Bankruptcy: Implementation of Reform Act's Debt Reaffirmation	 
Agreement Provisions (07-DEC-07, GAO-08-94).			 
                                                                 
The Bankruptcy Abuse Prevention and Consumer Protection Act of	 
2005 (referred to hereafter as the Reform Act) included 	 
provisions to better inform individuals who file for personal	 
bankruptcy about their options for reaffirming debt--whereby	 
filers may voluntarily agree to pay certain creditors in an	 
effort to retain assets, such as an automobile. Reaffirmation	 
agreements between debtors and creditors are required, by law, to
formally disclose to debtors the terms of the agreement, such as 
the amount of debt reaffirmed. Some requirements differ for	 
credit unions, such as an exemption for reporting debtor	 
financial information when the debtor's attorney signs the	 
agreement. The Reform Act required GAO to study the bankruptcy	 
reaffirmation process. This report discusses (1) the extent to	 
which required Reform Act disclosures and other information have 
been incorporated into reaffirmation agreements, (2) the types of
debts reaffirmed and the percent this debt comprised of debtors' 
overall debt burden, and (3) how reaffirmed and original interest
rates compare. GAO reviewed a representative sample of bankruptcy
files with agreements in five bankruptcy courts (in AL, CA, IL,  
TX, and WV) selected by, among other things, filing volume and	 
geographic dispersion. Estimates from our sample cannot be	 
generalized to all bankruptcy courts, but can be generalized to  
each of the selected bankruptcy courts. 			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-94						        
    ACCNO:   A78689						        
  TITLE:     Bankruptcy: Implementation of Reform Act's Debt	      
Reaffirmation Agreement Provisions				 
     DATE:   12/07/2007 
  SUBJECT:   Bankruptcy 					 
	     Cost sharing (finance)				 
	     Debt collection					 
	     Debt held by public				 
	     Financial management				 
	     Financial management systems			 
	     Financial statements				 
	     Information disclosure				 
	     Interest rates					 
	     Noncompliance					 
	     Public debt					 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-08-94

   

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as part 
of a longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to [email protected].

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately.

Report to Congress:

United States Government Accountability Office: 
GAO:

December 2007:

Bankruptcy:

Implementation of Reform Act's Debt Reaffirmation Agreement Provisions:

GAO-08-94:

GAO Highlights:

Highlights of GAO-08-94, a report to Congress. 

Why GAO Did This Study:

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 
(referred to hereafter as the Reform Act) included provisions to better 
inform individuals who file for personal bankruptcy about their options 
for reaffirming debtï¿½whereby filers may voluntarily agree to pay 
certain creditors in an effort to retain assets, such as an automobile. 
Reaffirmation agreements between debtors and creditors are required, by 
law, to formally disclose to debtors the terms of the agreement, such 
as the amount of debt reaffirmed. Some requirements differ for credit 
unions, such as an exemption for reporting debtor financial information 
when the debtorï¿½s attorney signs the agreement. 

The Reform Act required GAO to study the bankruptcy reaffirmation 
process. This report discusses (1) the extent to which required Reform 
Act disclosures and other information have been incorporated into 
reaffirmation agreements, (2) the types of debts reaffirmed and the 
percent this debt comprised of debtorsï¿½ overall debt burden, and (3) 
how reaffirmed and original interest rates compare. 

GAO reviewed a representative sample of bankruptcy files with 
agreements in five bankruptcy courts (in AL, CA, IL, TX, and WV) 
selected by, among other things, filing volume and geographic 
dispersion. Estimates from our sample cannot be generalized to all 
bankruptcy courts, but can be generalized to each of the selected 
bankruptcy courts. 

What GAO Found:

Most reaffirmation agreements across the five districts included Reform 
Act disclosure statements and other required information. For example, 
for the five districts, the required disclosure statement for the 
ï¿½Annual Percentage Rateï¿½ was included in an estimated 86 to 97 percent 
of agreements and the disclosure statement for the ï¿½Amount Reaffirmedï¿½ 
and the amount was included in an estimated 87 to 98 percent of 
agreements, as shown below. 

Estimated Percentage of Reaffirmation Agreements That Included 
Disclosure Statements and Other Information for Selected Statements and 
Information: 

Required disclosure statements and other information: ï¿½Annual 
Percentage Rateï¿½ and the amount; 
AL: 86; 
CA: 97; 
IL: 91; 
TX: 92; 
WV: 86. 

Required disclosure statements and other information: ï¿½Amount 
Reaffirmedï¿½ and the amount; 
AL: 90; 
CA: 98; 
IL: 96; 
TX: 93; 
WV: 87. 

Required disclosure statements and other information: Debtor monthly 
income, expense, and net income information to make determination of 
whether a presumed undue hardship exists[a]: 
AL: 67; 
CA: 71; 
IL: 88; 
TX: 75; 
WV: 67. 

Source: GAO analysis of bankruptcy file reviews.

Note: The margin of error for this data is plus or minus 10 percent, 
or less at the 95 percent confidence level. 

[a] Because this disclosure statement and the inclusion of information 
differs for credit unions, these data are for non-credit unions only. 

[End of table] 

We also estimate that, for the five districts, 67 to 88 percent of non-
credit union agreements included monthly income, expense, and net 
income informationï¿½conversely, 12 to 33 percent were missing this 
information. This information helps to inform debtors, debtor 
attorneys, creditors, and court officials of the potential inability of 
the debtor to make payment on reaffirmed debt. In May 2007, a federal 
judiciary advisory committee proposed the use of a reaffirmation 
agreement coversheet that, if approved, would make it mandatory for 
debtors to provide required financial information to determine an undue 
hardship. If approved, the coversheet would appear to address the 
issue of missing financial information. 

For the five districts, debts secured by assets, such as an automobile, 
were the most frequently reaffirmed type of debtï¿½comprising an 
estimated 90 percent or more of all reaffirmations. Unsecured debtï¿½such 
as credit card debtï¿½was reaffirmed infrequently in reaffirmation 
agreements, occurring in an estimated 2 percent to 10 percent among all 
agreements in the five districts. For the five districts, we estimate 
that in approximately two-thirds of cases the reaffirmed debt burden 
comprised 25 percent or less of the debtorsï¿½ total debts. 

In those cases where an original interest rate was provided, rates on 
reaffirmed debt were generally less than or equal to the original 
rate. Specifically, the interest rates were equal to the original rate 
in an estimated 56 to 84 percent of reaffirmed debts for the five 
districts, less than the original rate for 10 to 44 percent of debts, 
and greater in 0 to 8 percent of debts. (The margin of error for these 
estimates is at most plus or minus 16 percent at the 95 percent 
confidence level.) 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.GAO-08-94]. For more information, contact 
William O. Jenkins Jr. at (202) 512-8777 or [email protected]. 

[End of section] 

Contents:

Letter:

Results in Brief:

Background:

Required Reform Act Disclosure Statements Were Included in Most 
Reaffirmation Agreements, though Required Information Was Missing in 
Some Agreements:

Secured Debts for Autos and Homes Most Frequent Type of Reaffirmed 
Debt; for Most Agreements, Reaffirmed Debt Burden Less than 25 Percent 
of Total Debt:

Reaffirmed Interest Rates Were Less than or Equal to the Original Rate:

Agency Comments:

Appendix I: Objectives, Scope, and Methodology:

Selection of Five Bankruptcy Court Districts for File Review:

Selection of Cases Reviewed within Five Bankruptcy Court Districts:

Appendix II: Reaffirmation Agreement Disclosures and Required 
Information; Estimates for Credit Unions:

Appendix III: Federal Judiciary Reaffirmation Agreement Form, January 
2007:

Appendix IV: Additional Estimates on Cases and Reaffirmation Agreements 
Filed in Five Bankruptcy Court Districts:

Case-Level Information:

Reaffirmation-level Information:

Appendix V: Federal Judiciary Proposed Coversheet for Reaffirmation 
Agreements:

Appendix VI: GAO Contact and Staff Acknowledgments:

Tables:

Table 1: Summary of Reform Act-Required Disclosure Statements and Other 
Required Information:

Table 2: Estimated Percentages for Inclusion of Required Financial 
Data, Asset Information, and Debtor Notification Statements in 
Reaffirmation Agreements Filed in Five Selected Bankruptcy Courts:

Table 3: Estimated Percentages for Inclusion of Required Debtor 
Agreement Statement and Other Information in Reaffirmation Agreements 
Filed in Five Selected Bankruptcy Courts:

Table 4: Estimated Percentages for Inclusion of Debtor Attorney 
Certification Statements and in Reaffirmation Agreements Filed in Five 
Selected Bankruptcy Courts:

Table 5: Estimated Percentages for Inclusion of Debtor Statement in 
Support of Reaffirmation Agreement and Other Information in 
Reaffirmation Agreements with Non-Credit Unions Filed in Five Selected 
Bankruptcy Courts:

Table 6: Estimated Percentage of Cases in Five Districts by Total 
Amount Reaffirmed as Percentage of Total Debt:

Table 7: Characteristics of Five Selected Bankruptcy Court Districts 
Relied upon When Selecting Districts for Review:

Table 8: Description of Sampling Universe and Samples for Five Selected 
Districts for Cases Filed from October 17, 2005, through October 17, 
2006:

Table 9: Reform Act Reaffirmation Agreement Disclosure Statements and 
Other Required Information:

Table 10: Estimated Percentage of Reaffirmation Agreements with Credit 
Unions That Included Disclosure Statements and Required Information for 
Five Selected Bankruptcy Court Districts:

Table 11: Estimated Mean and Median Dollar Amounts for Debtor Assets, 
Liabilities, Income, and Expenses in Case Petitions That Included 
Reaffirmation Agreements in Five Bankruptcy Court Districts (October 
17, 2005, through October 17, 2006):

Table 12: Estimated Percentages for Certain Characteristics in 
Reaffirmation Agreements Filed in Five Bankruptcy Court Districts 
(October 17, 2005, through October 17, 2006):

Table 13: Estimated Dollar Amounts for Debtor Monthly Income and 
Expenses Based on Information from Reaffirmation Agreements in Five 
Bankruptcy Court Districts (October 17, 2005, through October 17, 2006):

Table 14: Total Dollar Amount of Debt Reaffirmed Per Agreement in Five 
Bankruptcy Court Districts (October 17, 2005, through October 17, 2006):

Table 15: Estimated Average and Median Dollar Amount of Debt Reaffirmed 
per Reaffirmation Agreement and Average and Median Original Debt Amount 
or Original Purchase Price:

Table 16: Estimated Average Interest Rates on Original Debt for 
Reaffirmation Agreements Filed in Five Bankruptcy Court Districts 
(October 17, 2005, through October 17, 2006):

Table 17: Estimated Average Interest Rates on Reaffirmed Debt for 
Reaffirmation Agreements Filed in Five Bankruptcy Court Districts 
(October 17, 2005, through October 17, 2006):

Figures:

Figure 1: General Process for Reaffirmation Agreements:

Figure 2: Excerpt of Unclear Attorney Certification Form:

Figure 3: Excerpt of Clear Attorney Certification Form:

Figure 4: Example of Additional Language Added to Debtor Attorney 
Certification:

Figure 5: Estimated Percentage of Reaffirmation Agreements with 
Reaffirmed Interest Rates Greater than, Equal to, or Less than Original 
Rates:

Figure 6: Estimated Percentage of Chapter 7 Cases with at Least One 
Reaffirmation Agreement in the Five Bankruptcy Court Districts (October 
17, 2005, through October 17, 2006):

Figure 7: Estimated Average Number of Days from Date when Petition was 
Filed to Date Case was Closed (October 17, 2005, through October 17, 
2006):

Figure 8: Estimated Average Number of Days from Date When Reaffirmation 
Agreement Was Filed to Date Case Was Closed (October 17, 2005, through 
October 17, 2006):

Abbreviations:

AL-N: Northern District of Alabama: 

AOUSC: Administrative Office of the U.S. Courts: 

CA-C: Central District of California: 

IL-N: Northern District of Illinois: 

TX-N: Northern District of Texas: 

WV-S: Southern District of West Virginia:

[End of section]

United States Government Accountability Office: Washington, DC 20548:

December 7, 2007:

The Honorable Robert C. Byrd: 
President Pro Tempore: 
United States Senate:

The Honorable Nancy Pelosi: 
Speaker of the House: 
House of Representatives:

The Honorable Patrick Leahy: 
Chairman: 
The Honorable Arlen Specter: 
Ranking Member: 
Committee on the Judiciary: 
United States Senate:

The Honorable John Conyers, Jr.: 
Chairman: 
The Honorable Lamar Smith: 
Ranking Member: 
Committee on the Judiciary: 
House of Representatives: 

Individuals may file for personal bankruptcy in federal bankruptcy 
courts to reduce their debts by having their eligible debts discharged 
by the bankruptcy court.[Footnote 1] Bankruptcy filers may voluntarily 
reaffirm--that is, agree to pay--certain debts with creditor firms in 
an effort to retain assets.[Footnote 2] Debtors may, for example, be 
motivated to reaffirm one or more debts through a reaffirmation 
agreement with a creditor to retain an asset that secures a debt, such 
as an automobile, home, or household good that otherwise would likely 
have to be surrendered to the creditor if the debtor did not reaffirm 
the debt.[Footnote 3] A debtor may also choose to reaffirm a debt that 
is not secured by an asset, such as credit card debt or a line of 
credit from a bank. In the late 1990s, several reports, including a 
1997 National Bankruptcy Review Commission report, expressed concern 
over questionable practices that may have led some individuals filing 
for bankruptcy to take actions that were not in their best interests-- 
by entering, for example, into agreements with creditors that were 
financially burdensome.[Footnote 4]

Between 2001 and 2004, an average of more than 1.5 million people 
annually filed for personal bankruptcy protection. In April 2005, the 
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 
(referred to in this report as the Reform Act) was enacted and 
contained provisions designed to better inform debtors and assist them 
in making decisions about reaffirming debt.[Footnote 5] Under the 
Reform Act, a reaffirmation agreement is required to contain specified 
disclosure statements that, among other things, are designed to inform 
debtors of the terms of the reaffirmation agreement as well as the 
debtor's rights and responsibilities. For example, the amount 
reaffirmed and the annual percentage rate for that amount must be 
conspicuously disclosed in the agreement. Statements, among other 
prescribed narratives, must also be included to inform debtors of their 
right to rescind a reaffirmation agreement within a certain time period 
and that the debtor or creditor must file the agreement with the court. 
The required disclosure statements are designed to help ensure that 
debtors make decisions about reaffirming a debt that are in their best 
interests.

The Reform Act required that GAO study the bankruptcy reaffirmation 
agreement process. This report addresses the following questions 
regarding reaffirmation agreements in cases filed over a 1 year period 
beginning October 17, 2005, when the reaffirmation provisions of the 
Reform Act took effect:

1. To what extent have required Reform Act disclosure statements and 
other required information (such as the annual percentage rate for the 
reaffirmed debt) been incorporated into reaffirmation agreements?

2. What types of debts were reaffirmed and to what extent did 
reaffirmed debt amounts comprise debtors' overall debt burden when they 
filed for bankruptcy?

3. How did the reaffirmed and original interest rates compare?

To answer these questions, we reviewed a representative sample of 
bankruptcy case files with reaffirmation agreements in each of five 
district bankruptcy courts: Alabama Northern (AL-N), California Central 
(CA-C), Illinois Northern (IL-N), Texas Northern (TX-N), and West 
Virginia Southern (WV-S). The districts were selected based on the 
following criteria: a range of filing volume, proportion of Chapter 7 
filings within the bankruptcy courts,[Footnote 6] whether cases were 
overseen by the U.S. Trustee Program or the Bankruptcy Administrator 
program,[Footnote 7] and courts in dispersed geographic locations. From 
January 1, 2001, to June 30, 2006, the average quarterly filing volume 
for the nation's 90 district bankruptcy courts was 385,424. The five 
districts we selected collectively represented about 12 percent of 
those average quarterly filings. When determining which districts to 
include in our study, we selected the 2001 to 2006 time period to 
gather sufficient historical filing data to determine the average 
number of filings each district had over time. Each sample of cases 
within these districts was selected from the universe of cases that 
were filed in the five districts between October 17, 2005, and October 
17, 2006--the first year the Reform Act's reaffirmation provisions were 
in effect--and also contained at least one reaffirmation agreement. 
Each universe of cases with at least one reaffirmation agreement was 
drawn from a database maintained by the bankruptcy courts. We 
determined that these data were sufficiently reliable to develop the 
universe of cases for each of the five district bankruptcy courts from 
which we selected a representative sample of bankruptcy cases. To 
determine the reliability of the bankruptcy data we reviewed 
documentation about the system that maintained them and interviewed 
agency officials knowledgeable about the data to discuss the procedures 
they used in collecting and maintaining these data. On the basis of our 
samples of bankruptcy cases with at least one reaffirmation agreement 
from the five selected bankruptcy court districts, we generated 
estimates of percentages, means, and medians to generalize sample 
results to each district's bankruptcy court. All percentage estimates 
in this report have a margin of error of plus or minus 10 percent or 
less, unless otherwise noted. Some percentage estimates we present have 
a margin of error greater than plus or minus 10 percent. This occurred 
for percentage estimates based on a small number of cases in the 
district samples with specific characteristics that were unavailable to 
us prior to sampling. For instance, when we present percentage 
estimates for reaffirmation agreements made with credit unions, the 
small number of agreements made with credit unions in the samples 
results in larger margins of error. Mean and median estimates have a 
relative error of 20 percent or less, unless otherwise noted. Some mean 
and median estimates we present in this report have a great deal of 
variance, resulting in large percentages of relative error. For 
instance, when we discuss the mean and median amount of the debt 
reaffirmed per reaffirmation agreement, individual reaffirmation 
agreement debts range from very low amounts (such as a small 
outstanding balance for an automobile) to much higher amounts (as with 
the outstanding balance for the mortgage on a home); these large 
variations result in larger percentages of relative error.

Our case file review was performed using a data collection instrument 
that included uniform questions to ensure data were collected 
consistently. We relied on data presented in bankruptcy documents filed 
with the courts by debtors, creditors, and debtor attorneys. Bankruptcy 
courts, bankruptcy administrators, and the U.S. Trustee Program manage 
bankruptcy cases and perform some measures to verify data that help 
ensure the reliability of information provided. For example, bankruptcy 
court officials have measures to ensure that data entered into 
information systems are accurate. Also, as a part of the bankruptcy 
process, the U.S. Trustee Program verifies selected debtor-reported 
financial data, such as income and assets. On the basis of these 
measures, we believe the bankruptcy data we reviewed to be sufficiently 
reliable for our purposes. In addition to reviewing case files in each 
district, we interviewed bankruptcy court clerks, U.S. Regional 
Trustees, case trustees, and the Bankruptcy Administrator for the 
Northern District of Alabama to determine the availability of 
reaffirmation agreement data and to learn about the reaffirmation 
process. We interviewed four creditors that we identified during our 
case file review as the creditors that most frequently entered into 
reaffirmation agreements in the five selected districts. We also 
interviewed debtor and creditor attorneys, bankruptcy consumer 
advocates who represented the interests of debtors during development 
of the Reform Act, and academics specializing in bankruptcy issues.

The Reform Act provides that disclosures (with the exception of the 
terms "Amount Reaffirmed" and "Annual Percentage Rate") may be made in 
a different order and may use terminology different from those set out 
in the Reform Act and that such disclosure requirements shall be 
satisfied if the required disclosures are given in good faith. This 
report discusses how the reaffirmation process was working under the 
Reform Act in selected bankruptcy court districts, not whether 
agreements were in compliance with the Reform Act. Furthermore, we did 
not determine the reason that individual reaffirmation agreements did 
not include required disclosures or other information. Appendix 1 
provides additional information on our scope and methodology.

