Bits & Bytes – Lender Edition: Why Should I Have My Customer Reaffirm in Bankruptcy?

B&BTake a moment for “Bits & Bytes” as Deanne Koll discusses the reasons why a lender should have its customer reaffirm a debt in bankruptcy.

Click here for a transcript or click here to view previous videos in the Lender Edition series.

Disclaimer: This video is designed to be educational and informative, but it is not legal advice. Collection law is constantly evolving and subject to change. Each situation is unique, and each case should be addressed to fit the unique situation.

 

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Why Should I Have My Customer Reaffirm in Bankruptcy?

B&BTake a moment for “Bits & Bytes” as Deanne Koll discusses the reasons why a lender should have its customer reaffirm a debt in bankruptcy.

Disclaimer: This video is designed to be educational and informative, but it is not legal advice. Collection law is constantly evolving and subject to change. Each situation is unique, and each case should be addressed to fit the unique situation.

When a debtor agrees to reaffirm a debt, the debtor agrees to be personally liable on a debt, after the discharge in the bankruptcy case. Normally, upon receiving a discharge in bankruptcy, a debtor is relieved from any personal liability on debts incurred prior to the bankruptcy filing.

For example, if I owe my attorney $200 and then I file bankruptcy and receive a discharge, that attorney is forbidden from collecting that $200. If a customer reaffirms, however, the circumstances change.

When a debtor signs a reaffirmation agreement in bankruptcy, that debtor agrees that he or she will remain personally liable on a debt after the bankruptcy discharge. This usually occurs on secured debts on which the debtor desires to continue to pay post-bankruptcy.

A common example is a real estate mortgage on the debtor’s homestead. If the debtor expresses a desire to keep the home post-bankruptcy, a creditor should require a debtor to sign a reaffirmation agreement. If the reaffirmation agreement is signed, and the debtor later defaults, the debtor is still personally liable on the note.

Meaning, if there is an eventual deficiency, he or she will remain liable for that amount.

On the other hand, if the debtor does not sign a reaffirmation agreement, but continues to pay on the mortgage and then years later defaults, the creditor is forbidden from seeking a deficiency judgment on any shortfall because of the failure to obtain a reaffirmation agreement in the underlying bankruptcy.

As you can see, this is a tricky area of the law, and you should seek legal advice on reaffirmation options regarding any specific situation.

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Tim O’Brien Re-Certified as Civil Trial Advocate by NBTA

Tim O'Brien
Tim O’Brien

The National Board of Trial Advocacy (NBTA) announced that Bakke Norman’s Tim O’Brien  successfully achieved re-certification as a Civil Trial Advocate. Board Certification is the highest, most stringent, and most reliable honor an attorney can receive. To be certified as a Civil Trial Advocate, an attorney must complete a rigorous application process, which includes demonstration of substantial jury trial experience, submission of references by judges and other attorneys, attendance at specialized continuing legal education courses, and proof of high ethical standards.  Approximately three percent of American lawyers are Board Certified.

Tim O’Brien was first certified as a Civil Trial Advocate on November 10, 2000, and was previously re-certified in 2010. His practice focuses on assisting people injured in automobile accidents, defending individuals charged with serious crimes, and representing businesses and their owners in legal disputes.

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