A weekly news service that publishes case summaries of the most recent important bankruptcy-law decisions, tracks major commercial bankruptcies, and reports on developments in bankruptcy reform in...
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.
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.
To contact the reporter on this story: Diane Davis in Washington at email@example.com
To contact the editor responsible for this story: Jay Horowitz at firstname.lastname@example.org
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)