A fellow attorney recently asked me this question because she had a client who failed to attend the reaffirmation hearing.  As a result, the judge disapproved the reaffirmation agreement.  She wondered if the creditor could now repossess the car.  The short answer is: Yes.  What’s going on here?

I.          To Reaffirm Or Not To Reaffirm, That Is The Question

Last month I posted a fairly detailed discussion of reaffirmation.  In that post I described secured debts and the reaffirmation process.  I won’t reproduce the entire post here – you can, after all, read it yourself.  However, I will reproduce a little bit of it because it is particularly germane to the question at hand:

. . . if you refuse to reaffirm or redeem, the creditor can repossess the car even if you’re current on the payments!  See, e.g., In re Dumont, 581 F. 3d 1104 (9th Cir. 2009) . . . .  If the judge approves the reaffirmation agreement the in personam liability survives bankruptcy. . . . If the judge refuses to approve the reaffirmation agreement can the creditor repossess the car?  . . . [I]f the debtor has complied with the requirements of §§ 524(c) and 521(a)(6), and if the only reason there is no reaffirmation agreement in place is because of the judge’s refusal to approve it, then the creditor has no authority to repossess as long as the debtor is current on the payments.

While most debtors would prefer not to reaffirm the debt, but still keep the car and continue to make regular payments, some creditors insist on reaffirmation.  My colleague wondered if her client’s car was safe since she had signed the reaffirmation agreement, even though she hadn’t attended the reaffirmation hearing.  Hadn’t her client complied with the requirements of the Bankruptcy Code?

II.        Attendance At The Hearing Is A Requirement Of Reaffirmation

As I discussed in the December 15 post, § 521(a)(6), coupled with the hanging paragraph immediately after § 521(a)(7) and In re Dumont, 581 F.3d 1104 (9th Cir. 2009), make clear that if the debtor fails either to reaffirm the debt or redeem the item within 45 days after the first meeting of creditors, then the stay terminates and the creditor can repossess, even if the debtor is current on the payments.

The steps necessary (but not sufficient) for the debtor to reaffirm the debt are:  (1) signing the proposed reaffirmation agreement, and (2) attending the hearing on reaffirmation, if there is one.  Failure to complete either step is a failure on the debtor’s part to reaffirm the debt, resulting in stay termination and possible repossession.  After all, signing the agreement and attending the hearing are within the debtor’s power.

The reason the two steps are insufficient by themselves to accomplish reaffirmation is the possibility that the judge will refuse to approve the agreement.  Since the debtor cannot force the judge to approve the reaffirmation agreement, this final step is not required for the debtor’s compliance with § 521(a)(6).  This is why all of the judges I have heard opine on the matter say that repossession is not permitted under Dumont when the debtor is current on the payments, if the only reason there is no reaffirmation is the judge’s refusal to approve the agreement.  Unfortunately, there is no case law establishing this last proposition, probably because no creditor has had the temerity to repossess under those circumstances.