## Facts

- Steven Alan Waller and Monique Tonia Waller filed a joint Chapter 7 petition on May 21, 2008.
- Their residence in Aiken, South Carolina was encumbered by a first and second mortgage held by the South Carolina State Housing Finance and Development Authority.
- The debtors’ schedules reflected monthly income of about $2,163 and expenses of about $3,382, producing negative monthly net income.
- The creditor filed reaffirmation agreements on August 21, 2008; amended reaffirmation agreements were filed on September 11, 2008.
- The amended agreements showed a statutory presumption of undue hardship based on the debtors’ income and expenses; Mrs. Waller’s employment income was described as sporadic and unreliable.
- At a reaffirmation hearing on September 16, 2008, the debtors testified they were current on both mortgages and had been current when they filed; the creditor did not appear.

## Issues

1. Whether Chapter 7 debtors who are current on a debt secured by real property must choose among surrender, redemption, or reaffirmation, or may retain the property and continue paying without reaffirming (ride-through).
2. Whether the proposed reaffirmation agreements should be approved as in the debtors’ best interest despite a presumption of undue hardship.

## Decision

- The court refused to approve the reaffirmation agreements.
- It held the debtors could retain the home and continue making payments without reaffirming their personal liability, so long as they remained current.
- It found the presumption of undue hardship was not rebutted and reaffirmation was not in the debtors’ best interest given their negative monthly budget and uncertain income.

## Legal Principles

- A reaffirmation agreement may be disapproved when it is not in the debtor’s best interest or when a presumption of undue hardship is not rebutted under the Bankruptcy Code’s reaffirmation provisions.
- For debts secured by real property, Chapter 7 debtors who are current may keep the property and continue payments without reaffirming personal liability (ride-through).
- Reaffirmation reinstates personal liability; absent reaffirmation, the creditor’s in rem rights in the collateral remain, but the debtor’s post-discharge personal liability for any deficiency is discharged.

## Conclusion

The court disapproved the debtors’ first- and second-mortgage reaffirmation agreements because the debtors’ finances created an unrebutted presumption of undue hardship, and it recognized that current Chapter 7 debtors may keep real property and keep paying without reaffirming personal liability.


In re Waller, 394 B.R. 111 (Bankr. D.S.C. 2008)