Makea R. Barton

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF COLUMBIA
In re
MAKEA R. BARTON,
Debtor.
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Case No. 05-01796
(Chapter 7)
OPINION AND ORDER DISAPPROVING
REAFFIRMATION AGREEMENT WITH TOYOTA FINANCIAL SERVICES
BUT ALLOWING TOYOTA FINANCIAL SERVICES TO SEND
DEBTOR MONTHLY STATEMENTS REGARDING AMOUNTS OWED ON LIEN
The debtor appeared at a hearing on this date held to
address the Reaffirmation Agreement (Docket Entry No. 17) filed
on November 25, 2005. The Reaffirmation Agreement has not been
executed by the creditor, Toyota Financial Services, and thus is
ineffective. Moreover, the reaffirmation agreement is not in the
debtor's best interests as it would subject her to the risk of
personal liability for a debt of approximately $19,000 that is
secured by collateral worth only $10,000. The debtor, who is now
free of a prepetition garnishment by another creditor, intends to
mail in double payments to Toyota Financial Services this month
(on approximately January 13, 2006), and each succeeding month
until she has brought her payments on her car note current, and
The Opinion and Order below is hereby signed.
Dated: January 4, 2006.
_____________________________
S. Martin Teel, Jr.
United States Bankruptcy Judge
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intends to then remain current on the car note. If she does so,
it is unlikely that Toyota Financial Services will repossess the
car as it is better off letting the debtor implement her catch-up
plan and pay the balance of the debt of $19,000 over time (with
interest as provided for by the car note) instead of repossessing
the car and realizing only $10,000.
More importantly, even if Toyota Financial Services were to
act inconsistently with its own best interests and were to
repossess the car because the debtor has not reaffirmed the debt
(even though the debtor faithfully implements her catch-up plan),
the debtor will be better off than if she reaffirmed the debt.
Upon reaffirming the debt, the debtor would face the risk that
she would be unable to stay current on the reaffirmed debt (due
to illness, future unemployment, or some other cause). If that
occurred for any significant period, Toyota Financial Services
would repossess the car and sell it for less than its value,
leaving the debtor saddled with a reaffirmed (and hence non-
discharged) debt for the deficiency.
For example, if the debtor reaffirmed the debt but loses her
employment today, and Toyota Financial Services repossesses the
car, the debtor will obviously be better off not being saddled
with a deficiency debt of approximately $9,000 (the debt of
approximately $19,000 less approximately $10,000 in proceeds on a
repossession sale). That $9,000 debt would interfere with her
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ability to obtain a replacement car once she is re-employed. She
would be better off not having reaffirmed the debt so that she
has no deficiency debt owed to Toyota. She could then purchase a
replacement car for $10,000 (once she is re-employed). She would
then owe a debt of $10,000 but own a car.
However, it is in the debtor's best interests that Toyota
Financial Services be allowed to send her monthly statements
regarding the payments owed on the lien obligation, and
concerning her keeping the car insured for its value in favor of
the creditor, as she will not be personally obligated to make the
payments, and as the monthly statements will allow her to know
what payments are owed in order to avoid lien enforcement against
her motor vehicle based on a monetary default or issues regarding
insurance. It is accordingly
ORDERED that the Reaffirmation Agreement (Docket Entry No.
17) is DISAPPROVED. It is further
ORDERED Toyota Financial Services (and its successors and
assigns, and any entity on whose behalf it has acted) may
nevertheless continue to issue monthly statements to the debtor
of amounts owed by the debtor for which it (and its successors
and assigns, and any entity on whose behalf it has acted) still
retains a lien on the debtor’s motor vehicle, and to issue
statements regarding the debtor's keeping the car insured for its
value in favor of the lienor, and both types of statements will
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4	O:\JUDGTEMP\Barton (Makea) Order Disapproving Reaffirmation Agreement.wpd
not be construed as an act to collect the debt as a personal
liability of the debtor, and the automatic stay of 11 U.S.C. §
362(a) and the forthcoming discharge injunction of 11 U.S.C. §
524(a)(2) are clarified or modified to so provide and to allow
such statements. It is further
ORDERED that the debtor is advised that by reason of the
receipt of a discharge, she is not personally obligated to pay
the amounts stated to be due on any future monthly statements,
but that she may elect voluntarily to make such payments if she
wishes to avoid a monetary default pursuant to which the creditor
could enforce its lien against her motor vehicle.
Dated: January 4, 2006.
[Signed and dated above.]
Copies to: Debtor; Toyota Financial Services, P.O. Box 371339,
Pittsburgh, PA 15250-7339; Office of U.S. Trustee.
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