Why Your Lawyer Won’t Sign Your Reaffirmation Agreement: The Part C Liability Trap

When you file for Chapter 7 bankruptcy, lenders often pressure you to sign a Reaffirmation Agreement. They frame it as a simple “administrative step” to keep your car or home. But if you look at the paperwork, you’ll see a section titled Part C: Certification by Debtor’s Attorney.

Many debtors are surprised when their lawyer flat-out refuses to sign this section, making debtors feel as if they are left alone to handle the legal maze that bankruptcy can be. However, as a bankruptcy attorney for more than 26 years and a law professor, I can tell you that refusal isn’t because your lawyer is being “difficult.” Your bankruptcy lawyer is concerned about a malpractice lawsuit or bar complaint from you.

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

Key Takeaways: The Truth About Reaffirmation Agreements & Attorney Certification

• Part C and Attorney Liability: When a bankruptcy attorney signs Part C of a reaffirmation agreement, they are certifying to the court, under penalty of perjury, that the debt does not impose an undue hardship on the debtor.
• The “Undue Hardship” Presumption: If your bankruptcy schedules (Schedule I minus Schedule J) show a negative monthly income, the law automatically presumes an undue hardship. Signing in this scenario can expose an attorney to Rule 9011 sanctions or future malpractice claims.
• The Automatic Hearing: If an attorney refuses to sign, the court must hold a Section 524(m) hearing to determine if the reaffirmation agreement is in the best interest of the debtor.
• The “Ride-Through” Option: In many districts, you can choose to “retain and pay” without signing a formal agreement. This allows you to keep the car as long as you pay, while avoiding liability if you can’t pay later.

The “Signature Trap” of Part C of the Reaffirmation Agreement

Under 11 U.S.C. § 524(c)(3), an attorney must certify that the agreement does not impose an “undue hardship” on the debtor. This isn’t a mere suggestion that is rubber-stamped. It is a professional declaration made under penalty of perjury.

If your Schedule I (Income) minus your Schedule J (Expenses) results in a negative number, the law creates a “Presumption of Undue Hardship.” For an attorney to sign Part C in that situation, they must essentially swear to the court that you can afford a payment that your own bankruptcy schedules say you can’t.

The 2008 Housing Crisis: A Brutal Lesson on Reaffirmation Agreements

During the mortgage foreclosure crisis, I saw the true danger of these signatures. Thousands of homeowners reaffirmed mortgages on properties that were deeply underwater. When the market collapsed further, and those homeowners defaulted, they were hit with deficiency judgments.

Bankruptcy attorneys who signed those reaffirmation agreements were left exposed. If an attorney certifies a debt as “not an undue hardship” and the client defaults six months later, that attorney has essentially handed the client a “malpractice roadmap.”

Bankruptcy lawyers were put in the position of having to explain to debtors why they agreed to the debtor reaffirming a $200,000 mortgage when the house was worth half that!

Know Your District! Bankruptcy Districts and Local Rules Vary

One of the most frustrating aspects of bankruptcy practice is how much this varies by district.

In some jurisdictions, judges are “Gatekeepers,” strictly reviewing every reaffirmation agreement. Some judges require hearings every time an agreement is signed, while others don’t. I learned that lesson the hard way when a recently appointed bankruptcy judge scheduled a hearing, and I didn’t appear. Why would I? I never have in more than two decades, but this judge required it.

That’s why it’s important to review the bankruptcy judge’s webpage because each has different rules and practices.

In other districts, if the attorney doesn’t sign, the agreement is simply unenforceable, and the court may not even hold a hearing to “save” it. Again, review the local rules!

In the more extreme situations, some lenders, especially certain credit unions, may use an attorney’s refusal as grounds to attempt car repossession, leading to the issue of a “Ride-Through,” which also varies per district.

The Ride-Through Option

While the Bankruptcy Code officially lists only three ways to handle secured debt, surrender, redemption, or reaffirmation, there is a “fourth option” known as the ride-through (or “retain and pay”).

In a ride-through, the debtor continues making regular payments without signing a formal reaffirmation agreement. The advantage for the debtor is immense: because the debt was never reaffirmed, there’s no personal liability. If the car breaks down or the debtor defaults months later, the lender can repossess the vehicle, but they are legally barred from suing for a deficiency judgment.

However, after the 2005 BAPCPA amendments, this option has become a “district-by-district” gamble. Some courts allow it, while others permit lenders to repossess even if payments are current, simply because a reaffirmation wasn’t filed.

Professor’s Note: When a reaffirmation agreement is signed, lenders tend to be more flexible when a debtor falls behind on a payment. However, without a reaffirmation agreement signed, since there’s no liability attached to the debtor, I’ve had clients tell me that a payment late by a week has resulted in a car repossession.

The Professor’s Conclusion

When your lawyer refuses to sign Part C, they are triggering a Section 524(m) hearing. This moves the burden of “approval” from the lawyer to the Judge. This is by design in the Bankruptcy Code to protect debtors. It is not only a way to confirm they can afford to reaffirm debt, but also to understand the consequences.

Professor’s Note: While some bankruptcy judges automatically schedule a hearing even if a reaffirmation agreement is signed by the attorney, while others don’t, there will always be a hearing if it is not signed by the lawyer.

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