Gomez v. Wells Fargo Bank, N.A. (In re Gomez), Bankruptcy No. 5:08–bk–72134.

Decision Date24 May 2012
Docket NumberAdversary No. 5:11–ap–7157.,Bankruptcy No. 5:08–bk–72134.
Citation473 B.R. 322
PartiesIn re Marcelo and Martha GOMEZ, Debtors. Marcelo and Martha Gomez, Plaintiffs v. Wells Fargo Bank, N.A., Defendant.
CourtU.S. Bankruptcy Court — Western District of Arkansas

OPINION TEXT STARTS HERE

Todd F. Hertzberg, Fayetteville, AR, for Debtors.

Richard L. Ramsay, Alicia Austin Smith, Little Rock, AR, for Wells Fargo.

ORDER

BEN BARRY, Bankruptcy Judge.

This is a case about reaffirmation agreements; specifically, a reaffirmation agreement entered into between the debtors and Wells Fargo Bank, N.A. [Wells Fargo] that was filed with the Court over three years ago. After Wells Fargo attempted to collect the reaffirmed debt, the debtors reviewed the reaffirmation agreement they had voluntarily entered into to determine whether it complied with 11 U.S.C. § 524(c), the reaffirmation provisions of the bankruptcy code. On November 14, 2011, the debtors filed their Complaint Seeking Injunctive Relief Declaring Reaffirmation Agreement Null and Void and Seeking Damages For Violation of the Discharge Injunction. On December 14, 2011, Wells Fargo filed its answer. The Court heard the case on April 18, 2012, and then allowed both parties until May 15, 2012, to file simultaneous post-trial briefs. After considering the evidence presented and the parties' briefs, the Court denies the relief requested by the debtors.

Jurisdiction

The Court has jurisdiction over this matter under 28 U.S.C. § 1334 and 28 U.S.C. § 157, and it is a core proceeding under 28 U.S.C. § 157(b)(2)(O). The following opinion constitutes findings of fact and conclusions of law in accordance with Federal Rule of Bankruptcy Procedure 7052.

History

The debtors filed their chapter 7 voluntary petition on May 30, 2008, and included in their schedules a debt owed to Wells Fargo in the amount of $50,000, secured by a second mortgage on their residence located in Springdale, Arkansas. On their Statement of Intention, the debtors stated their intention to reaffirm the debt to Wells Fargo pursuant to § 524(c). On August 20, 2008, Wells Fargo filed an executed reaffirmation agreement on Official Form 240A relating to the subject debt; the reaffirmation agreement was signed by both debtors on July 21, 2008, the debtors' counsel at the time on August 4, 2008, and a representative of Wells Fargo on August 20, 2008. The debtors received their discharge on September 15, 2008, approximately one month later.

According to the debtors' complaint and Wells Fargo's answer to the complaint, Wells Fargo brought suit against the debtors in state court in May 2010 for a money judgment on the debt allegedly owed to Wells Fargo.1 The debtors failed to respond to the suit and the state court entered a default judgment against the debtors and in favor of Wells Fargo in the approximate amount of $53,000 in September 2010. A corrected default judgment was entered in the state court in April 2011, and in July 2011 Wells Fargo initiated a Writ of Garnishment to garnish the wages of both debtors to enforce the default judgment. Present counsel for the debtors moved to reopen the debtors' bankruptcy case in September 2011 and filed this adversary proceeding in November 2011.

Debtors' Arguments

The debtors presented three arguments related to the reaffirmation agreement. Their first argument is that the reaffirmation agreement between the debtors and Wells Fargo is legally deficient. The debtors' counsel succinctly presented what he believed to be the legal deficiencies during his closing argument. Specifically, the debtors argue that the reaffirmation agreement fails to comply with the following sections of the bankruptcy code:

1. § 524(k)(3)(C)(ii), which relates to disclosure of the total amount of debt being reaffirmed;

2. § 524(k)(3)(E)(i), which relates to the disclosure of interest rates;

3. § 524(k)(3)(F), which relates to variable rate transactions; and

4. § 524(k)(3)(H), which relates to repayment amounts and repayment schedules.

Additionally, the debtors believe that the reaffirmation agreement contains a high level of ambiguity.

The debtors' second argument is that the reaffirmation agreement is deceptive as to Martha Gomez because the agreement does not disclose on its face that Martha Gomez was being asked to reaffirm “an unsecured loan.” According to the debtors, Wells Fargo would have known that preparing the Agreement in this manner would cause an unsecured debtor to reasonably believe that the loan was secured by her property.”

Finally, the debtors argue that because the reaffirmation agreement fails to meet the requirements of § 524(c), it is without effect and the underlying debt was properly discharged. As a result, the post-discharge collection activity by Wells Fargo is a violation of the discharge injunction under § 524(a).