Our work was conducted from June 2006 through November 2007 in 
accordance with generally accepted government auditing standards.

Results in Brief:

Most reaffirmation agreements in the five districts included required 
Reform Act disclosure statements. For example, the disclosure statement 
for the annual percentage rate was included in an estimated 86 percent 
(in AL-N and WV-S) to 97 percent (in CA-C) of all agreements for the 
five districts in the first year after the Reform Act's reaffirmation 
provisions took effect. The disclosure statement for the "Amount 
Reaffirmed" and the amount was included in an estimated 87 percent (in 
WV-S) to 98 percent (in CA-C) of agreements for the five districts. 
Other required information that must be entered into reaffirmation 
agreement forms, in addition to disclosure statements, was generally 
included in agreements when required. For example, when a debt being 
reaffirmed is secured by an asset, the Reform Act requires that a 
description of the asset securing the agreement be included in the 
reaffirmation agreement. This information was included in an estimated 
87 percent (in WV-S) to 99 percent (in CA-C) of reaffirmation 
agreements for the five districts. We also estimate that 67 percent (in 
AL-N and WV-S) to 88 percent (in IL-N) of non-credit union agreements 
included debtors' monthly income, expense, and net income information-
-conversely, an estimated 12 percent (in IL-N) to 33 percent (in AL-N 
and WV-S) were missing this information (these data are not required 
for credit union agreements signed by a debtor attorney).[Footnote 8] 
This information helps to inform debtors, debtor attorneys, creditors, 
and court officials of the potential inability of the debtor to make 
payment on reaffirmed debt. While information about income, expenses, 
and net income available can be determined from other schedules in the 
bankruptcy filings or during hearings, having that information included 
in the agreement makes it easier for the courts to evaluate the 
debtor's financial situation. In May 2007, an advisory committee to the 
federal judiciary proposed the use of a reaffirmation agreement 
coversheet that, if approved, would make it mandatory for debtors to 
provide income and expense information, among other things, on the 
coversheet to be used in the evaluation of undue hardship. According to 
the Administrative Office of the U.S. Courts (AOUSC), this new form 
could take effect by December 1, 2009. If approved, the coversheet 
would appear to address the issue of missing financial information.

Secured debts (i.e., debts secured by assets that the creditor may 
repossess if the debtor does not pay the underlying debt) were the most 
frequently reaffirmed type of debt, comprising an estimated 90 percent 
(in AL-N) to 98 percent (in TX-N and WV-S) of all reaffirmations for 
the five districts. Of all types of secured debts, automobiles and 
homes were the most frequently reaffirmed assets. With respect to 
homes, reaffirmation agreements are not required to be reviewed by the 
court. Unsecured debt was reaffirmed infrequently--occurring in an 
estimated 2 percent (in TX-N and WV-S) to 10 percent (in AL-N) of all 
reaffirmation agreements in the five districts. Credit card debt was 
the most frequently reaffirmed unsecured debt in the 52 unsecured 
agreements we reviewed. As to the extent to which reaffirmed debt 
amounts comprised debtors' overall debt burden, in approximately two- 
thirds of cases for each of the five districts the reaffirmed debt 
burden comprised less than 25 percent of the debtors' total debts.

When the files contained both the original interest rate and the 
reaffirmed rate, reaffirmed interest rates were generally less than or 
equal to the original rate. Specifically, interest rates on reaffirmed 
debt were equal to the original rate in an estimated 56 percent (in WV- 
S) to 84 percent (in CA-C) of reaffirmation agreements for the five 
districts. The reaffirmed rate was less than the original rate in 10 
percent (in IL-N) to 44 percent (in WV-S) and greater than the original 
rate in 0 percent (in WV-S) to 8 percent (in IL-N) of agreements for 
the five districts. For the 9 (of 1,164) reaffirmation agreements we 
reviewed where the reaffirmed interest rate was greater than the 
original rate, the amount of the interest rate increase ranged from 
0.10 percentage points to 4.25 percentage points. For the 72 (of 1,164) 
reaffirmation agreements we reviewed where the reaffirmed interest rate 
was less than the original rate, the amount of the interest rate 
decrease ranged from 0.01 percentage points to 26.99 percentage points. 
The average reaffirmed interest rate was an estimated 8 to 10 percent 
in the five districts. Interest rates for 41 unsecured reaffirmations 
we reviewed that disclosed a reaffirmed interest rate ranged from 0 to 
21 percent. Nineteen of the 41 agreements were reaffirmed with a 0 
percent interest rate, while the remaining 22 agreements had interest 
rates ranging from 7.99 to 21 percent.

Background:

Overview of Reaffirmation Agreement Process:

The reaffirmation agreement process involves several parties and many 
steps. Creditors, debtors, debtor attorneys, and the courts each have 
reaffirmation agreement roles. The process begins when a debtor in 
bankruptcy decides to reaffirm a debt or the creditor proposes a 
reaffirmation agreement and forwards it to a debtor. Officials at four 
credit institutions that frequently engaged in reaffirmation agreements 
we reviewed stated that once they receive notice of a debtor filing for 
bankruptcy, the creditors generally send the debtor or the debtor's 
attorney their proposal for a reaffirmation agreement. Under the Reform 
Act, certain certifications may be required such as an attorney 
certification that certifies that the agreement does not impose an 
undue hardship on the debtor. Also, under the Reform Act, the court is 
to review agreements where debtors are not represented by an attorney 
and those that have a presumed undue hardship. A presumption of undue 
hardship is triggered when a debtor's monthly net income (including 
expected monthly payments on post-bankruptcy debt) is not sufficient to 
pay the proposed monthly reaffirmed payment. A debtor may try to 
counter this presumption in writing. After these reviews, the court may 
approve or disapprove the agreement. Figure 1 provides more detailed 
information about the reaffirmation agreement process.

Figure 1: General Process for Reaffirmation Agreements: 

[See PDF for image] 

This figure is an illustration of the General Process for Reaffirmation 
Agreements. The illustration depicts the process flow, which may take 
one of the following three paths as follows: 

First path: 
1. Debtor decides to reaffirm debt. 
2. Creditor prepares the reaffirmation agreement, signs it, and sends it 
to debtor. 
3. Debtor completed information about their finances and attests to their 
ability to make payments. 
4. Debtor and debtor's attorney (if applicable) sign the reaffirmation 
agreement. 
5. Creditor or debt/debtor's attorney files completed affirmation agreement 
with the court. 
6. If the reaffirmation agreement did not the have signature of a debtor 
attorney, presumption of undue hardship. Court reviews the 
reaffirmation agreement [b]. 
7. If the Court disapproves the reaffirmation agreement, the Court issues 
an order disapproving the agreement. 
8. Reaffirmation process is complete. 

Second path: 
1. Debtor decides to reaffirm debt. 
2. Creditor prepares the reaffirmation agreement, signs it, and sends it to 
debtor. 
3. Debtor completed information about their finances and attests to their ability 
to make payments. 
4. Debtor and debtor's attorney (if applicable) sign the reaffirmation agreement. 
5. If debtor's attorney signed the reaffirmation agreement, debtor's attorney 
certifies that the reaffirmation agreement does not impose an undue hardship [a]. 
6. Debtor may rescind the agreement any time before discharge or within 60 
days of the reaffirmation filing. 
7. Reaffirmation process is complete. 

Third path: 
1. Debtor decides to reaffirm debt. 
2. Creditor prepares the reaffirmation agreement, signs it, and sends it to 
debtor. 
3. Debtor completed information about their finances and attests to their ability 
to make payments. 
4. Debtor and debtor's attorney (if applicable) sign the reaffirmation agreement. 
5. If debtor's attorney signed the reaffirmation agreement, debtor's attorney 
certifies that despite a presumption of hardship being established that, in the 
opinion of the attorney, the debtor is able to pay the reaffirmed debt. 
6. Presumption of undue hardship. Court reviews the reaffirmation agreement [b]. 
7. Court approves the reaffirmation agreement. 
8. Debtor may rescind the agreement any time before discharge or within 60 days 
of the reaffirmation filing. 
9. Reaffirmation process is complete. 

Source: GAO analysis of the Reform Act.

Note: This general process refers to those reaffirmation agreements 
that have been made before the granting of the discharge and filed with 
the court. The Bankruptcy Code provides that such agreements are 
enforceable only if, among other things, such agreements are filed with 
the court.

[A] When a debtor attorney certifies that the debtor is able to make 
the reaffirmation payment, and no presumption of undue hardship is 
established, the Reform Act does not require a judge to review the 
agreement.

[B] Credit union agreements are not reviewed by the court unless the 
reaffirmation agreement is not signed by an attorney representing the 
debtor. Reaffirmations for real property, such as a home, are not 
required to be reviewed by the court.

[End of figure]

Reform Act Provisions Related to Reaffirmation Agreements:

Described as representing the most comprehensive set of reforms in more 
than 25 years, the Reform Act addressed, among other things, the 
reaffirmation agreement process. The Reform Act added new disclosures 
and court review requirements with respect to reaffirmation agreements 
designed to help ensure that reaffirmation agreements are consistent 
with the debtor's best interests. The reaffirmation agreement 
requirements include, among other things, disclosures notifying debtors 
of reaffirmed terms. Agreements must also include the debtor's monthly 
income and expenses to determine if a presumption of undue hardship 
exists and certification by the debtor's attorney that the agreement 
represents a fully informed and voluntary agreement by the debtor and 
that the agreement does not impose an undue hardship. Table 1 
summarizes key reaffirmation agreement disclosure requirements under 
the Reform Act. Appendix II provides the full text of the disclosure 
statements required by the Reform Act.

Table 1: Summary of Reform Act-Required Disclosure Statements and Other 
Required Information:

Reaffirmation section and description: Part A: Financial data, asset 
information, and debtor notifications; 
Required disclosure statements and other required information: 
* Disclosure statements: 
- Amount Reaffirmed, using those terms and including the amount; 
- Statements accompanying Amount Reaffirmed data; 
- Annual Percentage Rate, using those terms and including the rate; 
- Statement instructing debtor to review disclosures; 
- Statements indicating ï¿½Summary of Reaffirmation Agreementï¿½ and that 
the summary is pursuant to the Bankruptcy Code; 
- Statement accompanying variable rate transactions, if applicable; 
- Statement instructing debtor to consult with attorney or a judge 
regarding the effect of reaffirming a debt; 
- Statement explaining the reaffirmation process and certain 
requirements. 
* Other information: 
- Description of asset securing the agreement, if applicable; 
- Original purchase price or the original amount of the loan. 

Reaffirmation section and description: Part B: Debtor agreement 
statement; 
Required disclosure statements and other required information: 
* Disclosure statement: 
- Statement that debtor agrees to reaffirm the debt described in this 
section. 
* Other information: 
- Description of credit agreement; 
- Description of any changes to the credit agreement, if any. 

Reaffirmation section and description: Part C: Certification by the 
debtorï¿½s attorney; 
Required disclosure statements and other required information: 
* Disclosure statement: 
- Statement that the agreement represents a fully informed and 
voluntary agreement by the debtor, that the agreement does not impose 
an undue hardship on the debtor, and that the attorney has fully 
advised the debtor of the effect of the agreement. 
* Other information: 
- If applicable, statement that when a presumption of undue hardship is 
established, that in the opinion of the attorney, the debtor is able to 
make the reaffirmation payment[a]. 

Reaffirmation section and description: Part D: Debtor statement in 
support of the reaffirmation agreement[b]: 
Required disclosure statements and other required information: 
* Disclosure statement: 
- Statement that the reaffirmation agreement does not impose an undue 
hardship on the debtor. 
* Other information: 
- Debtor monthly income, expense, and net income information to make 
the determination of whether the presumption of an undue hardship 
exists. 

Reaffirmation section and description: Part E: Motion for court 
approval; 
Required disclosure statements and other required information: 
* Disclosure statement: 
- Motion for court approval, if debtor is not represented by an 
attorney[c]. 

Source: GAO analysis of the Reform Act.

[A] Under the Reform Act, in reaffirmation agreements with credit 
unions where a presumption of undue hardship is established, debtor 
attorneys are not required to certify that in the opinion of the 
attorney the debtor is able to make the payment.

[B] Under the Reform Act, the presumption of undue hardship calculation 
is not applicable to attorney represented debtors reaffirming with 
credit unions. Correspondingly, in the debtor statement in support of 
the reaffirmation agreement, monthly income, expense, and net income 
information is not required for debtors reaffirming a debt with a 
credit union where the debtor is represented by an attorney.

[C] Debtors who are not represented by an attorney are not required to 
file a motion for court approval where the consumer debt being 
reaffirmed is secured by a lien on real property.

[End of table]

Flexibility in Disclosure Requirements under the Reform Act:

The Reform Act allows for some flexibility in the disclosures required 
in reaffirmation agreements and provides that the disclosure 
requirements shall be satisfied if the disclosures were provided to the 
debtor in good faith. Almost all of the disclosures can be made in a 
different order and with different terminology than what is set forth 
in the law. In addition, one creditor official we interviewed stated 
that his organization uses a standardized form created by the creditor 
to comply with the Reform Act. However, according to the official, his 
company has 32 versions of the form designed to comply with individual 
bankruptcy court requirements.

The AOUSC, which provides administrative, legal, and other support to 
the federal judiciary, issued a reaffirmation agreement form that 
incorporates the required and recommended language in the Reform Act. 
The form was issued on October 2005 and was revised in August 2006 and 
in January 2007.[Footnote 9] Because of the requirement for flexibility 
in disclosure language, creditors and debtors are not required to use 
the AOUSC form and may use other forms. According to AOUSC, one of the 
primary reasons the federal judiciary did not impose a specific 
reaffirmation form was because the law allows for different 
reaffirmation agreement forms. The federal judiciary also took other 
factors into consideration, according to AOUSC, including the many 
variations of statutory requirements that are dependent upon the 
debtors' circumstances, and the fact that a creditor and debtor might 
want to include language in addition to what the law requires.

Court Review of Reaffirmations under the Reform Act:

The Reform Act also specifies in what circumstances reaffirmation 
agreements are to be reviewed by the courts during the bankruptcy 
process. In general, if the reaffirmation agreement is signed by a 
debtor attorney, the agreement is effective upon filing with the court, 
unless income and expense information on the debtor's statement in 
support of the agreement reflects insufficient funds for making the 
reaffirmation payment, which triggers the presumption of an undue 
hardship. If a presumption of undue hardship exists, the court is 
required to review and approve or disapprove the agreement based on 
whether the presumption is countered by debtor explanations for how the 
debtor can afford the reaffirmation payment.

The Reform Act makes certain provisions for reaffirmation agreements 
that do not include a debtor attorney signature. Reaffirmation 
agreements might not include a debtor attorney signature because the 
debtor has opted to undergo the bankruptcy process without an attorney, 
which is known as a pro se bankruptcy filing. Also, in some instances, 
debtor attorneys might not sign the agreement because he or she 
believes the agreement imposes an undue hardship on the debtor. All 
agreements that are not signed by debtor attorneys must be submitted to 
the court for review and approval or disapproval, with the exception of 
reaffirmed consumer debt secured by a lien on real property such as a 
home.[Footnote 10] Agreements cannot be disapproved without a hearing 
and notice of the hearing to the debtor and creditor.

Reaffirmations with Credit Unions:

Under the Reform Act, reaffirmation agreements where the creditor is a 
credit union have different requirements than reaffirmation agreements 
with other types of creditors. While most requirements for 
reaffirmation agreements are uniform across all types of lenders, the 
Reform Act's presumption of undue hardship provisions are not 
applicable to agreements with credit unions. This exemption is evident 
in several Reform Act provisions. For example, while reaffirmation 
agreements where the creditor is a credit union are to include a debtor 
statement in support of the reaffirmation agreement when the agreement 
is signed by a debtor attorney, the statement is not, however, required 
to include the income and expense information otherwise used to 
calculate whether there is a presumption of undue hardship. Instead, 
such a debtor's statement in support of the agreement is required to 
include that the reaffirmation is in the debtor's financial interest, 
that the debtor can afford the reaffirmation payments, and that the 
debtor received a copy of the required disclosures and has completed 
and signed the agreement. In addition, when the debtor is represented 
by an attorney, with respect to credit unions, a required debtor 
notification is to explain the reaffirmation process and state that the 
reaffirmation agreement is effective upon filing with the court. By 
contrast, the required debtor notification for agreements with all 
other types of creditors states that the agreement is effective upon 
filing with the court unless the agreement is presumed to be an undue 
hardship.

Required Reform Act Disclosure Statements Were Included in Most 
Reaffirmation Agreements, though Required Information Was Missing in 
Some Agreements:

We estimate that required disclosure statements were included in most 
reaffirmation agreements for each of the five districts.[Footnote 11] 
For example, we estimate inclusion of the statement "Amount Reaffirmed" 
and the amount was from 87 percent (in WV-S) to 98 percent (in CA-C) of 
all reaffirmation agreements. Similarly, we estimate that the statement 
"Annual Percentage Rate" and the amount were in 86 percent (in AL-N and 
WV-S) to 97 percent (in CA-C) of all reaffirmation agreements for the 
five districts. Debtor attorney certifications were frequently included 
in reaffirmation agreements signed by attorneys--from an estimated 95 
percent (in WV-S) to 100 percent (in CA-C) of agreements. We also 
estimate that 67 percent (in AL-N and WV-S) to 88 percent (in IL-N) of 
non-credit union agreements included monthly income, expense, and net 
income information--conversely, an estimated 12 percent (in IL-N) to 33 
percent (in AL-N and WV-S) were missing this required information (as 
mentioned previously, these data are not required of credit union 
agreements signed by a debtor attorney). This information helps to 
inform debtors, debtor attorneys, creditors, and court officials of the 
potential inability of the debtor to make payment on reaffirmed debt. 
While information about income, expenses and net income available can 
be determined from other schedules in the bankruptcy filings or during 
hearings, having that information included in the agreement makes it 
easier for the courts to evaluate the debtor's financial situation. In 
March 2007, the Judicial Conference's Advisory Committee on Bankruptcy 
Rules[Footnote 12] proposed the use of a reaffirmation agreement 
coversheet that, if approved, would make it mandatory for debtors to 
provide income and expense information, among other things, on the 
coversheet to be used in the evaluation of undue hardship. If approved 
by the Judicial Conference, the mandatory coversheet would appear to 
address the issue of missing financial information.

Financial Data, Asset Information, and Debtor Notifications Included in 
Most Reaffirmation Agreements:

The Reform Act requires that reaffirmation agreements include financial 
data disclosure statements for the amount reaffirmed and the annual 
percentage rate for the amount reaffirmed. As shown in table 2, we 
estimate that these disclosure statements were included in a high 
percentage of all agreements within the five districts. For example, 
the statement "Amount Reaffirmed" and the amount were included in an 
estimated 87 percent (in WV-S) to 98 percent (in CA-C) of all 
reaffirmation agreements. Similarly, the statement "Annual Percentage 
Rate" and the amount were included in an estimated 86 percent (in AL-N 
and WV-S) to 97 percent (in CA-C) of all reaffirmation agreements for 
the five districts.

