Recently I ran across someone who wanted to make just about the worst mistake possible for a Massachusetts resident who has just filed for bankruptcy protection.
She wanted to sign a reaffirmation agreement on a leased car.
Why is that such a no-no if you live in Mass? First, some terminology: a reaffirmation agreement is basically a new contract that is signed by the debtor after she has filed a bankruptcy case. The “re-aff” can be filed with the court and approved bye a judge. The debtor than owes the debt all over again, despite having filed a bankruptcy case.
Signing one is usually a horrible idea for a Massachusetts debtor who is just looking to keep their car during and after the bankruptcy case.
This is because Massachusetts state law independently protects car owners who are able to make all their payments on time. The Massachusetts General Law in chapter 255B, section 20B prevents a lender from repossessing an auto or truck without a court hearing if all payments have been made on time.
(An interesting sidelight is that the same law prevents a repossession when the vehicle is parked on land owned or rented by a debtor, even if payments are late).
With this protection on the books, it is usually crazy for a debtor in Massachusetts to go ahead and sign a re-aff. It’s especially nuts if the car is a lease, because the driver is never going to own the vehicle outright in any circumstance.
Of course, if you live in another state, all bets are off. That’s why if you cruise the internet looking for advice, lots of bankruptcy lawyers will say that you might have to enter a reaffirmation agreement if you want to keep your car. It might be true where they are, but the rules are a little different here.
This begs the question why would any creditor even bother sending out a reaffirmation to a Massachusetts debtor? Are they playing you for a dummy, or trying to twist arms? “Hope springs eternal,” I guess could be the underlying philosophy, but the main reason is that the large national creditors farm the job of printing up re-affs out to “bankruptcy support” firms who just grind out the forms without any care for the nuances of any particular state’s law.
The take-away here is easy: you don’t need to sign a re-aff to keep your car if you live anywhere in Massachusetts. And doing it on a leased vehicle is just plain stupid.
by Doug Beaton