ORDER
ARTHUR B. BRISKMAN, Bankruptcy Judge.
This matter came on for hearing on the Debtor’s Notice of Rescission of Reaffirmation Agreement and Motion to Withdraw Notice of Intent to Reaffirm and Reaffir
mation Agreement with Pearl Motors, Inc. The Court finds, concludes and orders as follows.
FINDINGS OF FACT
1. Mary Rhone Davis (hereafter Debtor) filed a bankruptcy petition under Chapter 7 of the Bankruptcy Code, 11 U.S.C. § 101 et seq., in this Court on December 8, 1988.
2. On March 9, 1989, Debtor executed, and filed with the Court a reaffirmation agreement, reaffirming indebtedness owing to Pearl Motors, Inc. (hereafter Pearl). The subject matter of this indebtedness was a 1984 Ford Tempo purchased by Debtor and financed by Pearl on November 28, 1988.
3. Debtor also executed a reaffirmation agreement on March 6, 1989, reaffirming indebtedness owing to Gulf Furniture Stores, Inc.
4. On July 26,1989, the Court granted a discharge to Debtor; discharging her from all dischargeable indebtedness, nullifying judgments and enjoining her creditors from instituting or continuing any action to collect any of the discharged debts.
5. On August 17, 1989, Debtor filed notice of her intent to rescind the reaffirmation agreement with Pearl and motion to withdraw notice of her intent to reaffirm.
6. A hearing pursuant to 11 U.S.C. § 524(d) (1988 ed.) was held on August 21, 1989. At the hearing, Debtor was informed that neither bankruptcy law nor nonbankruptcy law required her to reaffirm her indebtedness. Debtor was also informed of the legal effect and consequences of entering into the respective reaffirmation agreements.
CONCLUSIONS OF LAW
This matter presents no factual disputes. Debtor executed a reaffirmation agreement with Pearl subsequent to the filing of her bankruptcy petition but prior to being granted a discharge. Subsequent to receiving her discharge, but prior to the hearing held pursuant to 11 U.S.C. § 524(d) (1988 ed.), Debtor filed with the Court notice of her intent to rescind the reaffirmation agreement with Pearl.
Pearl objected; averring the attempted rescission was untimely.
If a debtor desires to reaffirm indebtedness, the consideration for which is based on a debt that is dischargeable, the court “shall” hold a hearing. 11 U.S.C. § 524(d) (1988 ed.). The purpose of the hearing is to inform the debtor that neither bankruptcy law nor nonbankruptcy law requires a debtor to enter into such an agreement and to inform the debtor of the legal effecf and consequences of the agreement. In theory, after being advised by counsel and after being admonished by the court, a debtor will be better able to avoid reaffirming indebtedness which may inhibit the enjoyment of the
fresh start
the Bankruptcy Code provides.
Under the statutory scheme, however, the court cannot hold the hearing until after the discharge has been granted. 11 U.S.C. § 524(d) (1988 ed.).
Unless the debtor files the reaffirmation agreement with the court (and gives notice to the affected creditor) within sixty days prior to being discharged, the discharge terminates the debtor’s ability to rescind under § 524(c)(4). More often than not, reaffirmation agreements are filed with the court in excess of sixty days prior to the granting of a discharge. Consequently, in most instances the admonishments serve no useful purpose since the debtor can no longer rescind the agreement once the discharge has been granted. The efficacy of the § 524(d) hearing, therefore, can be likened to postconviction
Miranda warnings.
As originally enacted, § 524(c)(2) enabled a debtor to rescind a reaffirmation agreement within thirty days after it became
enforceable.
Also, the original language of § 524(c)
of the Bankruptcy Code formerly required the court to approve reaffirmation agreements the consideration for which was based on a consumer debt not secured by real property.
The 1984 amendments to § 524, however, dramatically changed the reaffirmation process. Now, a debtor can only rescind a reaffirmation agreement by giving notice to the creditor with whom it has reaffirmed indebtedness any time prior to receiving its discharge or within sixty days after the agreement is filed with the court. See 11 U.S.C. § 524(c)(4) (1988 ed.). Furthermore, the court must now only approve agreements when the debtor was not represented by an attorney during the course of negotiating the reaffirmation agreement. See 11 U.S.C. § 524(c)(6) (1988 ed.).
