Karma in Bankruptcy, or the Lack Thereof

This week, I was working on a Reaffirmation Agreement. A Reaffirmation Agreement basically extends a contract through a bankruptcy. In Chapter 7, the bankruptcy discharge is very broad, and it will sever almost all obligations, include auto loans. In order to keep a car that one is making payments on in Chapter 7, a debtor has to Reaffirm the debt. By Reaffirming, the debtor is taking on all the obligations and risks of the contract, including liability if the vehicle is repossessed.

The Reaffirmation Agreement in question was with Chrysler Financial. The interest rate was a usury-level 23%, so I contacted the creditor to attempt to negotiate a lower rate. After all, if the debtor doesn't reaffirm, the creditor will just take the car back and notch a big fat loss in their ledger. The response: "Chrysler Financial does not negotiate on reaffirmation agreements."

F*ck you Chrysler. (I do realize that Chrysler Financial and Chrysler the auto company are different, but *vent rage*).

Bailout funds + Chapter 11 and you won't negotiate? I wish your bond holders had liquidated you. I wish they had said "We don't negotiate" and drove you to Chapter 7. Their stance only makes sense if they presume a debtor needs/wants the car. At 23% interest, my recommendation was to dump it; a Buy Here/Pay Here place would charge them the same, or perhaps even less in interest. Sadly, the debtor wants to keep it. Personally, I would have told Chrysler where to stick it.

I hate creditors, especially when they are simply patently unreasonable.

More Foreclosure Fun!

Today the Washington Post has an article that I find interesting. The article discusses th eMaking Home Affordable program, i.e., the "massive financial incentives to do loan modifications" program. In sum, it's working as well as a screen door on a submarine:

So far, more than 650,000 borrowers have been enrolled into the initial, or "trial," phase of the program and have seen their payments lowered by an average of $640 a month, or 40 percent. But a recent survey of large mortgage servicers published by the Treasury Department found that that more than 25 percent of borrowers in the program were not current on their trial payments.

The failure rate is no surprise. There's a very good reason why most of these mortgage borrowers are behind - they either cannot afford any payment, or they are so financially irresponsible that it doesn't matter what their budget it - they are going to screw it up.

As a bankruptcy attorney, I see new potential clients daily who are substantially behind on their mortgages; it is not uncommon for me to meet folks who are 6 to 10 months behind in their mortgages, with nothing to show for it. Where, oh where, did that $6,000 to $20,000 go? The answer, sadly, is that the money is up in smoke.

As a bankruptcy attorney, I enjoy my job - I can do a lot for people, saving homes and absolving folks of sometimes ludicrous amounts of debt - but at some point folks need to think for themselves.

While I am on an anti-debtor rant, I'll throw in two more for fun:

Defective Paperwork Strips Mortgage Holder of Foreclosure Rights!

Judge Cancel's $525,000 mortgage as sanctions!

At least there may be some relief in foreclosure defense.