The Reform Act requires several notification disclosure statements 
designed to help ensure that debtors make decisions about reaffirming 
debt that are in their best interests, such as informing them of the 
reaffirmation agreement process as well as the effect of agreeing to 
reaffirm debt. We estimate these notification disclosure statements 
were included in high percentages of reaffirmation agreements in all 
five districts. One notification disclosure explains the reaffirmation 
process and certain requirements. For example, the disclosure instructs 
debtors on which sections of the agreement to read and sign and under 
what circumstances the agreement may be reviewed by the court before 
becoming effective. The notification also informs debtors, among other 
things, of their right to rescind the agreement and that reaffirmation 
agreements are not required. As shown in table 2, we estimate that non- 
credit union reaffirmations included the notification disclosure 
statement explaining the reaffirmation process and certain requirements 
in an estimated 87 percent (in AL-N) to 96 percent (in CA-C) of 
reaffirmation agreements for the five districts. This disclosure 
statement differs for credit unions. We provide estimates for inclusion 
of disclosure statements in credit union agreements later in this 
report.

Other required debtor notification disclosure statements were also 
included in high percentages of reaffirmation agreements in the five 
districts. As shown in table 2, we estimate that 87 percent (in WV-S) 
to 97 percent (in CA-C) of all reaffirmation agreements within the five 
districts included a statement instructing debtors to review the 
required disclosures. Similarly, we estimate that 87 percent (in WV-S) 
to 97 percent (in CA-C) of all reaffirmation agreements in the five 
districts included a statement that summary information in the 
reaffirmation agreement was made pursuant to the requirements of the 
Bankruptcy Code.

With respect to unsecured debts, other than requiring a brief 
description of the credit agreement, the Reform Act does not provide a 
specific disclosure statement for inclusion of asset information, the 
original purchase price, or the original amount of the loan. However, 
when a reaffirmed debt is secured by an asset, the Reform Act requires 
both the asset and either the original purchase price or original 
amount of the loan be listed in the agreement. As shown in table 2, we 
estimate that required information describing the asset securing the 
agreement was included in 87 percent (in WV-S) to 99 percent (in CA-C) 
of agreements in the five districts. The original purchase price or the 
original amount of the loan was also included in a high percentage of 
agreements--an estimated 81 percent (in WV-S) to 91 percent (in CA-C) 
for the five districts.

Table 2: Estimated Percentages for Inclusion of Required Financial 
Data, Asset Information, and Debtor Notification Statements in 
Reaffirmation Agreements Filed in Five Selected Bankruptcy Courts:

Reaffirmation section and description: Part A: Financial data, asset 
information, and debtor notifications; Required disclosure statements 
and other information, Disclosure statement: "Amount Reaffirmed" and 
the amount; 
AL-N: 90; 
CA-C: 98; 
IL-N: 96; 
TX-N: 93; 
WV-S: 87. 

Reaffirmation section and description: Part A: Financial data, asset 
information, and debtor notifications; Required disclosure statements 
and other information, Disclosure statement: Statements accompanying 
Amount Reaffirmed data; 
AL-N: 88; 
CA-C: 97; 
IL-N: 96; 
TX-N: 91; 
WV-S: 87. 

Reaffirmation section and description: Part A: Financial data, asset 
information, and debtor notifications; Required disclosure statements 
and other information, Disclosure statement: "Annual Percentage Rate" 
and the amount; 
AL-N: 86; 
CA-C: 97; 
IL-N: 91; 
TX-N: 92; 
WV-S: 86. 

Reaffirmation section and description: Part A: Financial data, asset 
information, and debtor notifications; Required disclosure statements 
and other information, Disclosure statement: Statement instructing 
debtor to review disclosures; 
AL-N: 88; 
CA-C: 97; 
IL-N: 96; 
TX-N: 92; 
WV-S: 86. 

Reaffirmation section and description: Part A: Financial data, asset 
information, and debtor notifications; Required disclosure statements 
and other information, Disclosure statement: Statements indicating 
"Summary of Reaffirmation Agreement" and that the summary is pursuant 
to the Bankruptcy Code; 
AL-N: 88; 
CA-C: 97; 
IL-N: 96; 
TX-N: 92; 
WV-S: 86. 

Reaffirmation section and description: Part A: Financial data, asset 
information, and debtor notifications; Required disclosure statements 
and other information, Disclosure statement: Statement accompanying 
variable rate transactions, if applicable; 
AL-N: [A]; 
CA-C: [A]; 
IL-N: [A]; 
TX-N: [A]; 
WV-S: [A]. 

Reaffirmation section and description: Part A: Financial data, asset 
information, and debtor notifications; Required disclosure statements 
and other information, Disclosure statement: Statement instructing 
debtor to consult with attorney or a judge regarding the effect of 
reaffirming a debt; 
AL-N: 85; 
CA-C: 96; 
IL-N: 91; 
TX-N: 89; 
WV-S: 85. 

Reaffirmation section and description: Part A: Financial data, asset 
information, and debtor notifications; Required disclosure statements 
and other information, Disclosure statement: Statement explaining the 
reaffirmation process and certain requirements[B]; 
AL-N: 87; 
CA-C: 96; 
IL-N: 90; 
TX-N: 90; 
WV-S: 89. 

Reaffirmation section and description: Part A: Financial data, asset 
information, and debtor notifications; Required disclosure statements 
and other information, Disclosure statement: Other information; 
AL-N: [Empty]; 
CA-C: [Empty]; 
IL-N: [Empty]; 
TX-N: [Empty]; 
WV-S: [Empty]. 

Reaffirmation section and description: Part A: Financial data, asset 
information, and debtor notifications; Required disclosure statements 
and other information, Disclosure statement: Description of asset 
securing the agreement, if applicable; 
AL-N: 94; 
CA-C: 99; 
IL-N: 97; 
TX-N: 97; 
WV-S: 87. 

Reaffirmation section and description: Part A: Financial data, asset 
information, and debtor notifications; Required disclosure statements 
and other information, Disclosure statement: Original purchase price or 
the original amount of the loan, if applicable; 
AL-N: 84; 
CA-C: 91; 
IL-N: 87; 
TX-N: 90; 
WV-S: 81. 

Source: GAO analysis of bankruptcy file reviews.

[A] We are not able to generate reliable estimates for variable rate 
transactions because of the low numbers of reaffirmation agreements 
with these characteristics.

[B] Because this disclosures statement differs for credit unions, these 
data are for non-credit unions only. See appendix II for credit union 
disclosure data.

[End of table] 

Debtor Agreement Disclosure Statement Included in Most Reaffirmation 
Agreements:

The Reform Act requires a disclosure statement that includes a 
statement that the debtor agrees to reaffirm the debt, a field for a 
brief description of the credit agreement, a field for a description of 
any changes to the credit agreement made as part of the reaffirmation 
agreement, and fields for debtor and creditor signatures. As shown in 
table 3, we estimate that this statement by the debtor was included in 
84 percent (in WV-S) to 95 percent (in CA-C) of all reaffirmation 
agreements within each of the five districts. We also estimate that 
creditors or debtors included required information describing the 
credit agreement in 76 percent (in WV-S) to 84 percent (in IL-N) of all 
reaffirmation agreements in the five districts, as shown in table 3. 
These descriptions varied in content. For example, when reviewing 
reaffirmation agreements, we observed agreements that included 
descriptive information about the type of contract involved in the 
transaction, such as a type of "retail installment contract" or 
"promissory note." Other agreements included more detail about the 
terms of the credit agreement, such as the number of payments, monthly 
payment amounts, and original amount of the loan.

Table 3: Estimated Percentages for Inclusion of Required Debtor 
Agreement Statement and Other Information in Reaffirmation Agreements 
Filed in Five Selected Bankruptcy Courts:

Reaffirmation section and description: Part B: Debtor agreement 
statement; Required disclosure statements and other information, 
Disclosure statement: Statement that debtor agrees to reaffirm the 
debt, a field for a brief description of the credit agreement, a field 
for a description of any changes to the credit agreement made as part 
of the reaffirmation agreement, and fields for debtor and creditor 
signatures; 
AL-N: 87; 
CA-C: 95; 
IL-N: 94; 
TX-N: 91; 
WV-S: 84. 

Reaffirmation section and description: Part B: Debtor agreement 
statement; Required disclosure statements and other information, 
Disclosure statement: Other information; 
AL-N: [Empty]; 
CA-C: [Empty]; 
IL-N: [Empty]; 
TX-N: [Empty]; 
WV-S: [Empty]. 

Reaffirmation section and description: Part B: Debtor agreement 
statement; Required disclosure statements and other information, 
Disclosure statement: Description of credit agreement; 
AL-N: 81; 
CA-C: 77; 
IL-N: 84; 
TX-N: 82; 
WV-S: 76. 

Source: GAO analysis of bankruptcy file reviews.

[End of table]

While not required information in all reaffirmation agreements, in a 
few reaffirmation agreements in the five districts, creditors or 
debtors included a description of changes to the credit agreement made 
as a part of the reaffirmation. We estimate that 12 percent (in AL-N) 
to 20 percent (in CA-C and WV-S) of all reaffirmations within the five 
districts included a description of such a change. For example, in one 
district we reviewed 36 agreements that had changes identified in the 
agreement. The interest rate was cited as a change in 17 of these 36 
agreements. Other changes described in the remaining 19 agreements 
included reductions in the loan balance, changes to the payment date, 
and changes in the monthly payment amount. Because analysis of these 36 
agreements was conducted in addition to our standardized file review, 
we are not able to generalize these figures to all reaffirmations in 
this district.

Debtor Attorney Certification Included in Most Reaffirmation 
Agreements, although Notice of Undue Hardship Unclear in Some 
Agreements:

Debtor attorneys signed reaffirmation agreements in an estimated 90 
percent to 97 percent of all agreements in each of the five 
districts.[Footnote 13] When a debtor attorney signs a reaffirmation 
agreement, the Reform Act requires that a disclosure statement be 
included with the signature. The disclosure statement includes the 
debtor attorney's certification that (1) the agreement represents a 
fully informed and voluntary agreement by the debtor, (2) the agreement 
does not impose an undue hardship on the debtor or any dependent of the 
debtor, and (3) that the attorney has fully advised the debtor of the 
legal effect and consequences of the agreement and any default under 
the agreement. As shown in table 4, we estimate that this required 
attorney disclosure statement was included in 95 percent (in WV-S) to 
100 percent (in CA-C) of reaffirmations signed by attorneys in the five 
districts.

Table 4: Estimated Percentages for Inclusion of Debtor Attorney 
Certification Statements and in Reaffirmation Agreements Filed in Five 
Selected Bankruptcy Courts: 

Reaffirmation section and description: Part C: Certification by the 
debtor's attorney; Required disclosure statements and other 
information, Disclosure statement: Statement that (1) the agreement is 
a fully informed and voluntary agreement by the debtor, (2) that the 
agreement does not impose an undue hardship on the debtor, and (3) that 
the attorney has fully advised the debtor of the effect of the 
agreement.: 98; Statement that (1) the agreement is a fully informed 
and voluntary agreement by the debtor, (2) that the agreement does not 
impose an undue hardship on the debtor, and (3) that the attorney has 
fully advised the debtor of the effect of the agreement; 

Source: GAO analysis of bankruptcy file reviews.

[End of table]

In addition to the disclosure statement, the Reform Act requires that 
when a presumption of undue hardship has been established with respect 
to the agreement, the debtor attorney certify that in his or her 
opinion, the debtor is able to make the reaffirmation payment. We 
estimate that 1 percent (in CA-C) to 11 percent (in WV-S) of all 
reaffirmation agreements with non-credit unions in the five districts 
included an attorney certification statement explicitly identifying 
that a presumed undue hardship was established with respect to the 
agreement, and that in the opinion of the attorney, the debtor could 
make the reaffirmation payment.[Footnote 14] Reaffirmation agreements 
are not required by the Reform Act to include an explicit indication of 
whether a presumed undue hardship has been established with respect to 
the agreement. While we did not formally track the extent to which 
reaffirmation agreements forms included an explicit way for presumed 
undue hardship to be identified, we observed that some reaffirmation 
agreement forms included a way to explicitly identify presumed undue 
hardship in the debtor attorney certification and some did not. For 
example, we observed reaffirmation agreement forms that included the 
following language for debtor attorneys to certify, which has no 
explicit indication of whether a presumption of undue hardship had been 
established: "If a presumption of undue hardship has been established 
with respect to this agreement, in my opinion the debtor is able to 
make the payment." This statement is unclear because it does not 
explicitly identify whether a presumption of undue hardship has been 
established with respect to the reaffirmation agreement. Instead, the 
statement only indicates that "if" a presumption of undue hardship is 
established, the debtor attorney certifies that the debtor can make the 
payment. AOUSC's reaffirmation agreement form dated January 2007 
addresses this ambiguity by placing a checkable box next to an explicit 
statement indicating that there is a presumption of undue hardship and 
that the debtor attorney certifies that the debtor is able to make the 
required payment. As mentioned previously, use of the AOUSC form is 
suggested but not required. Figures 2 and 3 illustrate clear and 
unclear debtor attorney certification of an undue hardship.

Figure 2: Excerpt of Unclear Attorney Certification Form:

[See PDF for image] 

This figure is an excerpt of an unclear Attorney Certification form, as 
follows: 

Part C: Certification By Debtor's Attorney (If Any): 

I hereby certify that 1) this agreement represents a fully informed and 
voluntary agreement by the debtor(s); 2) this agreement does not impose 
a hardship on the debtor or any dependent of the debtor; 3) I have 
fully advised the debtor of the legal effect and consequences of this 
agreement and any default under this agreement and; 4) if there was a 
presumption of undue hardship, in my opinion, the debtor is able to 
make this payment. 

Signature of Debtor's Attorney, if any: Date: 

BAPCA Multi-State Reaffirmation Agreement: 9/22/05: 

Source: Federal judiciary's electronic public access service.

[End of figure]

Figure 3: Excerpt of Clear Attorney Certification Form: 

[See PDF for image] 

This figure is an excerpt of a clear Attorney Certification form, as 
follows: 

Part C: Certification By Debtor's Attorney (If Any): 

[To be filed only if the attorney represented the debtor during the 
course of negotiating this agreement.] 

I hereby certify that 1) this agreement represents a fully informed and 
voluntary agreement by the debtor(s); 2) this agreement does not impose 
a hardship on the debtor or any dependent of the debtor; 3) I have 
fully advised the debtor of the legal effect and consequences of this 
agreement and any default under this agreement. 

[Check box, if applicable and the creditor is not a Credit Union.] A 
presumption of hardship has been established with respect to this 
agreement. In my opinion, however, the debtor is able to make the 
required payment. 

Printed Name of Debtor's Attorney: 

Signature of Debtor's Attorney: 

Date: 

Source: Administrative Office of the U.S. Courts.

[End of figure] 

In some reaffirmation agreements, the debtor attorney certification 
portion of reaffirmation agreements included additional language beyond 
the disclosure statement required by the Reform Act. We estimate that 
from 1 percent (in CA-C) to 11 percent (in TX-N) of reaffirmation 
agreements in the five districts included such additional language. We 
observed several instances where the additional language supplemented 
the debtor attorney's certification by indicating that the attorney was 
not guaranteeing the debtor's reaffirmation payment. One example of 
this supplemental information is shown in figure 4.

Figure 4: Example of Additional Language Added to Debtor Attorney 
Certification:

[See PDF for image] 

This figure is an example of additional language Added to Debtor 
Attorney Certification, as follows: 

* However, counsel does not warrant the ability of the debtor to 
perform the terms of the Reaffirmation Agreement and the singing of 
this declaration shall in no way be construed as a guaranty by counsel 
of the debtorï¿½s obligations under said Reaffirmation Agreement. 

A presumption of undue hardship has been established with respect to 
this agreement. In my opinion, however, the debtor is able to make the 
required payment. 

Source: Federal judiciary's electronic public access service.

Note: In the above text, with the exception of the marked out 
signatures and date, the wording is exactly as it appeared in the 
source document, including the asterisk, italics, bolding, and spelling 
errors.

[End of figure] 

Debtor Statement in Support of Agreement Included in Most Reaffirmation 
Agreements, although Required Data Missing in Some Agreements:

The Reform Act requires a debtor statement in support of the 
reaffirmation agreement that is to include debtor-inserted data for 
determination of whether a presumption of undue hardship is 
established.[Footnote 15] The data to be inserted include monthly 
income, monthly expenses (which are to include payments on post- 
bankruptcy debt and other reaffirmation payments), and the monthly net 
income remaining to make the monthly payments for the reaffirmed debt. 
If the net income is not sufficient to pay the reaffirmation payments, 
a presumption of undue hardship is established that the debtor may 
overcome if the debtor explains, to the satisfaction of the court, how 
the debtor can afford to make the payments. Specifically, the court is 
required to review reaffirmation agreements where a presumption of 
undue hardship has been established when net income is insufficient for 
the reaffirmation payments. The court may approve or disapprove the 
agreement based on information presented to the court.

Table 5: Estimated Percentages for Inclusion of Debtor Statement in 
Support of Reaffirmation Agreement and Other Information in 
Reaffirmation Agreements with Non-Credit Unions Filed in Five Selected 
Bankruptcy Courts: 

Reaffirmation section and description: Part D: Debtor statement in 
support of the reaffirmation agreement; Required disclosure statements 
and other information, Disclosure statement: Statement that the 
reaffirmation agreement does not impose an undue hardship on the 
debtor[a]; 
AL-N: 89; 
CA-C: 97; 
IL-N: 95; 
TX-N: 92; 
WV-S: 92. 

Reaffirmation section and description: Part D: Debtor statement in 
support of the reaffirmation agreement; Required disclosure statements 
and other information, Disclosure statement: Other information; 
AL-N: [Empty]; 
CA-C: [Empty]; 
IL-N: [Empty]; 
TX-N: [Empty]; 
WV-S: [Empty]. 

Reaffirmation section and description: Part D: Debtor statement in 
support of the reaffirmation agreement; Required disclosure statements 
and other information, Disclosure statement: Debtor monthly income, 
expense, and net income information to make the determination of 
whether a presumed undue hardship exists[B]; 
AL-N: 67; 
CA-C: 71; 
IL-N: 88; 
TX-N: 75; 
WV-S: 67. 

Source: GAO analysis of bankruptcy file reviews.

[A] Figures are for non-credit unions only. See appendix II for 
information on disclosure inclusion for credit unions.

[B] Figures are for non-credit unions only. Financial information is 
not required for debtors reaffirming a debt with a credit union where 
the debtor is represented by an attorney.

[End of table]

The majority of reaffirmation agreements were with non-credit unions-- 
from 80 percent to 94 percent of reaffirmations in the five 
districts.[Footnote 16] As shown in table 5, we estimate that 89 
percent (in AL-N) to 97 percent (in CA-C) of reaffirmation agreements 
with non-credit unions for the five districts included the debtor 
statement that the reaffirmation agreement does not impose an undue 
hardship on the debtor. We also estimate that 67 percent (in AL-N and 
WV-S) to 88 percent (in IL-N) of non-credit union agreements included 
monthly income, expense, and net income information--conversely, an 
estimated 12 percent (in IL-N) to 33 percent (in AL-N and WV-S) were 
missing this required information. This information is a key component 
in the presumption of undue hardship determination.[Footnote 17] While 
information about income, expenses, and net income available can be 
determined from other schedules in the bankruptcy filings or during 
hearings, having that information included in the agreement makes it 
easier for courts to evaluate the debtor's financial situation. For 
example, one case included reaffirmation agreements certified by a 
debtor attorney for two automobiles with monthly payments of $315 and 
$376.[Footnote 18] The debtor's statement in support for each 
reaffirmation agreement was signed by the debtor but did not include 
the required monthly income, expense, and net income data. According to 
monthly expenses and net income reported on other documents the debtor 
provided the court, which included only one of the reaffirmed car 
payment amounts as an expense, the debtor's monthly net income was 
negative $131, reflecting the potential inability of the debtor to 
afford the reaffirmed payment amounts.[Footnote 19]

Federal Judiciary Has Proposed a New Form to Evaluate Undue Hardship:

In March 2007, the Judicial Conference's Advisory Committee on 
Bankruptcy Rules proposed the use of a reaffirmation agreement 
coversheet form that, if approved, would make it mandatory for debtors 
to provide financial information on the coversheet, such as amount of 
debt reaffirmed, the annual percentage rate for reaffirmed debt, 
monthly reaffirmation payment, and monthly income and expense 
information at the time of petition and reaffirmation agreement 
filings, to facilitate the evaluation of undue hardship. The coversheet 
form also requires a supplemental debtor certification that any 
explanation of the difference between the income and expenses reported 
on the debtor's bankruptcy petition documents and the income and 
expenses reported in the debtor's statement of support of the 
reaffirmation agreement is true and correct. According to AOUSC, this 
new coversheet form could take effect by December 1, 2009, after 
undergoing a period of at least 6 months for public comment on the new 
coversheet as well as final review by the Judicial Conference. If 
approved, the coversheet would appear to address the issue of missing 
financial information. See appendix V for the proposed reaffirmation 
agreement coversheet.