Congress’ inclusion of the bankruptcy court in the reaffirmation process was the result of its reservations about reaffirmation agreements.
Congress sought to reduce its perceived disparity in bargaining positions between debtors and creditors. The court’s designated role was to protect unsophisticated debtors from overreaching sophisticated creditors who might impair the debtor’s ability to achieve a
fresh start
The matter now before the Court, however, aptly reveals how the subsequent amendments to § 524
have eviscerated an element of the protections Congress labored to accord debtors and transformed the § 524(d) hearing into a superfluous formality.
As laudable as Congress’ goals were, the hearing held pursuant to § 524(d) no longer serves the purpose Congress intended. Since in most instances the court is no longer involved in the approval of reaffirmation agreements, the purpose to be served by § 524(d) has been frustrated. Here, the Debtor was represented by counsel. In addition to being advised by counsel she was admonished by the Court, albeit after she was granted a discharge. Yet, now the Debtor seeks to rescind the reaffirmation agreement with Pearl. Since her attempted rescission is more than sixty days from the filing of the agreement with the Court and subsequent to the granting of her discharge, the agreement cannot be rendered unenforceable under 11 U.S.C. § 524(c)(4) (1988 ed.).
Free access — add to your briefcase to read the full text and ask questions with AI
ORDER
ARTHUR B. BRISKMAN, Bankruptcy Judge.
This matter came on for hearing on the Debtor’s Notice of Rescission of Reaffirmation Agreement and Motion to Withdraw Notice of Intent to Reaffirm and Reaffir
mation Agreement with Pearl Motors, Inc. The Court finds, concludes and orders as follows.
FINDINGS OF FACT
1. Mary Rhone Davis (hereafter Debtor) filed a bankruptcy petition under Chapter 7 of the Bankruptcy Code, 11 U.S.C. § 101 et seq., in this Court on December 8, 1988.
2. On March 9, 1989, Debtor executed, and filed with the Court a reaffirmation agreement, reaffirming indebtedness owing to Pearl Motors, Inc. (hereafter Pearl). The subject matter of this indebtedness was a 1984 Ford Tempo purchased by Debtor and financed by Pearl on November 28, 1988.
3. Debtor also executed a reaffirmation agreement on March 6, 1989, reaffirming indebtedness owing to Gulf Furniture Stores, Inc.
4. On July 26,1989, the Court granted a discharge to Debtor; discharging her from all dischargeable indebtedness, nullifying judgments and enjoining her creditors from instituting or continuing any action to collect any of the discharged debts.
5. On August 17, 1989, Debtor filed notice of her intent to rescind the reaffirmation agreement with Pearl and motion to withdraw notice of her intent to reaffirm.
6. A hearing pursuant to 11 U.S.C. § 524(d) (1988 ed.) was held on August 21, 1989. At the hearing, Debtor was informed that neither bankruptcy law nor nonbankruptcy law required her to reaffirm her indebtedness. Debtor was also informed of the legal effect and consequences of entering into the respective reaffirmation agreements.
CONCLUSIONS OF LAW
This matter presents no factual disputes. Debtor executed a reaffirmation agreement with Pearl subsequent to the filing of her bankruptcy petition but prior to being granted a discharge. Subsequent to receiving her discharge, but prior to the hearing held pursuant to 11 U.S.C. § 524(d) (1988 ed.), Debtor filed with the Court notice of her intent to rescind the reaffirmation agreement with Pearl.
Pearl objected; averring the attempted rescission was untimely.
If a debtor desires to reaffirm indebtedness, the consideration for which is based on a debt that is dischargeable, the court “shall” hold a hearing. 11 U.S.C. § 524(d) (1988 ed.). The purpose of the hearing is to inform the debtor that neither bankruptcy law nor nonbankruptcy law requires a debtor to enter into such an agreement and to inform the debtor of the legal effecf and consequences of the agreement. In theory, after being advised by counsel and after being admonished by the court, a debtor will be better able to avoid reaffirming indebtedness which may inhibit the enjoyment of the
fresh start
the Bankruptcy Code provides.
