Bankruptcy Basics – Part 7: Courts Hearings

The following program was produced by the United States Courts. Depending on the chapter of your bankruptcy case
and it’s complexity, you may also be required to appear at hearings before the
bankruptcy judge. In a Chapter 13 case, you may only have
to appear at a hearing for the court to confirm, meaning approve, the Chapter 13 plan.
In a Chapter 7 case, you typically will not appear in court and will not see the judge unless an objection is raised or a
reaffirmation hearing must be held. A reaffirmation hearing is held when a debtor wants to continue
to pay a debt, secured by, say, a car, or home furnishings, in order to keep the property. Let’s watch what goes on in a typical hearing where a judge considers whether a debtor’s reaffirmation
agreement should be approved. First, the judge will tell you about the consequences of reaffirming a debt, as well as your alternatives. “Miss Lopez, the Bankruptcy Code requires that
whenever someone wishes to reaffirm a debt that I must hold a hearing at which I discuss
with you the alternatives to entering into the reaffirmation agreement, and the consequences of
doing so. I also must make a finding that it’s in your
best interest and doesn’t impose an undue hardship on you. First of all, with respect to the alternates, one alternate, of course, is reaffirming
the debt and that’s why you’re here. Another is that I could approve an arrangement where you buy back the
car, called a redemption, based on the value of the car as determined
by me. Sometimes, that’s less than the amount of the
debt. The only problem with that is that you have to come up with cash to do that. The third alternative is called a surrender. This gives you the opportunity to give the
car back and be free of any further liability. That’s something that’s worth considering if the car payments were
beyond what you could reasonably afford. If you do reaffirm the debt, the consequences
are that you’ll be liable on the full amount of the debt, and if later on you have financial problems, they
can not only repossess the car, they can put it through the auction and come back against you for anything that’s
left over after applying the auction proceeds against the debt. Finally, I must find that the agreement’s in your best interest and doesn’t
impose an undue hardship on you. Let me ask you, now that we’ve discussed those alternatives,
do you have any questions?” “No, Your Honor.” “Do you still want to proceed?” “Yes.” Before approving the agreement, the judge must first make sure
The debtor can handle the payments. “Now this automobile, as I understand it, is a
2002 Honda Civic?” “Yes, Your Honor.” “Are you currently behind on your payments?” “I am two months behind on my car payments.” “Do you have any arrangement where you can catch
that up with the lender?” “Yes, the attorney for the creditor told me
that they could pay those two months that I’m behind at the end
of the loan, and they will also be willing to reduce the interest rate to decrease the monthly payment.”
“That’s very important because once you reaffirm the debt, if you are behind, they could come after you immediately for those
past due payments. Now, is this a car that you drive personally?” “Yes.” “Do you need
the car to get back and forth to work as your primary means of transportation?” “I drive it and
I use it to go to work and I also take my mom to her medical appointments.”
“Based on that I will find that this agreement is in your best interest
and doesn’t impose an undue hardship on you.” “I’ll enter an order to that effect and you’ll get a copy of that
in the mail. In the meantime, just make sure you stay current
on those payments.” “I will.” “Thank you very much, Ms. Lopez.”
“Thank you, Judge.”

1 Response

  1. Radi Rashid says:

    US Courts did a great job on these videos.

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