Small Percentage of Reaffirmation Agreements Required a Motion for 
Court Approval:

The Reform Act requires that a motion for court approval be included in 
reaffirmation agreements when the debtor is not represented by an 
attorney. We determined whether debtors were not represented by an 
attorney by noting whether reaffirmation agreements were or were not 
signed by a debtor attorney. Reaffirmation agreements were not signed 
by debtor attorneys in an estimated 3 percent to 10 percent of 
agreements for the five districts.[Footnote 20] In two districts we had 
sufficient data to estimate the extent to which a motion for court 
approval was included when a debtor attorney did not sign the 
agreement. In the two districts (IL-N and WV-S), a motion for court 
approval was included in 62 percent[Footnote 21] (in WV-S) and 80 
percent[Footnote 22] (in IL-N) of agreements. In one of the two 
districts (WV-S) court officials told us that regardless of whether or 
not a motion for court approval is filed, their internal process calls 
for clerk staff to review each reaffirmation agreement and forward 
those with undue hardship or lack of a debtor attorney's signature for 
court review. In the remaining three districts, the number of 
agreements including a debtor attorney signature was not sufficient to 
generate reliable estimates. Our review of cases in these three 
districts showed that 13 of 26 agreements (in AL-N), 28 of 34 
agreements in (TX-N), and 20 of 23 agreements (in CA-C) without debtor 
attorney signatures included the motion.

Reaffirmation Agreements with Credit Unions Included Required 
Disclosures in Varying Percentages:

Reaffirmation agreements with credit unions comprised an estimated 6 
percent to 20 percent of all reaffirmations in each of the five 
districts.[Footnote 23] As mentioned previously, under the Reform Act 
credit union reaffirmation agreements have different requirements than 
reaffirmation agreements with other types of creditors. The debtor 
notification statement explaining the reaffirmation agreement process 
is generally the same as the statement for other types of creditors. 
However, the debtor notification statement for credit union 
reaffirmation agreements indicates that the agreement is effective upon 
filing with the court (for non-credit unions, the debtor notification 
statement indicates that the agreement is effective upon filing with 
the court unless the reaffirmation is presumed to be an undue 
hardship). For the five districts, reaffirmation agreements with credit 
unions included the complete credit union debtor notification statement 
that explained the reaffirmation agreement process and stated that 
reaffirmation agreements with credit unions are effective upon filing 
with the court in an estimated 61 percent to 96 percent of 
agreements.[Footnote 24] Another difference for agreements with credit 
unions is that the Reform Act does not require an agreement with credit 
unions to include debtors' monthly income, expense, and net income 
information in the debtor statement in support of the agreement (unless 
the agreement does not include a debtor attorney signature). Instead, 
the disclosure statement indicates that the debtor believes the 
agreement is in his or her financial interest and that he or she can 
afford to make the reaffirmation payments. In four districts[Footnote 
25] we estimate that from 54 percent to 93 percent[Footnote 26] of 
agreements with credit unions included the credit union debtor 
statement in support of the agreement. However, for these same four 
districts, we also estimate that 45 percent to 96 percent[Footnote 27] 
of agreements with credit unions included the debtor statement whereby 
the debtor's income, expense and net income information could be 
recorded even though such data were not required (because the agreement 
was with a credit union and the debtor was represented by an attorney). 
Appendix II includes estimates for inclusion of other required 
disclosure statements in agreements with credit unions for the five 
districts.

Secured Debts for Autos and Homes Most Frequent Type of Reaffirmed 
Debt; for Most Agreements, Reaffirmed Debt Burden Less than 25 Percent 
of Total Debt:

Secured Debts Most Frequently Reaffirmed:

An estimated 90 percent (in AL-N) to 98 percent (in TX-N and WV-S) of 
reaffirmations in the five districts were for secured debts. 
Specifically, debtors more frequently reaffirmed debts for automobiles 
and homes in comparison to debts for other assets. We estimate that 54 
percent (in AL-N) to 87 percent (in CA-C) of reaffirmations in the five 
districts were for automobiles. In addition to automobiles, in four 
districts, we estimate that between 15 percent (in WV-S) to 24 percent 
(in IL-N) of reaffirmation agreements were for homes. Reaffirmations 
for homes in the remaining district (CA-C) occurred in an estimated 2 
percent of agreements. In addition to automobiles and homes, secured 
debts reaffirmed included, among other things, those for boats, 
electronics, and household goods. Appendix IV, table 14, provides more 
information on debts reaffirmed for each district.

Unsecured debt was reaffirmed infrequently--occurring in an estimated 2 
percent to 10 percent of all reaffirmation agreements in the five 
districts.[Footnote 28] In the one district where an estimated 10 
percent of all reaffirmations were for unsecured debt, almost half of 
these agreements were for electricity service (agreements that 
reaffirmed delinquent payments on electricity service so that the 
service could continue). Because of the small number of reaffirmation 
agreements that were unsecured, the following information about these 
agreements is based on our review of actual reaffirmation agreements 
and is not projected to the entire population of reaffirmation 
agreements in the five districts. Twenty of the 52 unsecured agreements 
reviewed were for some type of credit card debt such as bank charge 
cards, lines of credit, and merchant credit cards. In the remaining 32 
cases, debtors reaffirmed either an unsecured personal loan from a 
bank, a debt to another individual, a tax debt, or electricity service.

Similar to agreements for non-credit unions, most credit union 
reaffirmation agreements were for automobiles and houses. The types of 
secured and unsecured debts reaffirmed with credit unions generally did 
not differ from the types of secured and unsecured debts reaffirmed 
with non-credit unions. However, we are not able to make statistically 
significant comparisons between the types of debt reaffirmed by credit 
and non-credit unions because of the small number of credit union 
reaffirmation agreements.

For Most Agreements, Reaffirmed Debt Burden Less than 25 Percent of 
Total Debt:

One concern that consumer advocates and academics have had is that if 
the debtor reaffirms a high proportion of the total debts owed when 
filing for bankruptcy, the debtor may not obtain the financial "fresh 
start" that is one of the fundamental purposes of bankruptcy. To 
determine whether debtors were reaffirming a large proportion of their 
total debts, we examined reaffirmed debts in each case we reviewed as a 
percentage of the total debts the debtor reported he or she owed when 
he or she filed for bankruptcy.[Footnote 29]

As shown in table 6, we estimate that in 58 percent (in AL-N) to 68 
percent (in CA-C) of cases in the five districts, total reaffirmed 
debts were less than 25 percent of total debts. By contrast, in 0 
percent (in TX-N) to 8 percent (in IL-N) of cases, reaffirmed debts 
comprised 75 percent or more of total debts. We reviewed 63 
reaffirmation agreements in 26 cases in which reaffirmed debt was 75 
percent or more of total debts. For these 26 cases, automobiles were 
reaffirmed in 20 cases, homes in 18, mobile homes in 2, and household 
goods or other assets in 5 of the cases. In addition, we estimate that 
the average total amount of debt reaffirmed per case for the five 
districts was from $15,000 to $47,000,[Footnote 30] while the average 
of total debts per case was from $120,000 to $189,000.[Footnote 31]

Table 6: Estimated Percentage of Cases in Five Districts by Total 
Amount Reaffirmed as Percentage of Total Debt:

Total amount reaffirmed as percent of total debts: 0-24.9%; 
AL-N: 58; 
CA-C: 68; 
IL-N: 62; 
TX-N: 66; 
WV-S: 63.

Total amount reaffirmed as percent of total debts: 25-49.9%; 
AL-N: 17; 
CA-C: 28; 
IL-N: 15; 
TX-N: 24; 
WV-S: 19.

Total amount reaffirmed as percent of total debts: 50-74.9%; 
AL-N: 21; 
CA-C: 4; 
IL-N: 16; 
TX-N: 9; 
WV-S: 15. 

Total amount reaffirmed as percent of total debts: 75-100%; 
AL-N: 4; 
CA-C: 1; 
IL-N: 8; 
TX-N: 0; 
WV-S: 2. 

Source: GAO analysis of bankruptcy file reviews.

Note: Figures may not add to 100 percent due to rounding.

[End of table]

The debt burden for debtors after bankruptcy may include debts in 
addition to those reaffirmed. For example, debtors' total debts may 
include student loans, child support obligations, or other financial 
obligations that cannot be discharged in bankruptcy. Our scope of work 
included gathering information about debts reaffirmed and total debts 
at the time of filing, but did not gather data on total debt burdens 
following discharge of all nonreaffirmed debt.

For the five districts, the average amount reaffirmed per reaffirmation 
agreement was an estimated $12,000 to $31,000 for non-credit union 
reaffirmation agreements.[Footnote 32] For each of the three districts 
for which we are able to estimate the average amount reaffirmed for 
credit unions, the average amount reaffirmed in credit union agreements 
was an estimated $13,000.[Footnote 33]

Reaffirmed Interest Rates Were Less than or Equal to the Original Rate:

We estimate that the vast majority of interest rates on reaffirmed debt 
were equal to or less than the interest rate on the original debt, as 
shown in figure 5. As mentioned previously, the Reform Act requires 
that the rate on reaffirmed debt be disclosed as the "Annual Percentage 
Rate," hereafter referred to as the interest rate. While the Reform Act 
requires a brief description of the underlying credit agreement, the 
interest rate for the original debt is not specifically required to be 
included in reaffirmation agreements. However, we found the original 
interest rate in reaffirmation agreements or attached original credit 
agreements in some case files. The original interest rate was available 
in five districts in an estimated 32 percent to 88 percent of 
reaffirmation agreements or their supporting documents.[Footnote 34] 
One district had a high percentage of agreements with the original 
interest rate because the district had a standard form that required 
disclosure of the original interest rate.

As reflected in figure 5, we estimate that from 91 percent (in IL-N) to 
100 percent (in WV-S) of agreements in each of the five districts had 
reaffirmed interest rates less than or equal to the original rate. In 
one of the five district bankruptcy courts (WV-S), the reaffirmed 
interest rate was less than the original interest rate in an estimated 
44 percent of reaffirmation agreements. In the other four districts, 
interest rates were less than original interest rates in an estimated 
10 percent (in IL-N) to 17 percent (in AL-N) of reaffirmation 
agreements.

Figure 5: Estimated Percentage of Reaffirmation Agreements with 
Reaffirmed Interest Rates Greater than, Equal to, or Less than Original 
Rates:

[See PDF for image] 

This figure is a vertical bar graph. The vertical axis of the graph 
represents estimated percentage of reaffirmations from 0 to 90. The 
horizontal axis of the graph represents the five bankruptcy court 
districts. The following data is depicted: 

Bankruptcy Court District: AL-N; 
Reaffirmed rate greater than original rate: 1%; 
Reaffirmed rate equal to original rate: 82%[A]; 
Reaffirmed rate less than original rate: 17%[A]. 

Bankruptcy Court District: CA-C; 
Reaffirmed rate greater than original rate: 3%; 
Reaffirmed rate equal to original rate: 84%; 
Reaffirmed rate less than original rate: 14%. 

Bankruptcy Court District: IL-N; 
Reaffirmed rate greater than original rate: 8%[B]; 
Reaffirmed rate equal to original rate: 81%[B]; 
Reaffirmed rate less than original rate: 10%[A]. 

Bankruptcy Court District: TX-N; 
Reaffirmed rate greater than original rate: 2%; 
Reaffirmed rate equal to original rate: 83%[C]; 
Reaffirmed rate less than original rate: 16%[C]. 

Bankruptcy Court District: WV-S; 
Reaffirmed rate greater than original rate: 0; 
Reaffirmed rate equal to original rate: 56%[C]; 
Reaffirmed rate less than original rate: 44%[D]. 

Source: GAP analysis of bankruptcy file reviews. 

Note: Figures may not add to 100 percent due to rounding.

[A] The margin of error for this estimate is plus or minus 15 percent.

[B] The margin of error for this estimate is plus or minus 16 percent.

[C] The margin of error for this estimate is plus or minus 11 percent.

[D] The margin of error for this estimate is plus or minus 14 percent.

[End of figure]

Average interest rates on reaffirmed debt were similar for the five 
districts. The same was true for original interest rates. For the five 
districts the average interest rate on the debt reaffirmed was an 
estimated 8 percent (in CA-C, IL-N, and TX-N) to 10 percent (in AL-N 
and WV-S), while the average interest rate on the original debt was an 
estimated 9 percent (in TX-N) to 14 percent (in AL-N).

Moreover, we noted the following characteristics:

* For 9 (of 1,164) reaffirmation agreements we reviewed where the 
reaffirmed interest rate was greater than the original rate, the amount 
of the interest rate increase ranged from 0.10 percentage points to 
4.25 percentage points. Four of the agreements were for houses, 3 for 
automobiles, 1 for a mobile home, and 1 for household goods. A variety 
of creditors were involved in the 9 agreements--ranging, for example, 
from two credit unions to a mortgage company and a department store.

* For 72 (of 1,164) reaffirmation agreements we reviewed where the 
reaffirmed interest rate was less than the original rate, the amount of 
the interest rate decrease ranged from 0.01 percentage points to 26.99 
percentage points--which was for a reduction in rate to 0 percent. Over 
half of the 72 reaffirmation agreements were for automobiles and homes-
-44 were for automobiles and 7 were for homes. The remaining 21 
agreements included 6 agreements for household goods, 5 for mobile 
homes, 8 agreements for a wide variety of debt--including jewelry and 
electronic equipment--and 2 agreements that did not disclose the type 
of debt.

* For the 61 (of 1,164) reaffirmation agreements we reviewed with 
credit unions (that disclosed both an original and a reaffirmed 
interest rate), in each of the five bankruptcy courts the interest rate 
on the reaffirmed debt was equal to or less than the interest rate on 
the original debt in all but 2 reaffirmation agreements--10 of 10 
agreements in AL-N, 27 of 28 agreements in CA-C, 2 of 2 agreements in 
IL-N, 16 of 17 agreements in TX-N, and 4 of 4 agreements in WV-S.

We interviewed four creditors who were among the firms that most 
frequently engaged in reaffirmations that we reviewed in the five 
selected districts. Officials from three of these creditors stated that 
during the reaffirmation process their policy was to not adjust credit 
terms, such as interest rates, from the terms established in original 
debt contracts. The fourth creditor said that when reaffirming debt it 
had a policy to consider reducing amounts reaffirmed and interest rates 
based on certain criteria.[Footnote 35]

As mentioned previously, reaffirmed unsecured debt occurred in a small 
number of reaffirmation agreements reviewed (52 of 1,164). 
Consequently, information about these agreements is based on our review 
of actual reaffirmation agreements and is not projected across the 
entire population of reaffirmed agreements in the five districts. 
Interest rates and amounts reaffirmed for unsecured debt in 
reaffirmations varied in the agreements we reviewed in the five 
districts. Interest rates ranged from 0 to 21 percent among 41 of 52 
unsecured reaffirmations that disclosed a reaffirmed interest rate. 
Nineteen of the 41 agreements were reaffirmed with a 0 percent interest 
rate, while the remaining 22 agreements had interest rates ranging from 
7.99 to 21 percent. Examples of unsecured debt reaffirmed at 0 percent 
interest included electricity service and credit card debt. Examples of 
unsecured debt reaffirmed in the 7.99 to 21 percent range included 
overdraft protection for a checking account reaffirmed at a 12 percent 
interest rate and a credit card reaffirmed at a 21 percent interest 
rate. Amounts reaffirmed for the 52 unsecured agreements also varied 
(all of the agreements had amounts reaffirmed disclosed), ranging from 
$0 (for a line of credit on a credit card) to $25,000 (for a legal fine 
owed by a debtor). While we cannot generalize average amounts for 
unsecured reaffirmations, for the 52 agreements we reviewed, the 
average amount of unsecured debt reaffirmed was $2,300.

During our review, court officials in one district and academics who 
conduct bankruptcy research that we spoke with expressed concerns that 
debtors who are not represented by an attorney would potentially be at 
a disadvantage. To test this premise, we analyzed interest rate data 
based on whether a debtor attorney had signed an agreement (our proxy 
for whether a debtor was represented by an attorney) and when an 
original interest rate could be determined (disclosure of the original 
interest rate is not required). When a reaffirmation agreement did not 
include a debtor attorney's signature, the interest rate on the 
reaffirmed debt was equal to or less than the interest rate on the 
original debt in all reaffirmations reviewed in each of the five 
bankruptcy courts. In addition, with the exception of one district, we 
estimate that there was no significant difference between the average 
interest rate on reaffirmed debt when a reaffirmation agreement either 
included or did not include a debtor attorney's signature. In one 
district where the difference was statistically significant, however, 
the average reaffirmed interest rate was an estimated 8 percent when 
the agreement was signed by a debtor attorney, and an estimated 12 
percent when the agreement was not signed by a debtor attorney.

Agency Comments:

We requested comments on a draft of this report from the Director of 
AOUSC. AOUSC reviewed a draft of this report and had technical 
comments, which we incorporated as appropriate.

We are sending copies of this report to the Director of AOUSC and 
interested congressional committees and parties. We will also make 
copies available to others upon request. In addition, the report will 
be available at no charge on GAO's Web site at [hyperlink, 
http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-8757 or [email protected]. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. GAO staff contributing to this report 
are listed in appendix VI.

Signed by: 

William O. Jenkins, Jr., 
Director Homeland Security and Justice Issues:

[End of section]

Appendix I: Objectives, Scope, and Methodology:

Our objectives were to determine the following:

* To what extent have required Reform Act disclosure statements and 
other required information (such as the annual percentage rate for the 
reaffirmed debt) been incorporated into reaffirmation agreements?

* What types of debts were reaffirmed and to what extent did reaffirmed 
debt amounts comprise debtors' overall debt burden when they filed for 
bankruptcy?

* How did the reaffirmed and original interest rates compare?

To answer these objectives, in five selected bankruptcy court districts 
we reviewed a representative sample of bankruptcy cases that included 
at least one reaffirmation agreement. We selected this sample of 
bankruptcy cases from a universe of bankruptcy case data provided by 
bankruptcy court officials. We determined that these data were 
sufficiently reliable to develop the universe of cases for each of the 
five district bankruptcy courts. To determine the reliability of the 
bankruptcy data, we reviewed documentation about the system that 
produced them and interviewed agency officials knowledgeable about the 
data. Our case file review was performed using a data collection 
instrument that included uniform questions to ensure data were 
collected consistently. We relied on data presented in bankruptcy 
documents filed with the courts by debtors, creditors, and debtor 
attorneys. Bankruptcy courts and U.S. Trustees manage bankruptcy cases 
and perform some measures to verify data that help ensure the 
reliability of information provided. For example, bankruptcy court 
officials have measures to ensure that data entered into information 
systems is accurate. Also, as a part of the bankruptcy process, the 
U.S. Trustee Program verifies selected debtor-reported financial data, 
such as income and assets.

