HOW TO DEAL WITH CAR LENDERS WHO REFUSE TO PROVIDE STATEMENTS OR ELECTRONIC ACCESS IF YOU DO NOT REAFFIRM THE DEBTS

DEBT REAFFIRMATION

If you recently filed bankruptcy you may find that some lenders, notably many automobile finance companies will stop providing statements and electronic access to your account information. They don’t repossess a car or take action against you, they just make it just a little more complicated for you to make payments or get account information. They do this under the pretext that they would be violating the bankruptcy stay by giving this information to you or giving you access. This is absurd especially if you file bankruptcy in Maryland with a Maryland bankruptcy lawyer. The local Bankruptcy Rules in Maryland make it very clear that there is no legitimate reason for these lenders to discriminate against persons who filed a bankruptcy. Local Bankruptcy Rule 4001-5 States:

POST PETITION PAYMENT NOTICES AND ACCOUNT ACCESS

Creditors and lessors may continue to provide customary notices, including, but not limited to, monthly statements, payment coupons, and escrow adjustment analyses to debtors regarding post-petition account activity. Further, to the extent available, creditors and lessors may allow debtors to access, obtain information, and make post-petition payments through electronic, telephonic and/or on-line means.

Because the bankruptcy rules in Maryland are very clear one can only wonder what improper reason the lenders might have for telling their customers that the information is only available to customers who either did not file bankruptcy or who reaffirmed the debt. From the calls we get I can guess at a plausible reason. The scene painted by the client is one where the car lender, mortgage company or bank refused to let the client pay using the normal electronic system. After trying unsuccessfully customer service informed them that because they filed a bankruptcy and did not reaffirm the debt they are forbidden as a creditor from providing the access or information. That then is followed with a recommendation that they call their bankruptcy lawyer and have the debt reaffirmed or if its after the case is closed with a suggestion that it’s a shame the lawyer did not help them reaffirm the obligations.

WHAT IS REAFFIRMATION AGREEMENT?

It’s an agreement to make the debt pass through the bankruptcy unaffected. If you are current on your mortgage the mortgage company cannot foreclose. There is no possible reason to reaffirm the debt. If you don’t and you get sick and lose the house the mortgage company cannot come after you personally for a balance. If you reaffirm the debt you will be liable for the deficiency after foreclosure. Even if the reaffirmation agreement could be approved by the court it would be a very bad idea to reaffirm this debt just so you can avoid mailing the mortgage company a check and pay on the website.

With vehicles it is a little different. We almost never recommend that a client reaffirm vehicles. Only a handful of car companies will repossess a car if it is current. An experienced Maryland bankruptcy lawyer will be able to tell you from experience which ones is a potential problem. The benefit of not reaffirming the debt is that you can give the car back once your credit score improves and buy a better car that does not have negative equity. The Bankruptcy Court will not approve a reaffirmation agreement unless you have a positive budget (very few people have a budget showing they have funds left over in a Chapter 7 case). In some cases the Bankruptcy Court might approve the reaffirmation agreement if the car company reduces the balance or interest rate. The car companies very rarely will agree to this.

The way many car companies try to get around negative budget problem is to encourage the bankruptcy lawyers to “create” a new budget for the reaffirmation that does not show a negative number. This is disturbing since the original budget is done under oath. This would also avoid the need for a hearing so the lawyer can just sign it, avoid a hearing and you are stuck with something the Court should not approve. We get a very high callback from past clients on the few reaffirmation agreements that do get approved asking if they can put the car back in the bankruptcy because it is no longer running nor has problems.

GET HELP FROM BANKRUPTCY LAWYER WITH UNDERSTANDING REAFFIRMATIONS

The lenders’ policy of refusing to provide normal services to customers who filed bankruptcy often backfires. On the one hand telling my clients something is wrong with their case because we do not do the reaffirmation might generate a few concerned calls to the office. On the other hand they invite me to educate the client regarding their right to take advantage of their improved credit, give the car back and get a better one.

An experienced bankruptcy lawyer can always help to find the best solution to protect clients’ interests.