Maida Muharemovic

UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF IOWA

IN RE:

Maida Muharemovic,

Debtor

Chapter 7

Bankruptcy No. 26-00337

OPINION AND ORDER RE: REAFFIRMATION AGREEMENT

This matter came before the Court for hearing on Debtor’s Reaffirmation
Agreement with Capital One Auto Finance, a division of Capital One, N.A (Doc. 9).
Debtor Maida Muharemovic appeared without counsel. The Court took the matter
under advisement. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A).
I. B
ACKGROUND/STATEMENT OF THE CASE
Debtor filed for bankruptcy on April 8, 2026. Debtor seeks to reaffirm the debt
secured by a 2026 Dodge Durango. The amount of the debt is $48,016.72. The debt
would be repaid at a fixed annual percentage rate of 8.790% with monthly payments
of $766.33 for 84 months. The Reaffirmation Agreement lists the current market
value of the vehicle as $45,226.40. Debtor was not represented by an attorney in
negotiating the agreement and the presumption of undue hardship arises under 11
U.S.C. § 524(m).
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At the hearing, Debtor explained that her income was sufficient to make the
monthly payments in addition to her other obligations. Debtor also explained in the
reaffirmation agreement that making the payment on her vehicle was top priority and
that she would adjust elsewhere in her budget in order to do so.
II. D
ISCUSSION
One of the fun damental goals of the Bankruptcy Code is to provide the
“honest but unfortunate debtor” with a fresh start, “unhampered by the pressure and
discouragement of preexisting debt.” Local Loan Co. v. Hunt, 292 U.S. 234, 244
(1934). The code effectuates th is fres h star t by granting the debtor a discharge of
certai n debts. In a chapter 7 case, suc h as thi s one, secti on 727 mandates tha t “[t]h e
court shall grant the debtor a discharge” unless certain grounds exist that render the
debtor ineligible. 11 U.S.C. § 727(a).
When
d ischarge is entered in favor of the debtor, it “operates as an injunction
against the commencement or continuation of an action, the employment of process,
or an act, to collect, recover, or offset any such debt as a person
al liability of
the d
ebtor, whether or not discharge of such debt is waived.” Id. § 524(a)(2).
However, a debtor may voluntarily agree to repay, or “reaffirm,” a debt that would
otherwise be dischargeable. Under section 524(c), a debtor may reaffirm an
otherwise-dischargeable d
ebt only if (1) the agreement is made prior to the granting
of the discharge; (2) the debtor receives certain disclosures related to the legal
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ramifications of reaffirmations at or before the time the debtor signs the agreement;
and (3) the agreement is filed with the court and is accompanied by a declaration of
debtor’s attorney, which states that (a) debtor was fully informed and voluntarily
entered into the agreement; (b) the agreement does not impose an undue hardship on
the debtor; and (c) the attorney fully advised the debtor of the legal effect and
consequences of the agreement and any default thereunder. Id. § 524(c). “If the
debtor is not represented by an attorney during the course of negotiating the
agreement, the court must hold a hearing to inform the debtor that the reaffirmation
agreement is not required and describe the legal consequences of reaffirming debt.”
In re Bartz, 2011 Bankr. LEXIS 500 at *6 (Bankr. N.D. Iowa Feb. 17, 2011). The court
must also hold a hearing if payments under the reaffirmation agreement exceed the
debtor’s net monthly income. In such a case, “it shall be presumed that such
agreement is an undue hardship on the debtor.” 11 U.S.C. § 524(m)(1). The debtor
has the opportunity to rebut this presumption by submitting a written statement
identifying additional sources of funds to make payments under the agreement. Id.
“If the presumption is not rebutted to the satisfaction of the court, the court may
disapprove such agreement.” Id.
In this case, Debtor seeks to reaffirm the debt secured by a 2026 Dodge
Durango in the amount of $48,016.72. This Court has considered similar agreements
to reaffirm significant debt secured by high-cost vehicles. See, e.g. In re Bartz, 2011
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Bankr. LEXIS 500; In re Duffy, 2011 Bankr. LEXIS 3372 (Bankr. N.D. Iowa 2011);
In re Tarnowski, 2009 Bankr. LEXIS 231 (Bankr. N.D. Iowa Feb. 11, 2009). In such
a case, the Court must weigh the debtor’s ability to make the monthly payments
against the need for the vehicle securing the debt. In re Nielsen, 2016 Bankr. LEXIS
456 at 4 (Bankr. N.D. Iowa Feb. 12, 2016). “[T]he need for a vehicle alone is
insufficient to show the need for a high-cost vehicle.” Id. at 5 (citing Tarnowski,
2009 Bankr. LEXIS 231 at *3).
Here, Debtor’s monthly expenses exceed her monthly income by $350.56.
Because of this, Debtor must rebut the presumption that the reaffirmation agreement
imposes an undue hardship on her. Debtor explained that making the payment on her
vehicle was top priority and that she would adjust elsewhere in her budget in order
to do so, but did not note what specific changes in income or expenses would be
made. Debtor has not demonstrated a need for this newer, high-end vehicle or shown
that she explored less expensive transportation options. Additionally, Debtor has not
shown that she has any equity in the vehicle. In fact, the reaffirmation agreement
shows that Debtor currently owes more on the vehicle than its purchase price. For
these reasons, Debtor has failed to rebut the presumption that reaffirmation of the
debt in question will impose an undue hardship.
III. C
ONCLUSION
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WHEREFORE, approval of the Reaffirmation Agreement between Debtor
and Capital One Auto Finance, a division of Capital One, N.A. is DENIED.
Ordered:
Thad J. Collins
Chief Bankruptcy Judge
August 14, 2026
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