We also interviewed bankruptcy experts, creditor officials as well as 
bankruptcy court, U.S. Trustee, and bankruptcy administrator officials. 
We used information gathered during these interviews to identify data 
contained in bankruptcy file documents, including reaffirmation 
agreements, that could assist in answering our objectives. We 
considered reviewing reaffirmation agreements from a nationally 
representative sample of bankruptcy cases that included at least one 
reaffirmation agreement. However, because of the nature of the 
bankruptcy courts' data, information needed to develop a sample frame 
of cases with reaffirmation agreements is only available at the 
district level. In addition, we interviewed four creditors that we 
identified during our document review as the creditors that most 
frequently signed reaffirmation agreements in the five selected 
districts.

When reviewing reaffirmation agreements, we determined both whether 
complete disclosure information was included in the reaffirmation 
agreement and whether the language in the disclosure, while complete, 
varied at all from what is required by the Bankruptcy Abuse Prevention 
and Consumer Protection Act of 2005 (referred to here as the Reform 
Act). Reaffirmation agreements had some variation in disclosure 
language, as is allowed by the Reform Act, but the variations were 
generally minor alterations to the disclosure that did not affect the 
disclosure content. For example, headings were often inserted in the 
Part A disclosure sections that were not prescribed in the Reform Act 
but that did not affect the disclosure content. In another example of 
variation, many agreements also included both credit union and non- 
credit union disclosure information. For purposes of our analysis, we 
combined the data categories indicating inclusion of a verbatim 
disclosure and a nonverbatim (but complete) disclosure.

To obtain additional information about reaffirmation agreements and the 
bankruptcy process, we reviewed literature from bankruptcy journals and 
attended the American Bankruptcy Institute One-Year Anniversary Program 
on the Bankruptcy Abuse Prevention and Consumer Protection Act, October 
16, 2006, in Washington, D.C.

Our work was conducted from June 2006 through November 2007 in 
accordance with generally accepted government auditing standards.

Selection of Five Bankruptcy Court Districts for File Review:

In selecting bankruptcy court districts in which to conduct reviews of 
cases with reaffirmation agreements, we selected courts based on the 
following criteria: a range of filing volume, proportion of Chapter 7 
filings within the bankruptcy courts,[Footnote 36] whether cases were 
overseen by the U.S. Trustee Program or the Bankruptcy Administrator 
program,[Footnote 37] and the courts' geographic location. During the 
January 1, 2001, to June 30, 2006, time period, the average quarterly 
filing volume for the nation's 90 district bankruptcy courts was 
385,424. The five districts we selected collectively represented about 
12 percent of those quarterly filings. When determining which districts 
to include in our study, we selected the 2001 to 2006 time period to 
gather sufficient historical filing data to determine the average 
number of filings each district had over time.

Table 7: Characteristics of Five Selected Bankruptcy Court Districts 
Relied upon When Selecting Districts for Review:

Bankruptcy district: CA-C; 
Geographic region: West; 
Bankruptcy Administrator or U.S. Trustee: U.S. Trustee; 
Personal bankruptcy filing volume (quarterly data 1-1-01 to 6-30-06), 
Average quarterly filings: 17,680; 
Personal bankruptcy filing volume (quarterly data 1-1-01 to 6-30-06), 
Percent of national filings: 4.6%; 
Proportion Chapter 7[A] (1-1-01 to 6-30-06): Chapter 7 proportion: 87%. 

Bankruptcy district: TX-N; 
Geographic region: South Central; 
Bankruptcy Administrator or U.S. Trustee: U.S. Trustee; 
Personal bankruptcy filing volume (quarterly data 1-1-01 to 6-30-06), 
Average quarterly filings: 7,250; 
Personal bankruptcy filing volume (quarterly data 1-1-01 to 6-30-06), 
Percent of national filings: 1.9%; 
Proportion Chapter 7[A] (1-1-01 to 6-30-06): Chapter 7 proportion: 50%. 

Bankruptcy district: AL-N; 
Geographic region: South Atlantic; 
Bankruptcy Administrator or U.S. Trustee: Bankruptcy Administrator; 
Personal bankruptcy filing volume (quarterly data 1-1-01 to 6-30-06), 
Average quarterly filings: 6,154; 
Personal bankruptcy filing volume (quarterly data 1-1-01 to 6-30-06), 
Percent of national filings: 1.6%; 
Proportion Chapter 7[A] (1-1-01 to 6-30-06): Chapter 7 proportion: 50%. 

Bankruptcy district: WV-S; 
Geographic region: South Central East; 
Bankruptcy Administrator or U.S. Trustee: U.S. Trustee; 
Personal bankruptcy filing volume (quarterly data 1-1-01 to 6-30-06), 
Average quarterly filings: 1,648; 
Personal bankruptcy filing volume (quarterly data 1-1-01 to 6-30-06), 
Percent of national filings: 0.4%; 
Proportion Chapter 7[A] (1-1-01 to 6-30-06): Chapter 7 proportion: 95%. 

Bankruptcy district: IL-N; 
Geographic region: Midwest; 
Bankruptcy Administrator or U.S. Trustee: U.S. Trustee; 
Personal bankruptcy filing volume (quarterly data 1-1-01 to 6-30-06), 
Average quarterly filings: 13,664; 
Personal bankruptcy filing volume (quarterly data 1-1-01 to 6-30-06), 
Percent of national filings: 3.6%; 
Proportion Chapter 7[A] (1-1-01 to 6-30-06): Chapter 7 proportion: 73%. 

Bankruptcy district: Total for five selected districts; 
Geographic region: Not applicable; 
Bankruptcy Administrator or U.S. Trustee: Not applicable; 
Personal bankruptcy filing volume (quarterly data 1-1-01 to 6-30-06), 
Average quarterly filings: 46,396; 
Personal bankruptcy filing volume (quarterly data 1-1-01 to 6-30-06), 
Percent of national filings: 12%; 
Proportion Chapter 7[A] (1-1-01 to 6-30-06): Chapter 7 proportion: 
Not applicable. 

Bankruptcy district: National average; 
Geographic region: Not applicable; 
Bankruptcy Administrator or U.S. Trustee: Not applicable; 
Personal bankruptcy filing volume (quarterly data 1-1-01 to 6-30-06), 
Average quarterly filings: 385,424; 
Personal bankruptcy filing volume (quarterly data 1-1-01 to 6-30-06), 
Percent of national filings: 100%; 
Proportion Chapter 7[A] (1-1-01 to 6-30-06): Chapter 7 proportion: 
71%. 

Source: GAO analysis of AOUSC data.

[A] Proportion of Chapter 7 cases was based on comparing the total 
number of Chapter 7 to Chapter 13 cases. Most individuals file for 
bankruptcy under Chapter 7 or Chapter 13. In Chapter 7, debtors are 
discharged of eligible debts and assets are liquidated (unless 
associated debt is reaffirmed). Chapter 13 allows a debtor to keep 
property and pay debts over time, usually 3 to 5 years.

[End of table] 

Selection of Cases Reviewed within Five Bankruptcy Court Districts:

At each of the selected bankruptcy court districts, we obtained a 
universe of all cases with at least one reaffirmation agreement filed 
between October 17, 2005, and October 17, 2006. We chose this time 
period because the Reform Act's effective date for reaffirmation 
agreement requirements was October 17, 2005. We selected stratified 
random probability samples of cases from each bankruptcy court. We 
stratified the sampling universe for each district by case status (open 
versus closed) and by pro se status (i.e., debtors who file for 
bankruptcy without attorney representation). For each selected case, we 
examined every reaffirmation agreement on record. We calculated 
estimates of percentages and means/medians at the reaffirmation 
agreement level using methods appropriate for stratified cluster 
samples. Table 8 provides a description of the sampling universe and 
samples for the five selected districts.

Table 8: Description of Sampling Universe and Samples for Five Selected 
Districts for Cases Filed from October 17, 2005, through October 17, 
2006:

TX-N: Stratum: (1) Pro se open cases; 
Universe size: 6; 
Sample size: 6. 
TX-N: Stratum: (2) Pro se closed cases; 
Universe size: 15; 
Sample size: 15. 
TX-N: Stratum: (3) Non-pro se open cases; 
Universe size: 228; 
Sample size: 66. 
TX-N: Stratum: (4) Non-pro se closed cases; 
Universe size: 729; 
Sample size: 83. 
TX-N: Stratum: Total; 
Universe size: 978; 
Sample size: 180. 

IL-N: Stratum: (1) Pro se open cases; 
Universe size: 7; 
Sample size: 7. 
IL-N: Stratum: (2) Pro se closed cases; 
Universe size: 49; 
Sample size: 31. 
IL-N: Stratum: (3) Non-pro se open cases; 
Universe size: 161; 
Sample size: 59. 
IL-N: Stratum: (4) Non-pro se closed cases; 
Universe size: 1,607; 
Sample size: 89. 
IL-N: Stratum: Total; 
Universe size: 1,824; 
Sample size: 186. 

WV-S: Stratum: (1) Pro se open cases; 
Universe size: 4; 
Sample size: 4. 
WV-S: Stratum: (2) Pro se closed cases; 
Universe size: 3; 
Sample size: 3. 
WV-S: Stratum: (3) Non-pro se open cases; 
Universe size: 103; 
Sample size: 49. 
WV-S: Stratum: (4) Non-pro se closed cases; 
Universe size: 84; 
Sample size: 45. 
WV-S: Stratum: Total; 
Universe size: 194; 
Sample size: 101. 

AL-N: Stratum: (1) Pro se open cases; 
Universe size: 4; 
Sample size: 4. 
AL-N: Stratum: (2) Pro se closed cases; 
Universe size: 14; 
Sample size: 14. 
AL-N: Stratum: (3) Non-pro se open cases; 
Universe size: 163; 
Sample size: 60. 
AL-N: Stratum: (4) Non-pro se closed cases; 
Universe size: 1,056; 
Sample size: 87. 
AL-N: Stratum: Total; 
Universe size: 1,237; 
Sample size: 165. 

CA-C: Stratum: (1) Pro se open cases; 
Universe size: 87; 
Sample size: 29. 
CA-C: Stratum: (2) Pro se closed cases; 
Universe size: 111; 
Sample size: 37. 
CA-C: Stratum: (3) Non-pro se open cases; 
Universe size: 156; 
Sample size: 45. 
CA-C: Stratum: (4) Non-pro se closed cases; 
Universe size: 342; 
Sample size: 60. 
CA-C: Stratum: Total; 
Universe size: 696; 
Sample size: 171. 

Source: GAO analysis of information provided by district courts:

[End of table] 

With these probability samples, each case had a nonzero probability of 
being selected, and that probability could be computed for any case. 
Each selected case was subsequently weighted in the analysis to account 
statistically for all the members of the population, including those 
who were not selected.

Because we followed a probability procedure based on random selections, 
our sample is only one of a large number of samples that we might have 
drawn. Since each sample could have provided different estimates, we 
express our confidence in the precision of our particular sample's 
results as a 95 percent confidence interval (e.g., plus or minus  
percentage points). This is the interval that would contain the actual 
population value for 95 percent of the samples we could have drawn. As 
a result, we are 95 percent confident that each of the confidence 
intervals in this report will include the true values in the study 
population.

Estimates from these samples are not generalizable to the population of 
all bankruptcy courts; however, they can be generalized to each of the 
selected bankruptcy court districts and are intended for illustrative 
purposes. All percentage estimates in this report have a margin of 
error of plus or minus 10 percent or less, unless otherwise noted. All 
mean and median estimates have a relative error of 20 percent or less, 
unless otherwise noted. Some percentage estimates we present have a 
margin of error greater than plus or minus 10 percent. This occurred 
for percentage estimates based on a small number of cases in the 
district samples with specific characteristics that were unavailable to 
us prior to sampling. For instance, when we present percentage 
estimates for reaffirmation agreements made with credit unions, which 
we estimate comprises only 6 to 20 percent of all reaffirmation 
agreements across the districts, the small number of agreements made 
with credit unions in the samples results in larger margins of error. 
Some mean and median estimates we present in this report have a great 
deal of variance, resulting in large percentages of relative error. For 
instance, when we discuss the mean and median amount of the debt 
reaffirmed per reaffirmation agreement, individual reaffirmation 
agreement debts range from very low amounts (such as a small 
outstanding balance for an automobile) to much higher amounts (as with 
the outstanding balance for the mortgage on a home), these large 
variations result in larger percentages of relative error.

[End of section]

Appendix II: Reaffirmation Agreement Disclosures and Required 
Information; Estimates for Credit Unions:

This appendix includes two tables. Table 9 presents Bankruptcy Abuse 
Prevention and Consumer Protection Act of 2005 (Reform Act) 
reaffirmation agreement disclosure statements and other required 
information. We included disclosure inclusion information for all 
reaffirmation agreements in the letter portion of this report. Because 
some Reform Act provisions apply only to credit unions, we present data 
solely for credit unions in table 10. Table 10 shows estimated 
percentages for inclusion of disclosure statements and other required 
information for reaffirmation agreements with credit unions, for five 
bankruptcy court districts--Northern Alabama (AL-N), Central California 
(CA-C), Northern Illinois (IL-N), Northern Texas (TX-N), and Southern 
West Virginia (WV-S). As the tables indicate, the Reform Act places 
most information on reaffirmation agreements within five separately 
labeled sections--A through E--each with its own set of disclosure 
statements. Italicized areas in table 9 denote disclosure statements 
that GAO assessed were or were not included in reviewed reaffirmation 
agreements.

Table 9: Reform Act Reaffirmation Agreement Disclosure Statements and 
Other Required Information:

Reform Act reaffirmation agreement section: Part A; 
Requirement applicability: All agreements; 
Disclosure number[a]: 1; 
Reaffirmation agreement disclosures[b]: The statement: ï¿½Part A: Before 
agreeing to reaffirm a debt, review these important disclosures:ï¿½

Reform Act reaffirmation agreement section: Part A; 
Requirement applicability: All agreements; 
Disclosure number[a]: 2; 
Reaffirmation agreement disclosures[b]: Under the heading ï¿½Summary of 
Reaffirmation Agreement,ï¿½ the statement: ï¿½This Summary is made pursuant 
to the requirements of the Bankruptcy Code.ï¿½ 

Reform Act reaffirmation agreement section: Part A; 
Requirement applicability: All agreements; 
Disclosure number[a]: 3; 
Reaffirmation agreement disclosures[b]: The ï¿½Amount Reaffirmed,ï¿½ using 
that term.

Reform Act reaffirmation agreement section: Part A; 
Requirement applicability: All agreements; 
Disclosure number[a]: 4; 
Reaffirmation agreement disclosures[b]: In conjunction with the 
disclosure of the ï¿½Amount Reaffirmed,ï¿½ the statements, ï¿½(i) ï¿½The amount 
of debt you have agreed to reaffirmï¿½; and ï¿½(ii) ï¿½Your credit agreement 
may obligate you to pay additional amounts which may come due after the 
date of this disclosure. Consult your credit agreement.ï¿½ï¿½

Reform Act reaffirmation agreement section: Part A; 
Requirement applicability: All agreements; 
Disclosure number[a]: 5; 
Reaffirmation agreement disclosures[b]: The ï¿½Annual Percentage Rate,ï¿½ 
using that term. 

Reform Act reaffirmation agreement section: Part A; 
Requirement applicability: Variable rate transactions; 
Disclosure number[a]: 6; 
Reaffirmation agreement disclosures[b]: If the underlying debt 
transaction was disclosed as a variable rate transaction on the most 
recent disclosure given under the Truth in Lending Act, by stating ï¿½The 
interest rate on your loan may be a variable interest rate which 
changes from time to time, so that the annual percentage rate disclosed 
here may be higher or lower.ï¿½ 

Reform Act reaffirmation agreement section: Part A; 
Requirement applicability: All agreements (secured assets only); 
Disclosure number[a]: 7; 
Reaffirmation agreement disclosures[b]: (1) asset or type of asset. 

Reform Act reaffirmation agreement section: Part A; 
Requirement applicability: All agreements (secured assets only); 
Disclosure number[a]: 8; 
Reaffirmation agreement disclosures[b]: (2) original purchase price or 
original amount of loan. 

Reform Act reaffirmation agreement section: Part A; 
Requirement applicability: Optional for all agreements; 
Disclosure number[a]: 9; 
Reaffirmation agreement disclosures[b]: At the election of the 
creditor, a statement of the repayment schedule using one or a 
combination of the following "(i) by making the statement: ï¿½Your first 
payment in the amount of $[Empty] is due on [Empty] but the future payment 
amount may be different. Consult your reaffirmation agreement or credit 
agreement, as applicable.,ï¿½ and stating the amount of the first payment 
and the due date of that payment in the places provided; "(ii) by 
making the statement: ï¿½Your payment schedule will be:,ï¿½ and describing 
the repayment schedule with the number, amount, and due dates or period 
of payments scheduled to repay the debts reaffirmed to the extent then 
known by the disclosing party; or "(iii) by describing the debtorï¿½s 
repayment obligations with reasonable specificity to the extent then 
known by the disclosing party.ï¿½

Reform Act reaffirmation agreement section: Part A; 
Requirement applicability: All agreements; 
Disclosure number[a]: 10; 
Reaffirmation agreement disclosures[b]: The following statement: ï¿½Note: 
When this disclosure refers to what a creditor ï¿½mayï¿½ do, it does not 
use the word ï¿½mayï¿½ to give the creditor specific permission. The word 
ï¿½mayï¿½ is used to tell you what might occur if the law permits the 
creditor to take the action. If you have questions about your 
reaffirming a debt or what the law requires, consult with the attorney 
who helped you negotiate this agreement reaffirming a debt. If you 
donï¿½t have an attorney helping you, the judge will explain the effect 
of your reaffirming a debt when the hearing on the reaffirmation 
agreement is held.ï¿½ 

Reform Act reaffirmation agreement section: Part A; 
Requirement applicability: Non-credit unions only; 
Disclosure number[a]: 11; 
Reaffirmation agreement disclosures[b]: The following additional 
statements: "ï¿½Reaffirming a debt is a serious financial decision. The 
law requires you to take certain steps to make sure the decision is in 
your best interest. If these steps are not completed, the reaffirmation 
agreement is not effective, even though you have signed it. ï¿½1. Read 
the disclosures in this Part A carefully. Consider the decision to 
reaffirm carefully. Then, if you want to reaffirm, sign the 
reaffirmation agreement in Part B (or you may use a separate agreement 
you and your creditor agree on). ï¿½2. Complete and sign Part D and be 
sure you can afford to make the payments you are agreeing to make and 
have received a copy of the disclosure statement and a completed and 
signed reaffirmation agreement. ï¿½3. If you were represented by an 
attorney during the negotiation of your reaffirmation agreement, the 
attorney must have signed the certification in Part C. ï¿½4. If you were 
not represented by an attorney during the negotiation of your 
reaffirmation agreement, you must have completed and signed Part E. ï¿½5. 
The original of this disclosure must be filed with the court by you or 
your creditor. If a separate reaffirmation agreement (other than the 
one in Part B) has been signed, it must be attached. ï¿½6. If you were 
represented by an attorney during the negotiation of your reaffirmation 
agreement, your reaffirmation agreement becomes effective upon filing 
with the court unless the reaffirmation is presumed to be an undue 
hardship as explained in Part D. ï¿½7. If you were not represented by an 
attorney during the negotiation of your reaffirmation agreement, it 
will not be effective unless the court approves it. The court will 
notify you of the hearing on your reaffirmation agreement. You must 
attend this hearing in bankruptcy court where the judge will review 
your reaffirmation agreement. The bankruptcy court must approve your 
reaffirmation agreement as consistent with your best interests, except 
that no court approval is required if your reaffirmation agreement is 
for a consumer debt secured by a mortgage, deed of trust, security 
deed, or other lien on your real property, like your home. ï¿½Your right 
to rescind (cancel) your reaffirmation agreement. You may rescind 
(cancel) your reaffirmation agreement at any time before the bankruptcy 
court enters a discharge order, or before the expiration of the 60-day 
period that begins on the date your reaffirmation agreement is filed 
with the court, whichever occurs later. To rescind (cancel) your 
reaffirmation agreement, you must notify the creditor that your 
reaffirmation agreement is rescinded (or canceled). ï¿½What are your 
obligations if you reaffirm the debt? A reaffirmed debt remains your 
personal legal obligation. It is not discharged in your bankruptcy 
case. That means that if you default on your reaffirmed debt after your 
bankruptcy case is over, your creditor may be able to take your 
property or your wages. Otherwise, your obligations will be determined 
by the reaffirmation agreement which may have changed the terms of the 
original agreement. ï¿½For example, if you are reaffirming an open end 
credit agreement, the creditor may be permitted by that agreement or 
applicable law to change the terms of that agreement in the future 
under certain conditions. ï¿½Are you required to enter into a 
reaffirmation agreement by any law? No, you are not required to 
reaffirm a debt by any law. Only agree to reaffirm a debt if it is in 
your best interest. Be sure you can afford the payments you agree to 
make. ï¿½What if your creditor has a security interest or lien? Your 
bankruptcy discharge does not eliminate any lien on your property. ï¿½A 
ï¿½ï¿½lienï¿½ï¿½ is often referred to as a security interest, deed of trust, 
mortgage or security deed. Even if you do not reaffirm and your 
personal liability on the debt is discharged, because of the lien your 
creditor may still have the right to take the security property if you 
do not pay the debt or default on it. If the lien is on an item of 
personal property that is exempt under your Stateï¿½s law or that the 
trustee has abandoned, you may be able to redeem the item rather than 
reaffirm the debt. To redeem, you make a single payment to the creditor 
equal to the current value of the security property, as agreed by the 
parties or determined by the court.ï¿½ï¿½ 

Reform Act reaffirmation agreement section: Part A; 
Requirement applicability: Credit Unions Only; 
Disclosure number[a]: 12; 
Reaffirmation agreement disclosures[b]: If creditor is a credit union, 
the entire above disclosure (#11) should be included except that item 6 
should read as follows: "6. If you were represented by an attorney 
during the negotiation of your reaffirmation agreement, your 
reaffirmation agreement becomes effective upon filing with the court."

