Question

After filing for bankruptcy, Yvonne Brown sought permission of the court to reaffirm a $6,000 debt to her credit union. The debt was unsecured, and she was under no obligation to pay it. The credit union had published the following notice in its newsletter:

If you are thinking about filing bankruptcy, THINK about the long-term implications. This action, filing bankruptcy, closes the door on TOMORROW. Having no credit means no ability to purchase cars, houses, credit cards. Look into the future—no loans for the education of your children.

1. Why might a debtor want to reaffirm a debt?

2. Under what circumstances must Yvonne receive the court's approval to reaffirm the debt?

3. Is there anything improper about the credit union's newsletter?

4. Will the court be likely to approve this reaffirmation? Why or why not?

Answer 1

1. A debtor usually reaffirms his debt when he wants to recommit that he will abide by the terms of the loan and is ready to pay the loan fully or a part of it. This gives an assurance to the creditor and he is not required to seize the collateral or hire people to collect the debt amount from the debtor.

2. Some of the circumstances under which Yvonne Brown will be required to receive court’s approval for reaffirmation of his debts are:

• In case Yvonne was not represented by an attorney
• If the agreement between the parties is considered to be an undue hardship

3. The credit union’s newsletter lack formality and professionalism. The newsletter has a threatening tone associated with it and seems likely to threaten the debtor.

4. The court is likely to approve the reaffirmation. This is so because there is no undue hardship associated with the debt and Yvonne had affirmed to clear the same.