333 i. See also In re Hovestadt, 193 B.R. 382 (Bankr. D. Mass. 1996) (a new debt would result in the debtor having a negative cash flow according to the schedules, and yet the lawyer signed an affidavit in which he stated that a new statement would not cause unreasonable harshness). See also letter from Hon. Arthur J. Spector, bankruptcy judge, E.D. Me. Melissa Jacoby (May 20, 1997) (provision of tapes and transcripts of confirmation hearings with several confirmations exceeding debtors` ability to pay); In re Lantanowich, 207 B.R.
326 (Bankr. D. Mass 1997) (debtor agreed to repay $1000 plus interest to obtain a $200 line of credit). Back to text Other implications of the current practice of affirmation. The high number of affirmation agreements — submitted and not submitted — in the consumer insolvency system has an impact on the financial rehabilitation of debtors, but several other types of problems related to new reporting were also identified during the Commission`s consumer insolvency interviews. This division of authority is detrimental to both debtors and creditors. Again, the effects of bankruptcy on their property rights and obligations vary depending on the geographical location of the debtor. A car lender doing business nationwide must keep abreast of the districts that pass the bonds and the districts where the lender can repossess the car as soon as the stay is cancelled, if the debt is not confirmed. If the debtors are found in default a posteriori, the car lender can sue the confirming debtors, but not the transit debtors. While many lenders may not find it economically advantageous to sue potentially judgment-free borrowers for small default judgments, this patchwork of rights and obligations adds unnecessary complications and costs to the system. The code should contain a clear rule.
Creditors offer an additional explanation for the assertion of unsecured debt: they propose extensions of new loans, possibly on more competitive terms. Congress initially tried to address this type of agreement when the code was passed, as Congressman Butler stated at those hearings in 1978: Part A – Debtor Disclosures: Summary of the Sub-Confirmation Agreement. Fill out this section and indicate the details of the agreement: amount to be confirmed, percentage, payment to be made. Part B – The new Confirmation Agreement requires the signature of the creditor`s representative(s) and the debtor(s). The Bankruptcy Code provides that nothing in the debt relief rules prevents a debtor from voluntarily repaying a reduced debt. (364) None of the Commission`s recommendations would amend this provision. Debtors who feel morally obligated to pay certain debts may try to do so without assuming personal responsibility. For example, nothing in the insolvency regulation prevents a person from voluntarily repaying $20 spent by a neighbour or family member before bankruptcy. Debtors` lawyers, trustees and courts could draw debtors` attention to this fact. Creditors are free to withhold payments that the debtor may make voluntarily, but a creditor`s expectation of voluntary payment is not legally applicable. Numerous empirical studies show that under Chapter 7, debtors have debts that far exceed their ability to repay. (334) To the extent that some debtors have fallen into these conditions by underespending their inability to meet this debt, further reaffirmations of this problem are worsening.
Preliminary results from the Creighton Bankruptcy Reaffirmation Project show that in all the districts studied, debtors did not have sufficient monthly income to cover both their monthly expenses and debt repayments. (336) Even debtors who did not confirm the housing debt confirmed on average more than 23% of their total income, without interest on the debt that was again shameful. (337) When chapter 7 debtors have emerged from bankruptcy, so heavily burdened by debt, they are prevented from recovering the financial guarantee. . . .