In re Eastep

Citations: 562 B.R. 783; 2017 Bankr. LEXIS 48Docket: Case No. 16-11425-JDL

Court: United States Bankruptcy Court, W.D. Oklahoma; January 6, 2017; Us Bankruptcy; United States Bankruptcy Court

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The Court, presided over by Judge Janice D. Loyd, denied the Debtors Delton James Eastep, II and La-Donna Gayle Eastep's Motion to Reopen their Chapter 7 bankruptcy case, filed on December 1, 2016. The Debtors sought to reopen the case to file a late reaffirmation agreement with Ford Motor Credit, LLC (FMCC) following their discharge on September 20, 2016, and the case's closure on October 20, 2016. 

The Court emphasized that reopening a bankruptcy case is contingent upon meeting specific statutory grounds under 11 U.S.C. § 350(b), and the burden of proof lies with the moving party. Although the case was unopposed, the Court reiterated its duty to apply the law impartially, asserting that it must find merit in the motion regardless of the absence of objections. The decision to reopen hinges on whether relief can be granted without wasting judicial resources. The Court concluded that the motion did not meet the necessary criteria for reopening the case, leading to its denial.

Debtors' Motion to reopen their bankruptcy case is denied on both factual and legal grounds. The request does not specify which of the three allowable bases under 11 U.S.C. § 350(b) is relied upon: administration of assets, relief for the debtor, or other cause. While the Motion implies an intent to seek relief to retain a vehicle through a reaffirmation agreement with FMCC, such relief is impermissible post-discharge. According to 11 U.S.C. § 524(c)(1), reaffirmation agreements must be executed before the discharge is granted. The Federal Rules of Bankruptcy Procedure, specifically Rule 4008(a), further restrict the timeframe for filing such agreements to within 60 days after the creditors' meeting, with any extensions needing to be requested before discharge. No extension was sought in this case, leading to the automatic entry of discharge. Consequently, once a discharge is granted, the court lacks jurisdiction to approve any reaffirmation agreements made thereafter, rendering them unenforceable. This principle is supported by numerous cases, which consistently affirm that post-discharge reaffirmation agreements have no legal significance and cannot be approved by the court.

A minority of courts permit post-discharge reaffirmation agreements under the bankruptcy court's equitable powers or Fed. R. Civ. P. 60(b)(6), contingent on proving "special" or "extraordinary circumstances." However, this court rejects such cases, finding no extraordinary circumstances that would allow deviation from the Bankruptcy Code. Despite recognizing the equities favoring the Debtors—such as their reliance on a vehicle for work and being current on payments—the court emphasizes that it cannot expand the Bankruptcy Code's limits. It cites precedent stating that equitable powers must align with the Code and cannot disregard clear statutory language. Reaffirmation agreements are generally disfavored, requiring strict compliance with Section 524(c). The court denies the Debtors' motion to reopen their Chapter 7 case for a reaffirmation agreement, noting that such agreements cannot be executed post-discharge. However, if a reaffirmation agreement is signed before discharge, it may be filed afterward. The court finds no evidence that a reaffirmation agreement was made prior to discharge. Additionally, the court clarifies that post-BAPCPA, "ride-through" is not permitted, meaning debtors cannot retain possession of a vehicle without executing a reaffirmation agreement or opting for redemption. While the discharge lifted the automatic stay, it does not imply that the creditor has an automatic right to repossession.

Remedies related to secured creditors are governed by state law rather than bankruptcy law. According to the Oklahoma Uniform Commercial Code (UCC), a secured creditor may only exercise rights after a default occurs, but 'default' is not explicitly defined in the UCC. However, it references the Oklahoma Uniform Consumer Credit Code (UCCC), which states that a default in a consumer credit transaction occurs only when a consumer fails to make a required payment or if the likelihood of payment or collateral realization is significantly impaired. A mere bankruptcy filing does not suffice to demonstrate 'significant impairment' without a payment default, as established in relevant case law.

Furthermore, the court notes that it will not entertain motions to revoke a discharge order for the purpose of allowing a reaffirmation agreement. The bankruptcy statute specifies that only timely requests from the trustee or creditors can lead to revocation of a discharge, and it does not permit debtors to initiate such actions. The court emphasizes that it lacks the authority to retroactively vacate a discharge order to permit a reaffirmation agreement after discharge has been granted. The statute is clear that a reaffirmation agreement must be entered into before discharge, and granting relief contrary to this would undermine the statutory framework. No specific authority supports the debtor’s request for such relief.