Under the statutory scheme, however, the court cannot hold the hearing until after the discharge has been granted. 11 U.S.C. § 524(d) (1988 ed.).
Unless the debtor files the reaffirmation agreement with the court (and gives notice to the affected creditor) within sixty days prior to being discharged, the discharge terminates the debtor’s ability to rescind under § 524(c)(4). More often than not, reaffirmation agreements are filed with the court in excess of sixty days prior to the granting of a discharge. Consequently, in most instances the admonishments serve no useful purpose since the debtor can no longer rescind the agreement once the discharge has been granted. The efficacy of the § 524(d) hearing, therefore, can be likened to postconviction
Miranda warnings.
As originally enacted, § 524(c)(2) enabled a debtor to rescind a reaffirmation agreement within thirty days after it became
enforceable.
Also, the original language of § 524(c)
of the Bankruptcy Code formerly required the court to approve reaffirmation agreements the consideration for which was based on a consumer debt not secured by real property.
The 1984 amendments to § 524, however, dramatically changed the reaffirmation process. Now, a debtor can only rescind a reaffirmation agreement by giving notice to the creditor with whom it has reaffirmed indebtedness any time prior to receiving its discharge or within sixty days after the agreement is filed with the court. See 11 U.S.C. § 524(c)(4) (1988 ed.). Furthermore, the court must now only approve agreements when the debtor was not represented by an attorney during the course of negotiating the reaffirmation agreement. See 11 U.S.C. § 524(c)(6) (1988 ed.).
Congress’ inclusion of the bankruptcy court in the reaffirmation process was the result of its reservations about reaffirmation agreements.
Congress sought to reduce its perceived disparity in bargaining positions between debtors and creditors. The court’s designated role was to protect unsophisticated debtors from overreaching sophisticated creditors who might impair the debtor’s ability to achieve a
fresh start
The matter now before the Court, however, aptly reveals how the subsequent amendments to § 524
have eviscerated an element of the protections Congress labored to accord debtors and transformed the § 524(d) hearing into a superfluous formality.
As laudable as Congress’ goals were, the hearing held pursuant to § 524(d) no longer serves the purpose Congress intended. Since in most instances the court is no longer involved in the approval of reaffirmation agreements, the purpose to be served by § 524(d) has been frustrated. Here, the Debtor was represented by counsel. In addition to being advised by counsel she was admonished by the Court, albeit after she was granted a discharge. Yet, now the Debtor seeks to rescind the reaffirmation agreement with Pearl. Since her attempted rescission is more than sixty days from the filing of the agreement with the Court and subsequent to the granting of her discharge, the agreement cannot be rendered unenforceable under 11 U.S.C. § 524(c)(4) (1988 ed.). While the agreement may now impose an undue hardship on Debtor, the Court is powerless to provide her with a remedy.
The desire to provide the Debtor with the
fresh start
Congress intended is curtailed by the Court’s appreciation for its role in our system of government.
Any empathy for Debtor does not shroud the Court’s recognition of its function. It is not the Court’s province to change laws the efficacy of which it questions; rather it is within Congress’ dominion.
Accordingly, since Debtor failed to give Pearl notice of her intent to rescind the reaffirmation agreement within sixty days subsequent to its being filed with the court or prior to being granted a discharge, the agreement is enforceable. Therefore, Pearl’s objection is due to be sustained and Debtor’s motion to rescind this reaffirmation agreement is due to be denied.
Now, therefore, it is ORDERED, ADJUDGED and DECREED that the objection of Pearl Motors, Inc., to the notice of intent to rescind the reaffirmation agreement with Pearl Motors, Inc. filed by the Debtor, Mary Rhone Davis, is SUSTAINED; and it is further
ORDERED, ADJUDGED and DECREED that the motion of Debtor, Mary Rhone Davis, to rescind her reaffirmation agreement dated March 9, 1989, reaffirming indebtedness owing to Pearl Motors, Inc. is DENIED; and it is further
ORDERED, ADJUDGED and DECREED that the reaffirmation agreement executed by Debtor, Mary Rhone Davis, reaffirming indebtedness owing to Pearl Motors, Inc., is enforceable by the terms thereunder to the extent enforceable under the laws of the State of Alabama.