Juanita S. Ballard

1 The Court has subject matter and personal jurisdiction
pursuant to 28 U.S.C. §§1334 and 157(b); this is a core
proceeding pursuant to 28 U.S.C. §157(b)(2)(I) and (O); and these
are findings of fact and conclusions of law as required by Rule
7052 F.R.B.P.
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
JUANITA BALLARD,
Debtor. 	No. 7-06-12076 SA
ORDER DENYING APPROVAL OF REAFFIRMATION AGREEMENT
WITH MOUNTAIN AMERICA CREDIT UNION
The reaffirmation agreement with Mountain America Credit
Union (“Credit Union”) came before the Court on January 23, 2007
for a hearing as required by 11 U.S.C. §524(d). 1 	Present were
the Debtor Juanita Ballard and counsel for the credit union Will
Jeffrey (“Counsel”). 	The Court reviewed with the Debtor her
filings and circumstances, and explained how the bankruptcy
process works, including the effect of filing a bankruptcy
petition and the effect of the approval of a reaffirmation
agreement. 	In addition, the Court heard on behalf of the credit
union the most compelling argument it has yet heard for approving
a reaffirmation agreement of this sort.
Debtor filed her petition on November 13, 2006. 	She was and
still is unrepresented by counsel. 	The §341 meeting took place
on December 18, 2006. 	Her Statement of Intention (doc 5),
prepared for her by a bankruptcy petition preparer, contained
what is still in this jurisdiction virtually the standard
recitation concerning the vehicle she is purchasing with
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2 Debtor’s form B22 shows a deficit of $422 per month, but
the Debtor’s Schedules I and J and the Debtor’s hand-written
(continued...)
Page 2 of 	6
financing from a creditor holding a lien on the vehicle: “Debtor
will retain collateral and continue to make regular payments.”
However, she also agreed with the Credit Union to reaffirm the
debt, and so the Credit Union submitted to the Court the proposed
reaffirmation agreement (doc 16). 	The case remains open and the
discharge is not due to be entered until February 17, 2007 at the
earliest.
Among other things, the Court finds that (1) the Debtor has
approximately five years of payments left at $152 per month on
this 2006 Ford Focus, (2) she has considerable equity in the
vehicle, (3) the vehicle continues to be fully insured, including
comprehensive coverage, with the credit union named as a loss
payee and entitled to notice from the insurance agent if coverage
is terminated for any reason, (4) Debtor currently has the
resources to make the monthly payments and keep up the insurance
payments,(5) the Debtor will almost certainly complete all the
payments on time and keep the vehicle insured, (6) the Debtor has
a ten-year warranty on the engine and drive train, (7) the hand-
written budget Debtor said she was living by is considerably less
than the budget shown in her filed Schedule J and probably
somewhat too low to be accurate but even Schedules I and J
disclose a budget with an excess each month 2, (8) the figures in
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2(...continued)
budget, show a significant, and more realistic, surplus each
month.
3 Debtor posed this question to counsel; the Court
specifically refrained from asking the question in this
proceeding.
4 This results from the changes enacted by the Bankruptcy
Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No.
109-08, 119 Stat. 23. 	Section 521(a)(6) requires a debtor to
turn over the property to the creditor if, within 45 days of the
§341 meeting, the debtor either has not redeemed the property or
has not “enter[ed] into an agreement with the creditor pursuant
(continued...)
Page 3 of 	6
Part D do not raise a presumption of undue hardship, and (9)
Debtor is a responsible and careful person who filed bankruptcy
because of circumstances beyond her control. 	It therefore
appears that, unlike many other cases in which a debtor’s chances
of staying current on a reaffirmed debt are at best only good to
moderate, in this case the Debtor is quite unlikely to default,
and if she did default, likely the credit union would (and almost
certainly could) resell the vehicle for an amount that exceeded
the total debt owed by the Debtor, including all collection
costs.
