It is important to remember that BAPCPA did not change the provision that a debtor may rescind a reaffirmation agreement the later of (i) sixty (60) days from the date such reaffirmation agreement has been filed with the court, or (ii) the date the court issues the discharge order.
The grounds for setting aside reaffirmation agreements are limited after the time to rescind has expired. Reaffirmation agreements are not favored by bankruptcy courts and are strictly construed based on conventional contract principles.
After the time to rescind had expired, Courts have failed to allow recession. In the case of In re Curcio, 242 B.R. 192 (Bankr. S.D. Fla. 1999), the court rejected a Chapter 7 debtor's request to rescind a reaffirmation agreement after the entry of the agreement and after the finding that it would not impose undue hardship. The Court held that the agreement becomes enforceable to the same extent as if the Debtor had never filed for bankruptcy relief and that the Court was powerless to set aside the agreement.
See also In re McCrelass, 141 Br. 223 (Bankr. N.D. Fla., 1992,) in which the Court held that a reaffirmation agreement could not be rescinded after the time period even though there was a finding. After the expiration of the time to rescind the agreement, that continued performance under the agreement would impose an undue hardship on the debtor.
In sum, the time for reaffirmation remains very limited. A creditor cannot obtain a reaffirmation before a bankruptcy petition is filed because any pre-petition waiver of a bankruptcy discharge is against public policy and unenforceable. A creditor cannot obtain a reaffirmation after the discharge has been granted, because that is unenforceable. The only time to obtain the reaffirmation is between the filing of the petition and the granting of the discharge. Seeking a reaffirmation with the debtor before the discharge is entered is not considered a violation of the automatic stay unless the creditor harasses the debtor.
By: Justin H. Dion, Esq.