Reform Act reaffirmation agreement section: Part B; 
Requirement applicability: All agreements; 
Disclosure number[a]: 13; 
Reaffirmation agreement disclosures[b]: "'Part B: Reaffirmation 
Agreement. I (we) agree to reaffirm the debts arising under the credit 
agreement described below. ï¿½Brief description of credit agreement: 
ï¿½Description of any changes to the credit agreement made as part of 
this reaffirmation agreement: ï¿½Signature: 
Date: 
ï¿½Borrower: 
ï¿½Co-borrower, if also reaffirming these debts: 
ï¿½Accepted by creditor: 
ï¿½Date of creditor acceptance:ï¿½ 

Reform Act reaffirmation agreement section: Part C; 
Requirement applicability: Attorney-signed agreements only; 
Disclosure number[a]: 14; 
Reaffirmation agreement disclosures[b]: "'Part C: Certification by 
Debtorï¿½s Attorney (If Any). 
ï¿½I hereby certify that (1) this agreement represents a fully informed 
and voluntary agreement by the debtor; (2) this agreement does not 
impose an undue hardship on the debtor or any dependent of the debtor; 
and (3) I have fully advised the debtor of the legal effect and 
consequences of this agreement and any default under this agreement. 
ï¿½Signature of Debtorï¿½s Attorney: Date:ï¿½ 

Reform Act reaffirmation agreement section: Part C; 
Requirement applicability: Attorney-signed agreements only; 
non-credit unions only; 
Disclosure number[a]: 15; 
Reaffirmation agreement disclosures[b]: If a presumption of undue 
hardship has been established with respect to such agreement, such 
certification shall state that in the opinion of the attorney, the 
debtor is able to make the payment. 

Reform Act reaffirmation agreement section: Part D; 
Requirement applicability: Credit Unions; 
Disclosure number[a]: 16; 
Reaffirmation agreement disclosures[b]: "I believe this reaffirmation 
agreement is in my financial interest. I can afford to make the 
payments on the reaffirmed debt. I received a copy of the Reaffirmation 
Disclosure Statement in Part A and a completed and signed reaffirmation 
agreement."

Reform Act reaffirmation agreement section: Part D; 
Requirement applicability: Non-Credit unions (unless credit union 
agreement is not signed by a debtor attorney); 
Disclosure number[a]: 17; 
Reaffirmation agreement disclosures[b]: "'Part D: Debtorï¿½s Statement in 
Support of Reaffirmation Agreement. 
ï¿½1. I believe this reaffirmation agreement will not impose an undue 
hardship on my dependents or me. I can afford to make the payments on the 
reaffirmed debt because my monthly income (take home pay plus any other income 
received) is $[Empty], and my actual current monthly expenses including monthly 
payments on post-bankruptcy debt and other reaffirmation agreements total 
$[Empty], leaving $[Empty] to make the required payments on this 
reaffirmed debt. I understand that if my income less my monthly 
expenses does not leave enough to make the payments, this reaffirmation 
agreement is presumed to be an undue hardship on me and must be 
reviewed by the court. However, this presumption may be overcome if I 
explain to the satisfaction of the court how I can afford to make the 
payments here:[Empty]. 
ï¿½2. I received a copy of the Reaffirmation Disclosure Statement in 
Part A and a completed and signed reaffirmation agreement.ï¿½ 

Reform Act reaffirmation agreement section: Part E; 
Requirement applicability: Agreements not signed by attorneys; 
Disclosure number[a]: 18; 
Reaffirmation agreement disclosures[b]: "'Part E: Motion for Court 
Approval (To be completed only if the debtor is not represented by an 
attorney.) I (we), the debtor(s), affirm the following to be true and 
correct: 
ï¿½I am not represented by an attorney in connection with this 
reaffirmation agreement. 
ï¿½I believe this reaffirmation agreement is in my best interest based on 
the income and expenses I have disclosed in my Statement in Support of 
this reaffirmation agreement, and because (provide any additional relevant 
reasons the court should consider): 
ï¿½Therefore, I ask the court for an order approving this reaffirmation 
agreement.ï¿½ 

Source: GAO analysis of the Reform Act.

[A] Each reaffirmation agreement section corresponds with specific 
disclosure statements required by the Reform Act. While the Reform Act 
includes the identification of Parts A through E, GAO independently 
numbered the corresponding disclosure statements.

[B] Shaded area denotes disclosure statements that GAO determined were 
or were not included in reviewed reaffirmation agreements.

[End of table]

Table 10 lists disclosure information for reaffirmation agreements with 
credit unions. The percentage estimates can be generalized to all 
reaffirmation agreements with credit unions in cases filed in the five 
districts between October 17, 2005, and October 17, 2006. Unless 
otherwise noted, our percentage estimates in table 10 fall within a 
margin of error of plus or minus 20 percent or less.

Table 10: Estimated Percentage of Reaffirmation Agreements with Credit 
Unions That Included Disclosure Statements and Required Information for 
Five Selected Bankruptcy Court Districts:

Reaffirmation Agreement Section: Part A: 
Disclosure number[A]: 1; 
AL-N: 80; 
CA-C: 96; 
IL-N: 98; 
TX-N: 89; 
WV-S: 61. 

Reaffirmation Agreement Section: Part A: 
Disclosure number[A]: 2; 
AL-N: 80; 
CA-C: 96; 
IL-N: 98; 
TX-N: 89; 
WV-S: 61. 

Reaffirmation Agreement Section: Part A: 
Disclosure number[A]: 3; 
AL-N: 90; 
CA-C: 96; 
IL-N: 98; 
TX-N: 90; 
WV-S: 61. 

Reaffirmation Agreement Section: Part A: 
Disclosure number[A]: 4; 
AL-N: 80; 
CA-C: 96; 
IL-N: 98; 
TX-N: 83; 
WV-S: 61. 

Reaffirmation Agreement Section: Part A: 
Disclosure number[A]: 5; 
AL-N: 86; 
CA-C: 96; 
IL-N: 98; 
TX-N: 89; 
WV-S: 58. 

Reaffirmation Agreement Section: Part A: 
Disclosure number[A]: 6; 
AL-N: [B]; 
CA-C: [B]; 
IL-N: [B]; 
TX-N: [B]; 
WV-S: [B]. 

Reaffirmation Agreement Section: Part A: 
Disclosure number[A]: 7; 
AL-N: 99; 
CA-C: 97; 
IL-N: 97; 
TX-N: 94; 
WV-S: 65. 

Reaffirmation Agreement Section: Part A: 
Disclosure number[A]: 8; 
AL-N: 74; 
CA-C: 97; 
IL-N: 97; 
TX-N: 83; 
WV-S: 62. 

Reaffirmation Agreement Section: Part A: 
Disclosure number[A]: 9; 
AL-N: 87; 
CA-C: 100; 
IL-N: 97; 
TX-N: 93; 
WV-S: 100. 

Reaffirmation Agreement Section: Part A: 
Disclosure number[A]: 10; 
AL-N: 80; 
CA-C: 96; 
IL-N: 96; 
TX-N: 83; 
WV-S: 57. 

Reaffirmation Agreement Section: Part A: 
Disclosure number[A]: 12; 
AL-N: 80; 
CA-C: 96; 
IL-N: 96; 
TX-N: 82; 
WV-S: 61. 

Reaffirmation Agreement Section: Part B: 
Disclosure number[A]: 13; 
AL-N: 80; 
CA-C: 96; 
IL-N: 98; 
TX-N: 83; 
WV-S: 61. 

Reaffirmation Agreement Section: Part C: 
Disclosure number[A]: 14; 
AL-N: 100; 
CA-C: 100; 
IL-N: [B]; 
TX-N: 97; 
WV-S: 89. 

Reaffirmation Agreement Section: Part D: 
Disclosure number[A]: 16; 
AL-N: 77; 
CA-C: 93; 
IL-N: [B]; 
TX-N: 65; 
WV-S: 54. 

Reaffirmation Agreement Section: Part E: 
Disclosure number[A]: 18; 
AL-N: [B]; 
CA-C: [B]; 
IL-N: [B]; 
TX-N: [B]; 
WV-S: [B]. 

Source: GAO analysis of bankruptcy file reviews.

[A] The disclosure numbers correspond to those listed in table 9, 
although only disclosure numbers that apply to credit unions are listed 
in table 10.

[B] Because of the low numbers of reaffirmation agreements with these 
characteristics, we are not able to generate reliable estimates for 
these reaffirmation agreement sections.

[End of table]

[End of section]

Appendix III: Federal Judiciary Reaffirmation Agreement Form, January 
2007:

Form 240A - Reaffirmation Agreement (1/07): 

Presumption of Undue Hardship: No Presumption of Undue Hardship: (Check 
box as directed in Part D: Debtor's Statement in Support of 
Reaffirmation Agreement.) 

United States Bankruptcy Court: District of: 
In re: [Empty] (Debtor) 
Case No.: 
Chapter: 

Reaffirmation Agreement: 
[Indicate all documents included in this filing by checking each 
applicable box.] 

Part A: Disclosures, Instructions, and Notice to Debtor (pages 1 - 5): 
Part B: Reaffirmation Agreement: 
Part C: Certification by Debtor's Attorney: 
Part D: Debtor's Statement in Support of Reaffirmation Agreement: 
Part E: Motion for Court Approval: 

[Note: Complete Part E only if debtor was not represented by an 
attorney during the course of negotiating this agreement. Note also: If 
you complete Part E, you must prepare and file Form 240B - Order on 
Reaffirmation Agreement.]

Name of Creditor: 

[Check this box if] Creditor is a Credit Union as defined in ï¿½ 
9(b)(1)(a)(iv) of the Federal Reserve Act. 

Part A: Disclosure Statement, Instructions And Notice To Debtor 

1. Disclosure Statement: 
Before Agreeing to Reaffirm a Debt, Review These Important Disclosures:

Summary Of Reaffirmation Agreement: This Summary is made pursuant to 
the requirements of the Bankruptcy Code.

Amount Reaffirmed: 

The amount of debt you have agreed to reaffirm:	$[Empty]; 

The amount of debt you have agreed to reaffirm includes all fees and 
costs Of any) that have accrued as of the date of this disclosure. Your 
credit agreement may obligate you to pay additional amounts which may 
come due after the date of this disclosure. Consult your credit 
agreement. 

2. Annual Percentage Rate: 

[The annual percentage rate can be disclosed in different ways, 
depending on the type of debt.]

a. If the debt is an extension of "credit" under an "open end credit 
plan," as those terms are defined in ï¿½ 103 of the Truth in Lending Act, 
such as a credit card, the creditor may disclose the annual percentage 
rate shown in (i) below or, to the extent this rate is not readily 
available or not applicable, the simple interest rate shown in (ii) 
below, or both.

(i) The Annual Percentage Rate disclosed, or that would have been 
disclosed, to the debtor in the most recent periodic statement prior to 
entering into the reaffirmation agreement described in Part B below or, 
if no such periodic statement was given to the debtor during the prior 
six months, the annual percentage rate as it would have been so 
disclosed at the time of the disclosure statement: 

(ii) The simple interest rate applicable to the amount reaffirmed as of 
the date this disclosure statement is given to the debtor:	%. If 
different simple interest rates apply to different balances included in 
the amount reaffirmed, the amount of each balance and the rate 
applicable to it are:

b. If the debt is an extension of credit other than under than an open 
end credit plan, the creditor may disclose the annual percentage rate 
shown in (I) below, or, to the extent this rate is not readily 
available or not applicable, the simple interest rate shown in (ii) 
below, or both. 

(i) The Annual Percentage Rate under ï¿½128(a)(4) of the Truth in Lending 
Act, as disclosed to the debtor in the most recent disclosure statement 
given to the debtor prior to entering into the reaffirmation agreement 
with respect to the debt or, if no such disclosure statement was given 
to the debtor, the annual percentage rate as it would have been so 
disclosed: 

(ii) The simple interest rate applicable to the amount reaffirmed as of 
the date this disclosure statement is given to the debtor:	%. If 
different simple interest rates apply to different balances included in 
the amount reaffirmed, the amount of each balance and the rate 
applicable to it are:

$[Empty] @ [Empty]%; 
$[Empty] @ [Empty]%; 
$[Empty] @ [Empty]%. 

c. If the underlying debt transaction was disclosed as a variable rate 
transaction on the most recent disclosure given under the Truth in 
Lending Act:

The interest rate on your loan may be a variable interest rate which 
changes from time to time, so that the annual percentage rate disclosed 
here may be higher or lower.

d. If the reaffirmed debt is secured by a security interest or lien, 
which has not been waived or determined to be void by a final order of 
the court, the following items or types of items of the debtor's goods 
or property remain subject to such security interest or lien in 
connection with the debt or debts being reaffirmed in the reaffirmation 
agreement described in Part B.

Item or Type of Item: 
Original Purchase Price or Original Amount of Loan: 

Optional---At the election of the creditor, a repayment schedule using 
one or a combination of the following may be provided:

Repayment Schedule:

Your first payment in the amount of $[Empty] is due on [Empty] (date), 
but the future payment amount may be different. Consult your 
reaffirmation agreement or credit agreement, as applicable.

Or: 

Your payment schedule will be: [Empty] (number) payments in the amount 
of $[Empty] each, payable (monthly, annually, weekly, etc.) on the 
[Empty] (day) of each [Empty] (week, month, etc.), unless altered later 
by mutual agreement in writing.

Or: 

A reasonably specific description of the debtor's repayment obligations 
to the extent known by the creditor or creditor's representative.

2. Instructions And Notice To Debtor: 

Reaffirming a debt is a serious financial decision. The law requires 
you to take certain steps to make sure the decision is in your best 
Interest. If these steps are not completed, the reaffirmation agreement 
is not effective, even though you have signed it.

1. Read the disclosures in this Part A carefully. Consider the decision 
to reaffirm carefully. Then, if you want to reaffirm, sign the 
reaffirmation agreement in Part B (or you may use a separate agreement 
you and your creditor agree on).

2. Complete and sign Part D and be sure you can afford to make the 
payments you are agreeing to make and have received a copy of the 
disclosure statement and a completed and signed reaffirmation agreement.

3. If you were represented by an attorney during the negotiation of 
your reaffirmation agreement, the attorney must have signed the 
certification in Part C.

4. If you were not represented by an attorney during the negotiation of 
your reaffirmation agreement, you must have completed and signed Part E.

5. The original of this disclosure must be filed with the court by you 
or your creditor. If a separate reaffirmation agreement (other than the 
one in Part B) has been signed, it must be attached.

6. If the creditor is not a Credit Union and you were represented by an 
attorney during the negotiation of your reaffirmation agreement, your 
reaffirmation agreement becomes effective upon filing with the court 
unless the reaffirmation is presumed to be an undue hardship as 
explained in Part D. If the creditor is a Credit Union and you were 
represented by an attorney during the negotiation of your reaffirmation 
agreement, your reaffirmation agreement becomes effective upon filing 
with the court.

7. If you were not represented by an attorney during the negotiation of 
your reaffirmation agreement, it will not be effective unless the court 
approves it. The court will notify you and the creditor of the hearing 
on your reaffirmation agreement. You must attend this hearing in 
bankruptcy court where the judge will review your reaffirmation 
agreement. The bankruptcy court must approve your reaffirmation 
agreement as consistent with your best interests, except that no court 
approval is required if your reaffirmation agreement is for a consumer 
debt secured by a mortgage, deed of trust, security deed, or other lien 
on your real property, like your home.

Your Right To Rescind (Cancel) Your Reaffirmation Agreement: 

You may rescind (cancel) your reaffirmation agreement at any time	
before the bankruptcy court enters a discharge order, or before the 
expiration of the 60-day period that begins on the date your 
reaffirmation agreement is filed with the court, whichever occurs 
later. To rescind (cancel) your reaffirmation agreement, you must 
notify the creditor that your reaffirmation agreement is rescinded (or 
canceled).

Frequently Asked Questions:

What are your obligations if you reaffirm the debt? A reaffirmed debt 
remains your personal legal obligation. It is not discharged in your 
bankruptcy case. That means that if you default on your reaffirmed debt 
after your bankruptcy case is over, your creditor may be able to take 
your property or your wages. Otherwise, your obligations will be 
determined by the reaffirmation agreement which may have changed the 
terms of the original agreement. For example, if you are reaffirming an 
open end credit agreement, the creditor may be permitted by that 
agreement or applicable law to change the terms of that agreement in 
the future under certain conditions.

Are you required to enter into a reaffirmation agreement by any law? 
No, you are not required to reaffirm a debt by any law. Only agree to 
reaffirm a debt if it is in your best interest. Be sure you can afford 
the payments you agree to make.