Counsel for the credit union could not commit that, even
were Debtor current on her payments, the insurance in place, and
the vehicle continuing to maintain its relatively high value, the
credit union would not attempt to repossess the vehicle. 3 	And he
said that a motion for stay relief might follow a decision by the
Court not to approve the reaffirmation agreement. 4 	Counsel also
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4(...continued)
to section 524(c).” 	The statute then provides that if the debtor
fails to perform, the automatic stay is terminated under §362(h)
and the property is no longer property of the estate. 	Section
362(h)(1) requires the debtor, if he or she seeks to retain the
property, to elect to either redeem or enter into a reaffirmation
agreement and then comply timely with that election. 	While
Debtor’s “retain and pay” language in the Statement of Intention
may well not comply with the statute (a ruling which the Court
need not and does not make in this decision), Debtor clearly has
entered into a reaffirmation agreement with the Credit Union,
even if the Court does not approve the agreement. 	In any event
the automatic stay will likely end approximately three weeks from
now with the issuance of the discharge and the closing of the
case. 	And of course the Court offers no opinion on what would
happen were Debtor to resist any repossession effort in state
court invoking nonbankruptcy law.
Page 4 of 	6
argued that not approving the reaffirmation agreement had the
effect of denying a substantial benefit to the Debtor because of
some farfetched concern (the Court’s phrase, not counsel’s, but
the phrase captures the spirit of Counsel’s argument) on the part
of the Court that something bad might happen to the Debtor.
Nevertheless, the Court finds that it would not be in the
best interests of the Debtor to approve the reaffirmation
agreement. 	To begin with, the Court has assumed that the credit
union would act in its own enlightened self interest, including
pursuing a policy that emphasizes collecting a stream of cash
from the Debtor rather than seeking possession of the vehicle.
After all, that is what the basic market economics of this
transaction are: the Debtor needs a vehicle, the Credit Union
needs the income that the Debtor’s payments represent, and the
equity in the vehicle, the perfected lien, the insurance coverage
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5 This information was communicated to the Court by local
counsel for FMCC in a (public) hearing in another case.
(Mentioning this fact does not in any way constitute a criticism
of FMCC’s local counsel, who has always been completely ethical,
straightforward and candid with the Court.) 	Whether FMCC’s
policy is economically rational or not is irrelevant to this
decision.
6 To be sure, as FMCC is probably aware, the threat to
repossess a vehicle not subject to a reaffirmation agreement is
not an incentive for this Court to approve a reaffirmation
agreement.
Page 5 of 	6
and Debtor’s standing as an excellent customer provide about as
high a level of assurance of full payment as is possible short of
having all the cash right now. 	So it appears highly unlikely
that the Credit Union would act against its own interests merely
because the statute now allows it to do so. 	Of course, nothing
in the statute compels the Credit Union not to try to repossess
the vehicle, and indeed the Court is well aware that another
vehicle financing entity, Ford Motor Credit Company (“FMCC”), has
publicly declared a binary policy of repossessing vehicles in all
instances where no reaffirmation agreement is effected. 5 	But if
it is the case that the Credit Union will maintain the status
quo, then the Debtor need not fear an arbitrary attempt by the
credit union to repossess the vehicle despite the Debtor’s being
current on her payments and insurance up to date. 6 	Of course
§524(f) permits the two parties to voluntarily continue the
purchase arrangement they have in place. 	And were something to
happen to Debtor such that after reaffirmation became finally
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7 The Court by this decision is not saying that it will
never approve a reaffirmation agreement. 	For example, the Court
frequently approves reaffirmation agreements which materially
reduce the principal balance and interest rate for the debtor,
such that the debtor is reobligated on a contract that provides a
vehicle at the actual retail value and at a competitive interest
rate. 	The Court of course understands that if a contract is not
reaffirmed and the debtor ends up entering into a new contract
for another vehicle, that new contract in effect obligates the
debtor as the reaffirmation would have.
Page 6 of 	6
effective she could not make the payment she bears some risk,
albeit slight, of a deficiency judgment after repossession of the
vehicle. 	Thus, on balance, Debtor is at least slightly better
off without the risk attendant to the approval of the
reaffirmation agreement. 7
IT IS THEREFORE ORDERED that approval of the proposed
reaffirmation agreement between Debtor Juanita Ballard and
Mountain America Credit Union (doc 16) is hereby denied.
James S. Starzynski
United States Bankruptcy Judge
COPY TO:
Juanita S. Ballard
7112 Pan American Fwy NE Sp 228
Albuquerque, NM 87109-4209
Will Jeffrey
1212 Pennsylvania NE
Albuquerque, NM 87110-7410
United States Trustee
PO Box 608
Albuquerque, NM 87103-0608
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