Debtor Can't Keep Jaguar He Bought Before Filing Bankruptcy

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By Diane Davis

July 20 — Buying a luxury car one month before filing bankruptcy isn't a good way to get the bankruptcy judge to rule in your favor ( In re Grether, 2016 BL 228202, Bankr. N.D. Tex., No. 15-34192-SGJ-7, 7/15/16 ).

Judge Stacey G.C. Jernigan of the U.S. Bankruptcy Court for the Northern District of Texas July 15 denied debtor Todd Anthony Grether's motion for reconsideration and concluded that his reaffirmation agreement should be disapproved.

According to the court, it was “downright offensive” that the debtor bought a luxury vehicle before filing bankruptcy “so that you can discharge potentially hundreds of thousands of dollars of debt,” the court said.

Reaffirmation agreements must meet strict requirements under Bankruptcy Code Section 524(c), (d), and (m) to be enforceable, and these provisions grew out of a long history of “coercive and deceptive actions by creditors to secure reaffirmation of discharged debt,” the court said.

Presumption of Undue Hardship

Bankruptcy courts must disapprove reaffirmation agreements upon a presumption of undue hardship that is not satisfactorily rebutted by the debtor, according to Bloomberg Law: Bankruptcy Treatise, pt. II, ch. 64 (D. Michael Lynn et al. eds., 2016). “Undue hardship” is a “situation in which the debtor's monthly income less expenses does not exceed the payments required under the reaffirmation agreement,” according to Bloomberg Law: Bankruptcy Treatise.

The debtor had monthly income of $3,000, with monthly expenses of $10,899, resulting in a monthly net income of negative $3,899. The reaffirmation agreement proposed paying $20,948 for a 2008 Jaguar, which the debtor said was needed for his work.

The debtor was unable to overcome the presumption of undue hardship, and the amount being reaffirmed for the Jaguar was more than it was worth, the court said.

The debtor has “failed to identify sources of additional funds to make payments required under a reaffirmation agreement,” the court said. “[H]e simply cannot afford this vehicle,” the court said.

Gregory Wayne Mitchell, The Mitchell Law Firm, L.P., Dallas, represented debtor Todd Anthony Grether; John Dee Spicer, North Richland Hills, Texas, represented himself, Trustee.

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To contact the editor responsible for this story: Jay Horowitz at

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