What if your creditor has a security interest or lien? Your bankruptcy 
discharge does not eliminate any lien on your property. A "lien" is 
often referred to as a security interest, deed of trust, mortgage or 
security deed. Even if you do not reaffirm and your personal liability 
on the debt is discharged, because of the lien your creditor may still 
have the right to take the security property if you do not pay the debt 
or default on it. If the lien is on an item of personal property that 
is exempt under your State's law or that the trustee has abandoned, you 
may be able to redeem the item rather than reaffirm the debt. To 
redeem, you make a single payment to the creditor equal to the current 
value of the security property, as agreed by the parties or determined 
by the court.

Note: When this disclosure refers to what a creditor "may" do, it does 
not use the word "may" to give the creditor specific permission. The 
word "may" is used to tell you what might occur if the law permits the 
creditor to take the action. If you have questions about your 
reaffirming a debt or what the law requires, consult with the attorney 
who helped you negotiate this agreement reaffirming a debt. If you 
don't have an attorney helping you, the judge will explain the effect 
of your reaffirming a debt when the hearing on the reaffirmation 
agreement is held. 

Part B: Reaffirmation Agreement: 

I (we) agree to reaffirm the debts arising under the credit agreement 
described below. 

1. Brief description of credit agreement: 

2. Description of any changes to the credit agreement made as part of 
this reaffirmation agreement: 

Signature(s):
Borrower: (Print Name): 
Signature:
Date: 
Co-borrower, if also reaffirming these debts: (Print Name): 
Signature:
Date: 

Accepted by creditor: (Printed Name of Creditor): 
Address of Creditor: 
Signature: 
Printed Name and Title of Individual Signing for Creditor: 
Date of creditor acceptance: 

Part C: Certification By Debtor's Attorney (If Any): 

[To be filed only if the attorney represented the debtor during the 
course of negotiating this agreement]

I hereby certify that (1) this agreement represents a fully informed 
and voluntary agreement by the debtor; (2) this agreement does not 
impose an undue hardship on the debtor or any dependent of the debtor; 
and (3) I have fully advised the debtor of the legal effect and 
consequences of this agreement and any default under this agreement.

[Check box, if applicable and the creditor is not a Credit Union.] A 
presumption of undue hardship has been established with respect to this 
agreement. In my opinion, however, the debtor is able to make the 
required payment.

Printed Name of Debtor's Attorney:	

Signature of Debtor's Attorney:

Date:	

Part D: Debtor's Statement In Support Of Reaffirmation Agreement: 

[Read and complete sections 1 and 2, OR, if the creditor is a Credit 
Union and the debtor is represented by an attorney, read section 3. 
Sign the appropriate signature line(s) and date your signature. If you 
complete sections 1 and 2 and your income less monthly expenses does 
not leave enough to make the payments under this reaffirmation 
agreement, check the box at the top of page 1 indicating "Presumption 
of Undue Hardship." Otherwise, check the box at the top of page 1 
indicating "No Presumption of Undue Hardship']

1. I believe this reaffirmation agreement will not impose an undue 
hardship on my dependents or me. I can afford to make the payments on 
the reaffirmed debt because my monthly income (take home pay plus any 
other income received) is $[Empty], and my actual current monthly 
expenses including monthly payments on post-bankruptcy debt and other 
reaffirmation agreements total $[Empty], leaving $[Empty] to make the 
required payments on this reaffirmed debt.

I understand that if my income less my monthly expenses does not leave 
enough to make the payments, this reaffirmation agreement is presumed 
to be an undue hardship on me and must be reviewed by the court. 
However, this presumption may be overcome if I explain to the 
satisfaction of the court how I can afford to make the payments 
here: (Use an additional page if needed for a full explanation.) 

2. I received a copy of the Reaffirmation Disclosure Statement in Part 
A and a completed and signed reaffirmation agreement. 
Signed:	
(Debtor): 
(Joint Debtor, if any): 
Date: 

Or: 
[If the creditor is a Credit Union and the debtor is represented by an 
attorney]

3. I believe this reaffirmation agreement is in my financial interest. 
I can afford to make the payments on the reaffirmed debt. I received a 
copy of the Reaffirmation Disclosure Statement in Part A and a 
completed and signed reaffirmation agreement. 
Signed:	(Debtor): 
(Joint Debtor, if any): 
Date: 

Part E: Motion For Court Approval: 

[To he completed and filed only if the debtor is not represented by an 
attorney during the course of negotiating this agreement.] 

Motion For Court Approval Of Reaffirmation Agreement: 

I (we), the debtor(s), affirm the following to be true and correct:

I am not represented by an attorney in connection with this 
reaffirmation agreement.

I believe this reaffirmation agreement is in my best interest based on 
the income and expenses I have disclosed in my Statement in Support of 
this reaffirmation agreement, and because (provide any additional 
relevant reasons the court should consider):

Therefore, I ask the court for an order approving this reaffirmation 
agreement under the following provisions (check all applicable boxes):

11 U.S.C. ï¿½ 524(c)(6) (debtor is not represented by an attorney during 
the course of the negotiation of the reaffirmation agreement): 

11 U.S.C. ï¿½ 524(m) (presumption of undue hardship has arisen because 
monthly expenses exceed monthly income): 

Signed:	(Debtor): 
(Joint Debtor, if any): 
Date: 

Source: Administrative Office of the U.S. Courts.

[End of section]

Appendix IV: Additional Estimates on Cases and Reaffirmation Agreements 
Filed in Five Bankruptcy Court Districts:

As part of our review, we collected information not reported in the 
body of this letter that provides context about the extent to which 
reaffirmations are included in Chapter 7 cases, the financial 
circumstances of debtors, and content of reaffirmation agreements. For 
example, we collected information at the case-level about the debtor's 
assets, liabilities, income, and expenses reported on the petition 
filed with the court and whether the court waived the requirement for 
the filer to pay filing fees. We also collected additional data about 
the reaffirmation agreements that included whether or not (1) the 
agreement was with a credit union, (2) a debtor attorneys signed the 
agreement, (3) the court approved or disapproved the agreement, (4) the 
agreement was rescinded, and (5) the agreement was filed after a case 
was closed. The following figures and tables provide estimates for the 
additional information. Unless otherwise noted, our percentage 
estimates in this appendix fall within a margin of error of plus or 
minus 10 percent or less, and our mean and median estimates fall within 
a relative error of 20 percent or less. In addition, for some items we 
are able to provide estimates for means but not medians, or vice versa. 
This is because the estimates of means and medians can be different in 
terms of their distributions and so can the variances of the estimates. 
Two of the factors that control the sampling error of an estimate are 
sample size and the estimated variation of the parameter we are 
estimating (mean and median). The difference between the sampling error 
of the means and medians is most likely due to the estimated variance 
of the parameters. Also, our samples were not designed to generate 
precise estimates of means or medians, so the results (in terms of 
sampling error) are sensitive to relatively small differences in 
distributions.

Case-Level Information:

Figure 6: Estimated Percentage of Chapter 7 Cases with at Least One 
Reaffirmation Agreement in the Five Bankruptcy Court Districts (October 
17, 2005, through October 17, 2006):

[See PDF for image] 

This figure is a vertical bar graph depicting the Estimated Percentage 
of Chapter 7 Cases with at Least One Reaffirmation Agreement in the 
Five Bankruptcy Court Districts (October 17, 2005, through October 17, 
2006). The vertical axis of the graph represents percent from 0 to 30. 
The horizontal axis of the graph represents the five bankruptcy court 
districts. The following data is depicted: 

Bankruptcy Court District: AL-N; 
Estimated Percentage of Chapter 7 Cases with at Least One 
Reaffirmation Agreement: 25%. 

Bankruptcy Court District: CA-C; 
Estimated Percentage of Chapter 7 Cases with at Least One 
Reaffirmation Agreement: 5%. 

Bankruptcy Court District: IL-N; 
Estimated Percentage of Chapter 7 Cases with at Least One 
Reaffirmation Agreement: 16%. 

Bankruptcy Court District: TX-N; 
Estimated Percentage of Chapter 7 Cases with at Least One 
Reaffirmation Agreement: 18%. 

Bankruptcy Court District: WV-S; 
Estimated Percentage of Chapter 7 Cases with at Least One 
Reaffirmation Agreement: 12%. 

Source: GAO analysis of bankruptcy file reviews and AOUSC data. 

[End of figure]

Table 11: Estimated Mean and Median Dollar Amounts for Debtor Assets, 
Liabilities, Income, and Expenses in Case Petitions That Included 
Reaffirmation Agreements in Five Bankruptcy Court Districts (October 
17, 2005, through October 17, 2006):

Item in petition: Total assets; 
AL-N Mean: $78,000;
AL-N Median: $57,000[A]; 
CA-C Mean: $108,000[A]; 
CA-C Median: $24,000; 
IL-N Mean: $115,000; 
IL-N Median: [E]; 
TX-N Mean: $137,000; 
TX-N Median: $113,000; 
WV-S Mean: $81,000; 
WV-S Median: $80,000.

Item in petition: Total liabilities; 
AL-N Mean: 149,000[A]; 
AL-N Median: 93,000; 
CA-C Mean: 161,000[A]; 
CA-C Median: 68,000; 
IL-N Mean: 180,000[A]; 
IL-N Median: [E]; 
TX-N Mean: 189,000; 
TX-N Median: 139,000; 
WV-S Mean: 120,000; 
WV-S Median: 99,000. 

Item in petition: Total secured claims [B]; 
AL-N Mean: 75,000; 
AL-N Median: [E]; 
CA-C Mean: 85,000[A]; 
CA-C Median: 16,000[A]; 
IL-N Mean: 108,000[A]; 
IL-N Median: [E]; 
TX-N Mean: 116,000[A]; 
TX-N Median: 76,000[A]; 
WV-S Mean: 71,000; 
WV-S Median: 57,000. 

Item in petition: Total unsecured priority claims [C]; 
AL-N Mean: [E]; 
AL-N Median: [E]; 
CA-C Mean: [E]; 
CA-C Median: [E]; 
IL-N Mean: [E]; 
IL-N Median: [E]; 
TX-N Mean: [E]; 
TX-N Median: [E]; 
WV-S Mean: [E]; 
WV-S Median:[E]. 

Item in petition: Total unsecured nonpriority claims [D]; 
AL-N Mean: [E]; 
AL-N Median: 32,000[A]; 
CA-C Mean: 75,000[A]; 
CA-C Median: 41,000; 
IL-N Mean: 75,000[A]; 
IL-N Median: 38,000; 
TX-N Mean: 76,000; 
TX-N Median: 50,000; 
WV-S Mean: 49,000; 
WV-S Median: 39,000. 

Item in petition: Monthly income; 
AL-N Mean: 2,200; 
AL-N Median: 2,000; 
CA-C Mean: 2,800; 
CA-C Median: 2,600; 
IL-N Mean: 2,700; 
IL-N Median: 2,700; 
TX-N Mean: 3,100; 
TX-N Median: 2,800; 
WV-S Mean: 2,800[A]; 
WV-S Median: 2,300. 

Item in petition: Monthly expenses; 
AL-N Mean: 2,500; 
AL-N Median: 2,300; 
CA-C Mean: 3,200; 
CA-C Median: 2,900; 
IL-N Mean: 2,700; 
IL-N Median: 2,700; 
TX-N Mean: 3,600; 
TX-N Median: 3,000; 
WV-S Mean: 2,700; 
WV-S Median: 2,500. 

Source: GAO analysis of bankruptcy file reviews.

[A] The relative errors for these estimates are greater than plus or 
minus 20 percent, but less than plus or minus 30 percent.

[B] Secured claims are those for which the creditor has a lien and can 
seek to foreclose on or repossess if the debtor does not pay the 
underlying debt.

[C] Unsecured priority claims are debts that the creditor has no right 
to collect against any particular property and have been granted 
special status by the bankruptcy law such as taxes and the cost of 
bankruptcy proceedings.

[D] Unsecured nonpriority claims are debts that the creditor has no 
right to collect against any particular property and have been not 
granted special status by the bankruptcy law.

[E] Because of the low numbers of reaffirmation agreements with these 
characteristics, we are not able to generate reliable mean or median 
estimates for these items in the petition.

[End of table] 

Figure 7: Estimated Average Number of Days from Date when Petition was 
Filed to Date Case was Closed (October 17, 2005, through October 17, 
2006):

[See PDF for image] 

This figure is a vertical bar graph depicting the estimated average 
number of days from date when petition was filed to date case was 
closed (October 17, 2005, through October 17, 2006). The vertical axis 
of the graph represents number of days from 0 to 250. The horizontal 
axis of the graph represents the five bankruptcy court district. The 
following data is depicted: 

Source: GAO analysis of bankruptcy file reviews. 

[End of figure]

Reaffirmation-level Information:

Table 12: Estimated Percentages for Certain Characteristics in 
Reaffirmation Agreements Filed in Five Bankruptcy Court Districts 
(October 17, 2005, through October 17, 2006):

Description of reaffirmation agreement characteristics: Reaffirmation 
agreements that included a debtor attorney's signature; 
AL-N: 94; 
CA-C: 90; 
IL-N: 97; 
TX-N: 97; 
WV-S: 94. 

Description of reaffirmation agreement characteristics: Reaffirmation 
agreements that that did not include a debtor attorney's signature; 
AL-N: 6; 
CA-C: 10; 
IL-N: 3; 
TX-N: 3; 
WV-S: 6. 

Description of reaffirmation agreement characteristics: Reaffirmations 
whereby court documentation indicated approval of the reaffirmation; 
AL-N: 3; 
CA-C: 6; 
IL-N: 17; 
TX-N: 6; 
WV-S: 40. 

Description of reaffirmation agreement characteristics: Reaffirmations 
whereby court documentation indicated disapproval of the reaffirmation; 
AL-N: 1; 
CA-C: 6; 
IL-N: 2; 
TX-N: 0; 
WV-S: 6. 

Description of reaffirmation agreement characteristics: Reaffirmations 
with indication in the court records that the agreement was rescinded; 
AL-N: 1; 
CA-C: 1; 
IL-N: 3; 
TX-N: 4; 
WV-S: 4. 

Description of reaffirmation agreement characteristics: Reaffirmations 
with no indication in the court records that the agreement was 
rescinded; 
AL-N: 99; 
CA-C: 99; 
IL-N: 97; 
TX-N: 96; 
WV-S: 96. 

Description of reaffirmation agreement characteristics: Reaffirmations 
where creditor was credit union; 
AL-N: 20; 
CA-C: 17; 
IL-N: 6; 
TX-N: 16; 
WV-S: 18. 

Description of reaffirmation agreement characteristics: Reaffirmations 
where creditor was not a credit union; 
AL-N: 80; 
CA-C: 83; 
IL-N: 94; 
TX-N: 84; 
WV-S: 82. 

Description of reaffirmation agreement characteristics: Reaffirmation 
agreements filed after case closed; 
AL-N: 3; 
CA-C: 1; 
IL-N: 2; 
TX-N: 1; 
WV-S: 0. 

Source: GAO analysis of bankruptcy file reviews.

Note: Totals may not add to 100 percent due to rounding.

[End of table]

Table 13: Estimated Dollar Amounts for Debtor Monthly Income and 
Expenses Based on Information from Reaffirmation Agreements in Five 
Bankruptcy Court Districts (October 17, 2005, through October 17, 2006):

Item in petition: Monthly income; 
AL-N Mean: 2,600; 
AL-N Median: 2,500; 
CA-C Mean: 3,000; 
CA-C Median: 2,800; 
IL-N Mean: 3,000; 
IL-N Median: 3,000; 
TX-N Mean: 3,900[A]; 
TX-N Median: 3,400; 
WV-S Mean: 2,500; 
WV-S Median: 2,500. 

Item in petition: Monthly expenses; 
AL-N Mean: 2,100; 
AL-N Median: 2,000[A]; 
CA-C Mean: 2,800; 
CA-C Median: 2,500; 
IL-N Mean: 2,600; 
IL-N Median: 2,500; 
TX-N Mean: 3,500[A]; 
TX-N Median: 2,900; 
WV-S Mean: 2,300; 
WV-S Median: 2,300. 

Item in petition: Net income; 
AL-N Mean: 560[A]; 
AL-N Median: 450[A]; 
CA-C Mean: 430[A]; 
CA-C Median: 380; 
IL-N Mean: 470[A]; 
IL-N Median: 360[A]; 
TX-N Mean: 520; 
TX-N Median: 430; 
WV-S Mean: 360[A]; 
WV-S Median: 360[A]. 

Source: GAO analysis of bankruptcy file reviews.

[A] The relative errors for these estimates are greater than plus or 
minus 20 percent but less than plus or minus 30 percent.

[End of table] 

Table 14: Total Dollar Amount of Debt Reaffirmed Per Agreement in Five 
Bankruptcy Court Districts (October 17, 2005, through October 17, 2006):

Item in petition: Auto; 
AL-N Mean: 11,000; 
AL-N Median: 9,000[A]; 
CA-C Mean: 13,000; 
CA-C Median: 11,000; 
IL-N Mean: 11,000; 
IL-N Median: 9,000[A]; 
TX-N Mean: 15,000; 
TX-N Median: 13,000; 
WV-S Mean: 10,000; 
WV-S Median: 9,000[A]. 

Item in petition: House; 
AL-N Mean: 60,000[A]; 
AL-N Median: [B]; 
CA-C Mean: [B]; 
CA-C Median: [B]; 
IL-N Mean: 82,000[A]; 
IL-N Median: [B]; 
TX-N Mean: 63,000[A]; 
TX-N Median: [B]; 
WV-S Mean: 59,000; 
WV-S Median: [B]. 

Item in petition: Mobile Home; 
AL-N Mean: 44,000[A]; 
AL-N Median: [B]; 
CA-C Mean: [B]; 
CA-C Median: [B]; 
IL-N Mean: [B]; 
IL-N Median: [B]; 
TX-N Mean: 26,000; 
TX-N Median: [B]; 
WV-S Mean: 38,000; 
WV-S Median: [B]. 

Item in petition: Boat; 
AL-N Mean: [B]; 
AL-N Median: [B]; 
CA-C Mean: [B]; 
CA-C Median: [B]; 
IL-N Mean: [B]; 
IL-N Median: [B]; 
TX-N Mean: [B]; 
TX-N Median: [B]; 
WV-S Mean: [B]; 
WV-S Median: [B]. 

Item in petition: Household Good; 
AL-N Mean: 1,100[A]; 
AL-N Median: [B]; 
CA-C Mean: [B]; 
CA-C Median: [B]; 
IL-N Mean: [B]; 
IL-N Median: [B]; 
TX-N Mean: [B]; 
TX-N Median: [B]; 
WV-S Mean: [B]; 
WV-S Median: [B]. 

Item in petition: Other; 
AL-N Mean: [B]; 
AL-N Median: [B]; 
CA-C Mean: [B]; 
CA-C Median: [B]; 
IL-N Mean: [B]; 
IL-N Median: [B]; 
TX-N Mean: [B]; 
TX-N Median: [B]; 
WV-S Mean: [B]; 
WV-S Median: [B]. 

Item in petition: All items; 
AL-N Mean: 22,000[A[; 
AL-N Median: 10,000[A]; 
CA-C Mean: 12,000; 
CA-C Median: 10,000; 
IL-N Mean: 30,000[A]; 
IL-N Median: 11,000[A]; 
TX-N Mean: 24,000; 
TX-N Median: 15,000; 
WV-S Mean: 18,000; 
WV-S Median: 10,000[A]. 

Source: GAO analysis of bankruptcy file reviews.

[A] The relative errors for these estimates are greater than plus or 
minus 20 percent but less than plus or minus 30 percent.

[B] Because of the low numbers of reaffirmation agreements with these 
characteristics, we are not able to generate reliable mean or median 
estimates for these items.

