Matter of Roberts, Bankruptcy No. BK91-41435.

• Decision Date: 11 April 1993
• Docket Number: Bankruptcy No. BK91-41435.
• Citation: 154 BR 967
• Parties: In the Matter of Kevin and Tina ROBERTS, Debtors.
• Court: U.S. Bankruptcy Court — District of Nebraska

154 B.R. 967 (1993)

In the Matter of Kevin and Tina ROBERTS, Debtors.

Bankruptcy No. BK91-41435.

United States Bankruptcy Court, D. Nebraska.

April 11, 1993.

John Hahn, Lincoln, NB, for Park Place Pontiac-Cadillac-GMC, Inc.

Sandra DeLair, Lincoln, NB, for Kevin and Tina Roberts, debtors.

MEMORANDUM

JOHN C. MINAHAN, Jr., Bankruptcy Judge.

This bankruptcy case was reopened for the limited purpose of determining whether a reaffirmation agreement between the debtors and GMAC is enforceable. I conclude that the reaffirmation agreement is not binding because it does not contain a "clear and conspicuous" notice of rescission and because debtors effectively rescinded by conduct.

On December 22, 1990, and prior to the filing of the bankruptcy case, the debtors entered into a lease agreement with Cornhusker Auto Lease respecting a motor vehicle. Under the terms of the lease, debtors were to pay Cornhusker Auto Lease $440.00 per month for 48 months. Park Place Pontiac Cadillac-GMC, Inc. is listed as previous owner of the vehicle on the certificate of title. The debtors also signed on December 22, 1990, two promissory notes, each in the amount of $500.00 (the "Notes"), naming Park Place as the payee. The Notes were secured by an interest in the leased vehicle, but there is no indication that the security interest is perfected. Subsequently, Cornhusker Auto Lease assigned its interest under the lease agreement to GMAC. During the pendency of the bankruptcy case, the debtors entered into a reaffirmation agreement with respect to the lease agreement. The parties to the reaffirmation agreement were the debtors and GMAC.

The reaffirmation agreement makes no reference to the Notes. Park Place is not even a party to the reaffirmation agreement and there is no evidence or assertion that the Notes were transferred to GMAC. Accordingly, there is no evidence that the debtors intended to reaffirm their obligations on the Notes. I conclude that debtors did not reaffirm the Notes. This conclusion is without prejudice to the right of Park Place to assert that it has a valid security interest in the vehicle and that such security interest may be foreclosed. However, if the lien of Park Place was not duly perfected, it may be avoidable pursuant to 11 U.S.C. § 544 by separate adversary proceeding.

The debtors assert several reasons why the reaffirmation agreement is not enforceable. Let me address each argument:

First, debtors contend that the reaffirmation agreement is not enforceable because the court did not conduct a reaffirmation hearing. Reaffirmation hearings are not required as a condition to the enforceability of a reaffirmation agreement unless either (1) the debtor is not represented by counsel; See § 524(c)(6), or (2) the debtor enters the reaffirmation agreement after a discharge order is entered; See § 524(d). If a debtor is represented by counsel and enters into a reaffirmation agreement before a discharge order is entered, as in this case, and counsel files the affidavit required by § 524(c)(3), neither court approval of the reaffirmation agreement nor a hearing is required. A reaffirmation hearing was not required in this case.

Second, debtors argue that the reaffirmation agreement is defective in that it does not contain adequate language advising debtors of the right to rescind. I agree.

Section 524(c)(2) provides that reaffirmation agreements are enforceable only if, among other things, the agreement—

contains a clear and conspicuous statement which advises the debtor that the agreement may be rescinded at any time prior to discharge or within sixty days after such agreement is filed with the court, whichever occurs later, by giving notice of rescission to the holder of such claim.

The reaffirmation agreement before the court does contain conspicuous language which provides as follows:

NOTICE: THE OBLIGATION ASSIGNED GENERAL MOTORS ACCEPTANCE CORPORATION DESCRIBED BELOW IS DISCHARGEABLE UNDER APPLICABLE BANKRUPTCY LAWS. YOU ARE NOT LEGALLY OBLIGATED TO REAFFIRM SUCH OBLIGATION; AND IF YOU REAFFIRM SUCH OBLIGATION, YOUR LIABILITY ON SUCH OBLIGATION WILL BE FULLY RESTORED AND ENFORCEABLE IN ACCORDANCE WITH ITS TERMS.

The above quoted language is conspicuous, but it does not satisfy the requirements of § 524(c)(2) because the language does not advise debtor that the agreement may be rescinded.

In addition, the last paragraph of the reaffirmation agreement provides:

The Debtor(s) may rescind this

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