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Rescission of Reaffirmation Agreement Two Years Post =
Hi,
Based on our research thus far. There are two ways a few bankruptcy courts have addressed the issue of rescinding reaffirmation agreements for real property. One bankruptcy court found that rescision could be applied based on mutual mistake and two courts have found that failure to provide a disharge hearing for pro se debtors is a basis for rescission of the reaffirmation agreement.
1) Mutual Mistake: In re Enos- 2012 Bankr. LEXIS 4304, (September 11, 2002) the bankruptcy court held that because the uncontroverted facts submitted by the parties reveal a mutual mistake regarding the interest rate i the reaffirmation agreement, the agreement may be rescinded. However, sanctions for violation of the automatic stay and discharge injunction were not granted when creditor tried to pursue a deficiency balance.or a discharge hearing under Section 524(d) must take place so that the debtor recieves the reaffirmation admonitions. Id at *8. Moreover, since the reaffirmation agreement involves contract law, the concept of mutual mistake also applies. Id. at *9. At the time of the reaffirmation, Debtors and creditor acted under the mutual mistake of fact ...and the creditor does not controvert Debtor's evidence in this regard. bankrutpcy court rescinded the agreement. The bankruptcy court did not find that the automatic stay and discharge injunction had been violated because the parties did not discover the interest rate mistake.
2) Hearing to advise Pro Se Debtor of Reaffirmation Hearing admonitions: was closed and after the creditor foreclosed on the property attemped to enforce the reaffirmation agreement to obtain a deficiency judgment. The bankruptcy court held that the failure to have a hearing rendered the reaffirmation agreement at issue unenforceable and denied the creditor's motion to enforce the reaffirmation agreement. Id. at **2. Here the court stated that case law consting Sections 524(c) & (d) supports the conclusiong that the requirements contained in those subsections must be striclty complied with in order for a reaffirmation agreement to be enforceable. Id. at **10. (This case also cites In re Marletter, 236 B.R. 281 (Bankr. M.D. Fla. 1999) in support of the positin that Section 524(d) still requires the court to advise the debtor of the voluntary character of the agreement and
its legal effect and consequences. There is a good discussion in the case regarding Grogan v. Garner as well which states that "a central purpose of the code is to provide a procedure by which certain insolven debtors can reorder thier affairs...unhampered by the pressure and discouragement of pre-existing debt." Moreover the court states that "because peremitting a consumer to reaffirm a debt is contrary to this policy of providing the debtor with a fresh start, courts have noted that Section 524(c) and (d) set forth protections for the debtor, one of them being the a court hold a hearing to advise a pro se debtor of his or her rights when such a debtor seeks to reaffirm. Id. at **12. Moreover, the court found that despite the fact that the failure to obtain a valid and binding agreement may be due to the debtor's own inaction,...that it is up to creditors to protect their own rights...and ensure the agreement is properly executed. Id. at **13.
In another case cited as In re Law, 421 B.R. 735 (January 19, 2010), the bankruptcy court held that case open so that the court could have a hearing to inform the debtor of their right to rescind the agreement. However, in this case the debtor's case was still open.
We have done limited research in this area of reaffirmation agreementsof cases we see pertain to vehicles. However, I hope this is helpful. Good luck!
Best,
Maggie
________________________________
To: cdcbaa@yahoogroups.com
Sent: Wednesday, March 27, 2013 10:02 AM
Subject: [cdcbaa] Re: Rescission of Reaffirmation Agreement Two Years Post Discharge
Per Rutter, a BK case out of Maryland (in re Mandrell) permitted rescission after the 60 day limit based on mutual mistake. Rutter also suggests that State courts have concurrent jurisdiction for such challenges, which I interepret to mean that an action for rescission could be brought at the State Court level even if the BK Court rules prohibit such a challenge at the BK Court level.
Wouldn't the other alternative be to simply keep tendering the amount in the reaff agreement and challenge any collection or foreclosure effort based on the reaff agreement? That type of delay would however create continued negative credit reporting by the mortgagee? Any other thoughts out there?? --
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