[End of table]

Table 15: Estimated Average and Median Dollar Amount of Debt Reaffirmed 
per Reaffirmation Agreement and Average and Median Original Debt Amount 
or Original Purchase Price:

Description of dollar amount: Average amount of debt reaffirmed per 
reaffirmation agreement; 
AL-N: $22,000[A]; 
CA-C: $12,000; 
IL-N: $30,000[B]; 
TX-N: $24,000; 
WV-S: $18,000. 

Description of dollar amount: Average original debt amount or original 
purchase price; 
AL-N: 31,000[A]; 
CA-C: 19,000; 
IL-N: 34,000[B]; 
TX-N: 30,000; 
WV-S: 23,000. 

Description of dollar amount: Median amount of debt reaffirmed per 
reaffirmation agreement; 
AL-N: 10,000[C]; 
CA-C: 10,000; 
IL-N: 11,000[D]; 
TX-N: 15,000; 
WV-S: 10,000[E]. 

Description of dollar amount: Median original debt amount or original 
purchase price: 
AL-N: 17,000[D]; 
CA-C: 17,000; 
IL-N: 19,000; 
TX-N: 22,000; 
WV-S: 16,000]. 

Source: GAO analysis of bankruptcy file reviews.

[A] The relative error for this estimate is plus or minus 21 percent.

[B] The relative error for this estimate is plus or minus 24 percent.

[C] The relative error for this estimate is plus or minus 26 percent.

[D] The relative error for this estimate is plus or minus 29 percent.

[E] The relative error for this estimate is plus or minus 22 percent.

[End of table] 

Table 16: Estimated Average Interest Rates on Original Debt for 
Reaffirmation Agreements Filed in Five Bankruptcy Court Districts 
(October 17, 2005, through October 17, 2006):

Item reaffirmed: Auto; 
AL-N: 13[A]; 
CA-C: 9; 
IL-N: 12; 
TX-N: 9; 
WV-S: 12.

Item reaffirmed: House; 
AL-N: 11[A]; 
CA-C: 10; 
IL-N: 7; 
TX-N: 8; 
WV-S: [B]. 

Item reaffirmed: Mobile home; 
AL-N: 7; 
CA-C: [B]; 
IL-N: [B]; 
TX-N: 13[A]; 
WV-S: 9. 

Item reaffirmed: Boat; 
AL-N: [B]; 
CA-C: [B]; 
IL-N: [B]; 
TX-N: [B]; 
WV-S: [B]. 

Item reaffirmed: Household good; 
AL-N: 21; 
CA-C: 19[A]; 
IL-N: [B]; 
TX-N: [B]; 
WV-S: 22. 

Item reaffirmed: Other; 
AL-N: 21; 
CA-C: [B]; 
IL-N: [B]; 
TX-N: 8; 
WV-S: [B]. 

Item reaffirmed: All items; 
AL-N: 14; 
CA-C: 10; 
IL-N: 11; 
TX-N: 9; 
WV-S: 13. 

Source: GAO analysis of bankruptcy file reviews.

[A] The relative errors for these estimates are greater than plus or 
minus 20 percent, but less than plus or minus 30 percent.

[B] Because of the low numbers of reaffirmation agreements with these 
characteristics, we are not able to generate reliable average interest 
rate estimates for these reaffirmed items. 

[End of table]

Table 17: Estimated Average Interest Rates on Reaffirmed Debt for 
Reaffirmation Agreements Filed in Five Bankruptcy Court Districts 
(October 17, 2005, through October 17, 2006):

Item reaffirmed: Auto; 
AL-N: 10; 
CA-C: 9; 
IL-N: 8; 
TX-N: 9; 
WV-S: 9.

Item reaffirmed: House; 
AL-N: 9; 
CA-C: 9; 
IL-N: 8; 
TX-N: 7; 
WV-S: 8. 

Item reaffirmed: Mobile home; 
AL-N: 9; 
CA-C: 11; 
IL-N: [B]; 
TX-N: 12; 
WV-S: 10. 

Item reaffirmed: Boat; 
AL-N: [B]; 
CA-C: [B]; 
IL-N: [B]; 
TX-N: [B]; 
WV-S: [B]. 

Item reaffirmed: Household good; 
AL-N: 21; 
CA-C: [B]; 
IL-N: [B]; 
TX-N: [B]; 
WV-S: 19[B]. 

Item reaffirmed: Other; 
AL-N: [B]; 
CA-C: [B]; 
IL-N: [B]; 
TX-N: 7[A]; 
WV-S: 12[A]. 

Item reaffirmed: All items; 
AL-N: 10; 
CA-C: 8; 
IL-N: 8; 
TX-N: 8; 
WV-S: 10. 

Source: GAO analysis of bankruptcy file reviews.

[A] The relative errors for these estimates are greater than plus or 
minus 20 percent, but less than plus or minus 30 percent.

[B] Because of the low numbers of reaffirmation agreements with these 
characteristics, we are not able to generate reliable average interest 
rate estimates for these reaffirmed items.

[End of table] 

Figure 8: Estimated Average Number of Days from Date When Reaffirmation 
Agreement Was Filed to Date Case Was Closed (October 17, 2005, through 
October 17, 2006):

[See PDF for image] 

This figure is a vertical bar graph depicting the Estimated Average 
Number of Days from Date When Reaffirmation Agreement Was Filed to Date 
Case Was Closed (October 17, 2005, through October 17, 2006). The 
vertical axis of the graph represents number of days from 0 to 160. The 
horizontal axis of the graph represents the five bankruptcy court 
districts. The following data is depicted: 

Bankruptcy court district: AL-N; 
Estimated average number of days from date when reaffirmation agreement 
petition was filed to date case was closed: 75. 

Bankruptcy court district: CA-C; 
Estimated average number of days from date when reaffirmation agreement 
was filed to date case was closed: 117. 

Bankruptcy court district: IL-N; 
Estimated average number of days from date when reaffirmation agreement 
was filed to date case was closed: 83. 

Bankruptcy court district: TX-N; 
Estimated average number of days from date when reaffirmation agreement 
was filed to date case was closed: 69. 

Bankruptcy court district: WV-S; 
Estimated average number of days from date when reaffirmation agreement 
was filed to date case was closed: 143. 

Source: GAP analysis of bankruptcy file reviews. 

[End of figure]

[End of section]

Appendix V: Federal Judiciary Proposed Coversheet for Reaffirmation 
Agreements:

827 (Official Form 27) (12/09): 

United States Bankruptcy Court: [Empty] District of [Empty] 
In re: Debtor: 
Case No: 
Chapter: 
	
Reaffirmation Agreement: 

Cover Sheet: 

This form must be completed in its entirety and filed within the time 
set under Rule 4008. It may be filed by any party to the reaffirmation 
agreement. The filer also must attach a copy of the reaffirmation 
agreement to this cover sheet. 

Debtor's name and Address: 

Creditor's Name	and Address: 

1. Amount of debt as of commencement of case: 
2. Describe if any, 
securing debt: 
3. Amount of debt being reaffirmed: 
4. Repayment term of 
reaffirmation: [Empty] months.
5. Monthly payment under reaffirmation: 
6. Annual percentage rate under reaffirmation: 
7. Debtor's monthly income at reaffirmation: 
8. Income from Schedule I, line 16: 
9. Explain any difference in the amounts set out on lines 7 and 8: 
10. Debtor's monthly expenses at reanimation (without this 
reaffirmed debt: 
11. Current expenditures from Schedule J, line 18: 
12. Explain any difference in the amounts set out on lines 10 and 11: 

Check this box if the amount on Line 10 of this form exceeds the amount 
on Line 7 of this form. If these expenses exceed the income, a 
presumption of undue hardship arises. 

Check this box if the debtor was not represented by counsel during the 
course of negotiating this reaffirmation agreement. 

Filer's Certification: 

I [Empty] hereby certify that the attached agreement is a true and 
correct copy of the reaffirmation agreement between the parties 
identified on this Reaffirmation Agreement Cover Sheet. 

Signature: 

Debtor's Certification: 

I certify that any explanation contained on lines 9 or 12 of this form 
is true and correct. 

Signature (Debtor): 

Signature (Joint Debtor, if any): 

Form 27: 

Committee Note: 

This form is new. It requires the disclosure of financial information 
necessary for the court to make its determination under section 524(m) 
of the Code as to whether the reaffirmation agreement creates a 
presumption of undue hardship. 

The form also includes a supplemental debtor's certification that any 
explanation of the difference between the income and expenses reported 
on schedules I and J and the income and expenses reported in the 
debtor's statement in support of the reaffirmation agreement is true 
and correct. This supplemental debtor's certification is designed to 
implement the requirements of Bankruptcy Rule 4008(b). 

Source: Administrative Office of the U.S. Courts. 

[End of figure] 

[End of section] 

Appendix VI: GAO Contact and Staff Acknowledgments: 

Contact: 

William O. Jenkins Jr. at (202) 512-8777 or [email protected]. 

Acknowledgments: 

In addition to the contact named above, Linda Watson, Assistant 
Director; Pille Anvelt; James Ashley; Ben Atwater; Amy Bernstein; 
Carlos Garcia; Daniel Garcia; Geoffrey Hamilton; Lemuel Jackson; Ronald 
La Due Lake; Brian Lipman; Grant Mallie; Jamilah Moon; and Johanna Wong 
made significant contributions to this report. 

[End of section] 

Footnotes: 

[1] Not all debts are discharged. Discharged debts are those for which 
the debtor's personal liability is discharged at the end of the 
bankruptcy process (i.e., eligible debts). Section 523 of the code 
specifically excepts various categories of debts, such as tax 
obligations, from the discharge granted to individual debtors. 
Therefore, the debtor must still repay those types of nondischargable 
debts after bankruptcy. 

[2] Such a debt could otherwise be discharged by the bankruptcy court. 

[3] A debtor, for the purposes of this report, is an individual who has 
filed for personal bankruptcy in order to reduce his debt obligations 
by having the bankruptcy court discharge his eligible debts. 

[4] National Bankruptcy Review Commission, Bankruptcy: The Next Twenty 
Years (Oct. 20, 1997). Congressional Research Service, Consumer 
Bankruptcy Reform: Proposals before the 105th Congress (Mar. 20, 1998). 

[5] Pub. L. No. 109-8, 119 Stat. 23 (2005). 

[6] We examined the proportion of Chapter 7 cases filed in each 
district because reaffirmation agreements are more likely to be found 
in Chapter 7 cases. According to the Administrative Office of the U.S. 
Court's Bankruptcy Basics guide, Chapter 7 debtors may continue paying 
a dischargeable debt (such as an auto loan) after the bankruptcy 
through a reaffirmation agreement, usually for the purpose of keeping 
collateral (i.e., the car) that would otherwise be subject to 
repossession. 

[7] The U.S. Trustee Program is the component of the Department of 
Justice responsible for supervising the administration of bankruptcy 
cases and private trustees in all but the six bankruptcy court 
districts in Alabama and North Carolina. Separate from the U.S. Trustee 
Program, these six districts, also known as the Bankruptcy 
Administrator program, have judicial branch bankruptcy administrators 
perform duties similar to those of the U.S. Trustee program, including 
overseeing the administration of bankruptcy cases, maintaining a panel 
of private trustees, and monitoring the transactions and conduct of 
parties in bankruptcy. 

[8] The majority of reaffirmation agreements were with non-credit 
unions--from an estimated 80 percent (in AL-N) to 94 percent (in IL-N) 
in the five districts. 

[9] Appendix III includes the most recent AOUSC reaffirmation agreement 
form. 

[10] Where debtors are not represented by an attorney, the Bankruptcy 
Code, as amended by the Reform Act, provides that the bankruptcy court 
must approve the debtor's reaffirmation agreement as consistent with 
the debtor's best interests, except that no court approval is required 
if the debtor's reaffirmation agreement is for a consumer debt secured 
by a mortgage, deed of trust, security deed, or other lien on the 
debtor's real property, like a home. 11 U.S.C. ï¿½ 524 (c)(6) and ï¿½ 
524(k)(3)(J)(i). 

[11] We estimate that 5 percent (in CA-C) to 25 percent (in AL-N) of 
Chapter 7 cases filed in the five bankruptcy court districts during the 
period of our review included at least one reaffirmation agreement. 
Appendix IV lists the percentage of Chapter 7 cases by district that we 
estimate had reaffirmation agreements during our period of review. 

[12] The Judicial Conference of the United States operates through a 
network of committees created to address and advise on a wide variety 
of subjects, such as information technology, personnel, court 
administration, and rules of practice and procedure. The Committee on 
Rules of Practice and Procedure reviews recommendations submitted by 
the Advisory Committee and approves, modifies, disapproves, or returns 
those recommendations to the Advisory Committees, as appropriate. The 
Committee on Rules of Practice and Procedure also transmits proposed 
rules changes to the Judicial Conference. 

[13] The estimates are 90 percent for CA-C, 94 percent for AL-N and for 
WV-S, and 97 percent for IL-N and for TX-N. 

[14] Under the Reform Act, the debtor attorney certification where a 
presumption of undue hardship is established is not applicable to 
reaffirmation agreements with credit unions. 

[15] Not applicable to agreements with attorney-represented debtors 
reaffirming a debt with a credit union or when the agreement is for 
consumer debt secured by real property. 

[16] The estimates are 80 percent for AL-N, 82 percent for WV-S, 83 
percent for CA-C, 84 percent for TX-N, and 94 percent for IL-N. 

[17] An article in The American Bankruptcy Law Journal, volume 81, 
issue 3, 2007 (pp. 266-270) discusses determination of the presumption 
of an undue hardship. 

[18] Under the Reform Act, the creditor may elect to include a 
repayment schedule in a reaffirmation agreement. 

[19] There was no indication in the case files whether one or both 
reaffirmation agreements were approved or disapproved by the court. 

[20] The estimates are 3 percent for IL-N and for TX-N, 6 percent for 
AL-N and for WV-S, and 10 percent for CA-C. 

[21] The margin of error for this estimate is at most plus or minus 14 
percent. 

[22] The margin of error for this estimate is at most plus or minus 14 
percent. 

[23] The estimates are 6 percent for IL-N, 16 percent for TX-N, 17 
percent for CA-C, 18 percent for WV-S, and 20 percent for AL-N. 

[24] The estimates are 61 percent for WV-S, 80 percent for AL-N, 82 
percent for TX-N, and 96 percent for CA-C and for IL-N. Each of these 
estimates has a margin of error of plus or minus 18 percent or less. 

[25] We are not able to generalize to credit union reaffirmation 
agreements in IL-N due to the small sample of credit union agreements 
in this district. 

[26] The estimates are 54 percent for WV-S, 65 percent for TX-N, 77 
percent for AL-N, and 93 percent for CA-C. Each of these estimates has 
a margin of error of plus or minus 18 percent or less. 

[27] The estimates are 45 percent for TX-N and for WV-S, 80 percent for 
AL-N, and 96 percent for CA-C. Each of these estimates has a margin of 
error of plus or minus 18 percent or less. We are not able to 
generalize to all credit union reaffirmation agreements in IL-N due to 
the small sample of credit union agreements in this district. 

[28] The estimates are 2 percent for TX-N and for WV-S, 3 percent for 
IL-N, 4 percent for CA-C and 10 percent for AL-N. 

[29] Individual bankruptcy cases may contain more than one 
reaffirmation agreement. We estimate that the average number of 
reaffirmations per case was from one to two for the five districts. 
While most cases that we reviewed included one or two reaffirmation 
agreements, we examined cases that had as many as eight reaffirmation 
agreements. 

[30] The estimates and relative error for these estimates are $15,000 
plus or minus 11 percent for CA-C, $28,000 plus or minus 17 percent for 
WV-S, $34,000 plus or minus 22 percent for AL-N, $35,000 plus or minus 
21 percent for TX-N, and $47,000 plus or minus 30 percent for IL-N. 

[31] The estimates and relative error for these estimates are $120,000 
plus or minus 12 percent for WV-S, $149,000 plus or minus 26 percent 
for AL-N, $161,000 plus or minus 24 percent for CA-C, $180,000 plus or 
minus 21 percent for IL-N, and $189,000 plus or minus 16 percent for TX-
N. 

[32] The estimates and relative error for these estimates are $12,000 
plus or minus 11 percent for CA-C, $20,000 plus or minus 17 percent for 
WV-S, $25,000 plus or minus 22 percent for AL-N, $26,000 plus or minus 
18 percent for TX-N, and $31,000 plus or minus 23 percent for IL-N. 

[33] The estimates and relative error for the estimates are $13,000 
plus or minus 19 percent for CA-C, $13,000 plus or minus 29 percent for 
TX-N, and $13,000 plus or minus 28 percent for WV-S. 

[34] The estimates are 32 percent for IL-N, 43 percent for AL-N and for 
WV-S, 44 percent for TX-N, and 88 percent for CA-C. 

[35] According to officials with one creditor, the firm's policy was to 
offer debtors reaffirming automobile debt reduced interest rates and 
principal balances if the reductions were within ranges established by 
the creditor. For example, interest rates may be reaffirmed at the 
original rate or 8 percent, whichever is less. 

[36] According to the Administrative Office of the U.S. Court's (AOUSC) 
Bankruptcy Basics guide, Chapter 7 debtors may continue paying a 
dischargeable debt (such as an auto loan) after the bankruptcy, usually 
for the purpose of keeping collateral (i.e., the car) that would 
otherwise be subject to repossession. 

[37] The U.S. Trustee Program is the component of the Department of 
Justice responsible for supervising the administration of bankruptcy 
cases and private trustees in all but the six bankruptcy court 
districts in Alabama and North Carolina. Separate from the U.S. Trustee 
Program, these six districts, also known as the Bankruptcy 
Administrator program, have judicial branch bankruptcy administrators 
perform duties similar to those of the U.S. Trustee program, including 
overseeing the administration of bankruptcy cases, maintaining a panel 
of private trustees, and monitoring the transactions and conduct of 
parties in bankruptcy. 

[End of section] 

GAO's Mission: 

The Government Accountability Office, the audit, evaluation, and 
investigative arm of Congress, exists to support Congress in meeting 
its constitutional responsibilities and to help improve the performance 
and accountability of the federal government for the American people. 
GAO examines the use of public funds; evaluates federal programs and 
policies; and provides analyses, recommendations, and other assistance 
to help Congress make informed oversight, policy, and funding 
decisions. GAO's commitment to good government is reflected in its core 
values of accountability, integrity, and reliability. 

Obtaining Copies of GAO Reports and Testimony: 

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each 
weekday, GAO posts newly released reports, testimony, and 
correspondence on its Web site. To have GAO e-mail you a list of newly 
posted products every afternoon, go to [hyperlink, http://www.gao.gov] 
and select "E-mail Updates." 

Order by Mail or Phone: 

The first copy of each printed report is free. Additional copies are $2 
each. A check or money order should be made out to the Superintendent 
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 
more copies mailed to a single address are discounted 25 percent. 
Orders should be sent to: 

U.S. Government Accountability Office: 441 G Street NW, Room LM: 
Washington, DC 20548: 

To order by Phone: Voice: 
(202) 512-6000: 
TDD: (202) 512-2537: 
Fax: (202) 512-6061: 

To Report Fraud, Waste, and Abuse in Federal Programs: 

Contact: 

Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm] 
E-mail: [email protected]: 
Automated answering system: (800) 424-5454 or (202) 512-7470: 

Congressional Relations: 

Gloria Jarmon, Managing Director, [email protected]: 
(202) 512-4400: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7125: 
Washington, DC 20548: 

Public Affairs: 

Chuck Young, Managing Director, [email protected]: 
(202) 512-4800: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7149: 
Washington, DC 20548: 

*** End of document. ***