a. What is a co-signer?
b. What debt did the Hoffmans want to reaffirm?
c. How did the status of Mrs. Hoffman's mother as a co-signer discourage the Hoffmans from defaulting on the loan?
d. What does reaffirmation mean?
e. Why wouldn't a court allow a debtor to pay back a debt voluntarily, it seems counter to the goals of bankruptcy?
The Hoffmans filed Chapter 7 bankruptcy. Among their debts was a loan for $11,500 secured by their 1999 Dodge Caravan. The car was worth less than half the amount of the loan, thus, there was no economic sense to pay back twice the value of their car. However, Mrs. Hoffman's mother was a co-signer on the car. If they defaulted, she would have to pay. To protect her, the Hoffmans signed a reaffirmation agreement promising to repay the car loan at the rate of $96 per week. The Hoffman's monthly income of $4,799.12 was $35.87 less than their expenses. Because they had lost their house, they were living with his parents and paying $600 a month in rent.
The Hoffman's lawyer refused to approve the reaffirmation agreement because it had a negative monthly budget. The Hoffmans asked the Court to approve the agreement.