760-450-3333

SE HABLA ESPAÑOL

CONTACT DOAN LAW

    Name (required)

    Phone

    City

    Please Describe Your Case

    Please Select A Case Description

    Please Select an Office Location

    CONTACT DOAN LAW

    Reaffirmation Agreement Policy of Doan Law

    In a previous post, we had advised how it has long been Doan Law’s practice to not execute reaffirmation agreements except in very limited circumstances.  Reaffirmation agreements are harmful since they recreate personal liability on dischargeable debt, defeating the primary purpose of filing Bankruptcy in the first place.  

    Indeed, Bankruptcy Judge Mann went so far as to use sanctions against an attorney to void a reaffirmation agreement with Wells Fargo finding the reaffirmation agreement was entirely unnecessary and failed to account for the debtor’s best interest.  The attorney mistakenly thought the reaffirmation agreement was required to prevent a repossession and improve credit.  HE WAS WRONG.  Wells Fargo, like practically all other lenders except Ford, would not repossess a vehicle solely for filing Bankruptcy.  Likewise, the Court found the reaffirmation agreement would also not improve his credit.   The same policies against reaffirmation agreements applies to Mortgages and other secured accounts as well.  

    As of January 1, 2023, California enacted Civil Code 2983.3(a)(2) which provides:

    Neither the act of filing a petition commencing a case for bankruptcy under Title 11 of the United States Code by the buyer or other individual liable on the contract nor the status of either of those persons as a debtor in bankruptcy constitutes a default in the performance of any of the buyer’s obligations under the contract, and neither may be used as a basis for accelerating the maturity of any part or all of the amount due under the contract or for repossessing the motor vehicle. A provision of a contract that states that the act of filing a petition commencing a case for bankruptcy under Title 11 of the United States Code by the buyer or other individual liable on the contract or the status of either of those persons as a debtor in bankruptcy is a default is void and unenforceable.

    Civil Code 2983.3(a)(2) effectively eliminated the ipso default provisions of 521(d) which allowed creditors to consider a bankruptcy filing as a default to allow repossession.

    Bottom line, reaffirmation agreements used to be frowned upon and rarely necessary.  Now, as of January 1, 2023, there is virtually no reason to enter into any reaffirmation agreement ever again.  But keep in mind, this is California Law, and other states may still allow creditors to consider a Bankruptcy Filing a default.

    Written by Michael G. Doan– Owner of the Oceanside Bankruptcy Attorney Office, Michael also manages his business and is a highly skilled Bankruptcy Attorney with nearly 30 years of experience.  Michael is currently concentrating his practice solely in Bankruptcy Law and is a Board Certified Specialist in Consumer Bankruptcy Law by the American Board of Certification.

    SAN DIEGO BANKRUPTCY BLOG

    WHY DOAN LAW

    BANKRUPTCY LINKS

    BANKRUPTCY ALTERNATIVES

    FORECLOSURE RELIEF

    AFTER BANKRUPTCY SUPPORT SERVICES

    CLIENT RESOURCES

    COLLECTION ABUSE