Findings of Fact and Conclusions of LawDeficient Reaffirmation Agreement

The reaffirmation agreement that was filed with the Court and is the subject matter of this lawsuit was presented on the official form promulgated by the Administrative Office of the United States Courts—Form 240A—Reaffirmation Agreement (1/07). In April 2010, the Administrative Office promulgated an additional official reaffirmation agreement form. The new form is titled Form B240A; the original form, which was used by Wells Fargo, is now titled Form 240A/B ALT. The original form strictly complies with the provisions of § 524(c)(2) and (k); the new form only generally complies with the provisions of § 524(c)(2) and (k) but appears to be written to make it easier to understand. The introduction in 2010 of the new Official Form B240A belies an argument that the statutory requirements for disclosure under § 524(k) are to be strictly construed. According to a leading bankruptcy treatise, [i]ndeed, the Reaffirmation Form promulgated by the Administrative Office of the United States Courts deviates somewhat from the language in the statute. Presumably, a creditor properly using this form would face little risk of litigation.” 4 Collier on Bankruptcy ¶ 524.04[1], at 524–44–45 (16th ed.)(2011).2

The debtors' primary argument with regard to the reaffirmation agreement is that the agreement is legally deficient and, therefore, not binding on the debtors. The four deficiencies in the agreement enumerated specifically by the debtors' counsel related to § 524(k)(3)(C), (E), (F), and (H), which the Court will address below.

§ 524(k)(3)(C)(ii)

Under this subsection, the debtors argue that Wells Fargo was required to disclose separately the amount of debt being reaffirmed and the total fees and costs being reaffirmed in the reaffirmation agreement. Section 524(k)(3)(C) relates to the total amount of debt being reaffirmed and states:

(3) The disclosure statement required under this paragraph shall consist of the following:

....

(C) The “Amount Reaffirmed,” using that term, which shall be—

(i) the total amount of debt that the debtor agrees to reaffirm by entering into an agreement of the kind specified in subsection (c), and

(ii) the total of any fees and costs accrued as of the date of the disclosure statement, related to such total amount.

11 U.S.C. § 524(k)(3)(C). According to this subsection, the “Amount Reaffirmed” includes the total amount of debt the debtor agrees to reaffirm and the total of any fees and costs as of the date of the reaffirmation agreement. The statute does not include a requirement that the amount of debt and the fees and costs be segregated. The next subsection, § 524(k)(3)(D), requires two additional statements, the first of which is “The amount of debt you have agreed to reaffirm.” The Wells Fargo reaffirmation agreement consists of a completed Official Form 240A (now Form 240A/B ALT). The phrase “Amount Reaffirmed” appears on the first page in bolded, underlined, and capitalized letters, and is followed by the required phrase: “The amount of debt you have agreed to reaffirm,” and lists the amount of $50,964.84. Beneath that line, in bolded and italicized lettering, appears the phrase: “The amount of debt you have agreed to reaffirm includes all fees and costs (if any) that have accrued as of the date of this disclosure.” The statute requires no more and the Court finds that Wells Fargo complied with the requirements of § 524(k)(3)(C).

§ 524(k)(3)(E)(i)

Under this subsection, the debtors argue that the interest rate disclosed on the reaffirmation agreement must be disclosed in a specific manner with a clear distinction between Annual Percentage Rate and simple interest. In relation to this argument, the debtors argue that the loan consists primarily of a fixed rate advance, not an open end credit plan, and that the wrong disclosure was provided. Section 524(k)(3)(E)(i) relates to the disclosure of interest rates in the agreement and states:

(3) The disclosure statement required under this paragraph shall consist of the following:

....

(E) The “Annual Percentage Rate”, using that term, which shall be disclosed as—

(i) if, at the time the petition is filed, the debt is an extension of credit under an open end credit plan, as the terms “credit” and “open end credit plan” are defined in section 103 of the Truth in Lending Act, then—

(I) the annual percentage rate determined under paragraphs (5) and (6) of section 127(b) of the Truth in Lending Act, as applicable, as disclosed to the debtor in the most recent periodic statement prior to entering into an agreement of the kind specified in subsection (c) or, if no such periodic statement has been given to the debtor during the prior 6 months, the annual percentage rate as it would have been so disclosed at the time the disclosure statement is given to the debtor, or to the extent this annual percentage rate is not readily available or not applicable, then

(II) the simple interest rate applicable to the amount reaffirmed as of the date the disclosure statement is given to the debtor, or if different simple interest rates apply to different...

To continue reading

Request your trial
4 cases
  • In re Maynard, Case no. 7-11-10539 TL
    • United States
    • U.S. Bankruptcy Court — District of New Mexico
    • March 26, 2013
    ...effect and consequences of a reaffirmation agreement and default." 11 U.S.C. § 524(c)(3). See also Gomez v. Wells Fargo Bank, N.A. (In re Gomez), 473 B.R. 322, 330 (Bankr. W.D. Ark. 2012)(the certification by counsel negates any argument that the debtor was not advised of the legal effect o......
  • Williams v. City of Milwaukee City Clerk (In re Williams)
    • United States
    • U.S. Bankruptcy Court — Eastern District of Wisconsin
    • May 25, 2012
    ... ... City of Milwaukee, Defendant. Bankruptcy Nos. 1124658pp, 1128144pp, 1131185pp. Adversary ... ...
  • City of Milwaukee v. Gillespie
    • United States
    • U.S. District Court — Eastern District of Wisconsin
    • March 1, 2013
    ... ... Check, Bankruptcy Law Office of Richard A. Check SC, Milwaukee, WI, ... ...
  • Albright v. Maumee Valley Credit Union (In re Albright)
    • United States
    • U.S. Bankruptcy Court — Northern District of Ohio
    • August 5, 2016
    ...agreement form have been described as deviating somewhat from the actual statutory requirements. See, Gomez v. Wells Fargo Bank, N.A. (In re Gomez), 473 B.R. 322, 325 (Bankr.W.D.Ark.2012) ( “[T]he new form only generally complies with the provisions of § 524(c)(2) and (k) but appears to be ......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT