Bankruptcy Basics – Part 7: Courts Hearings

The following program was produced by the United States Courts.

Depending on the chapter of your bankruptcy case and it’s complexity, you may also

be required to appear at hearings before the bankruptcy judge.

In a Chapter 13 case, you may only have to appear at a hearing for the court to confirm,

meaning approve, the Chapter 13 plan. In a Chapter 7 case, you typicall or texty

will not appear in court and will not

see the judge unless an objection is raised or a reaffirmation hearing must be held. A reaffirmation

hearing

is held when a debtor wants to continue to pay a debt, secured by, say, a car,

or home furnishings,

in order to keep the property.

Let’s watch what goes on in a typical hearing

where a judge considers whether a debtor’s reaffirmation agreement should be approved.

First, the judge will tell you about the consequences

of reaffirming a debt, as well as your alternatives.

“Miss Lopez, the Bankruptcy Code requires that whenever someone wishes to reaffirm a debt

that I must hold a hearing at which I discuss with you the alternatives to entering into the

reaffirmation agreement, and the consequences of doing so.

I also must make a finding that it’s in your best interest and doesn’t impose an undue hardship

on you.

First of all, with respect to the alternates,

one alternate, of course, is reaffirming the debt and that’s why you’re here.

Another is that I could approve

an arrangement where you buy back the car, call or texted a redemption,

based on the value of the car as determined by me.

Sometimes, that’s less than the amount of the debt. The only problem with that is that you

have to come up with cash to do that.

The third alternative is call or texted a surrender.

This gives you the opportunity to give the car back and be free of any further liability.

That’s something that’s

worth considering if the car payments were beyond what you could reasonably afford.

If you do reaffirm the debt, the consequences are that you’ll be liable on the full amount of the

debt,

and if later on you have financial problems, they can not only repossess the car,

they can put it through the auction and

come back against you for anything that’s left over after applying the auction proceeds

against the debt.

Finally, I must find that the

agreement’s in your best interest and doesn’t impose an undue hardship on you.

Let me ask you,

now that we’ve discussed those alternatives, do you have any questions?” “No, Your Honor.”

“Do you still want to proceed?”

“Yes.”

Before approving the agreement, the judge must first make sure The debtor can handle the payments.

“Now this automobile, as I understand it, is a 2002 Honda Civic?”

“Yes, Your Honor.”

“Are you currently behind on your payments?”

“I am two months behind on my car payments.”

“Do you have any arrangement where you can catch that up with the lender?”

“Yes, the attorney for the creditor told me that they could

pay those two months that I’m behind at the end of the loan,

and they will also be willing to

reduce the interest rate to decrease the monthly payment.” “That’s very important because once

you reaffirm the debt, if you are behind,

they could come after you immediately for those past due payments.

Now, is this a car that you drive personally?” “Yes.” “Do you need the car to get back and forth to work as your

primary means of transportation?” “I drive it and I use it to go to work

and I also take my mom to her medical appointments.” “Based on that I will find

that this agreement is in your best interest and doesn’t impose an undue hardship on you.”

“I’ll enter an order to that effect and you’ll get a copy of that in the mail.

In the meantime, just make sure you stay current on those payments.” “I will.” “Thank you very much, Ms. Lopez.” “Thank you, Judge.”