and paid.