## Facts

- Stephen J. Jamo and Lynn M. Jamo filed a Chapter 7 petition and owed Katahdin Federal Credit Union (KFCU) secured mortgage debt on their home and additional unsecured loans and credit-card debt.
- The debtors indicated they wanted to reaffirm only the mortgage obligation.
- KFCU refused to reaffirm the mortgage unless the debtors also reaffirmed their unsecured debts, citing a written policy requiring reaffirmation of all debts when multiple obligations existed.
- KFCU proposed a bundled reaffirmation package restructuring all obligations; the debtors signed, but their attorney refused to certify the agreement as voluntary and non-hardship, and the bankruptcy court rejected it.
- The debtors later negotiated directly and filed a reaffirmation agreement that reaffirmed unsecured debt without interest to preserve reaffirmation of the mortgage; counsel again refused to certify.
- During reaffirmation discussions, KFCU sent letters that referenced possible foreclosure consequences if the mortgage was not reaffirmed and payments ceased.
- The debtors brought an adversary proceeding alleging KFCU’s conditioning of reaffirmation and the foreclosure references violated the automatic stay under 11 U.S.C. § 362.

## Issues

1. Whether a creditor violates the automatic stay, per se, by conditioning reaffirmation of a secured debt on reaffirmation of the debtor’s unsecured debts in a Chapter 7 case.
2. Whether creditor letters referencing possible foreclosure during reaffirmation discussions constitute stay-violative coercion or harassment.

## Decision

- The First Circuit reversed the Bankruptcy Appellate Panel.
- The court held that insisting on reaffirmation of unsecured debt as a condition to reaffirmation of secured debt is not a per se violation of the automatic stay.
- The court rejected the lower courts’ categorical approach and required a case-by-case inquiry into whether the creditor’s conduct is coercive or harassing enough to constitute prohibited collection activity.
- The court held the letters referencing foreclosure, in context, did not rise to unlawful coercion or harassment.
- The court vacated the injunctive and remedial relief based on the per se stay-violation findings and remanded for further proceedings consistent with its opinion.

## Legal Principles

- Reaffirmation is expressly contemplated by the Bankruptcy Code; negotiations over reaffirmation terms are generally permissible and are not automatically barred by § 362.
- A creditor has no duty to enter a reaffirmation agreement or to do so on particular terms; it may bargain aggressively within legal limits.
- Automatic-stay analysis in the reaffirmation context turns on whether the creditor’s conduct is so coercive or harassing that it amounts to an improper attempt to collect a dischargeable prepetition debt.
- Conditioning reaffirmation of a secured obligation on reaffirmation of unsecured obligations is a bargaining position that is not inherently unlawful under § 362.
- Counsel certification (and associated judicial oversight where applicable) under § 524(c) functions as a statutory safeguard against reaffirmations that are involuntary or impose undue hardship.

## Conclusion

The First Circuit held that a creditor’s “all-or-nothing” reaffirmation policy is not, by itself, an automatic-stay violation; reaffirmation communications and conditions are evaluated for actual coercion or harassment, and the challenged negotiations and letters fell within permissible reaffirmation bargaining.


In re Jamo, 283 F.3d 392 (1st Cir. 2002)