Beware: Credit Unions Remain Subject to Hearing for Certain Reaffirmations in Bankruptcy
When a debtor seeks to reaffirm a debt, and the debtor acts pro se with respect to the reaffirmation, the Bankruptcy Code requires a court hearing to approve, unless real property secures the debt. 11 USC 524(c)(6). The 2005 Bankruptcy amendments included a new section 524(m) inserting a presumption of undue hardship where the debtors’ monthly expense exceeds income as shown by schedules on file. The debtor may rebut that presumption, and if so, the court may approve reaffirmation. But, 11 USC 524(m)(2) excepts Credit Unions from this presumption.
At first read, this exception appears to eliminate court approval on any debt to a credit union. In Case No. 15-36323 In Re Cassandra N. Edwards, the Southern District of New York followed Judge Karlin’s lead, in validated a reaffirmation agreement, and held that the credit union exception only applies to a pro se case involving reaffirmation of a debt secured by debtor’s home. The court relied upon In re Cooper, 2012 WL 566070, at *5, 2012 Bankr. LEXIS 604 (Bankr. D. Kan. Feb. 21, 2012) (“The requirements of § 524(c)(6) operate wholly independently of the requirements of § 524(m)(1), and are not affected by the provisions of § 524(m)(2).”). Unlike the requirements of § 524(m)(1), which do not apply to debts owed to credit unions, the only exception to the requirements of § 524(c)(6) are reaffirmation agreements where the debt is a consumer debt secured by real property. Id.