
    In re Ray David ROMERO, Debtor.
    No. 14-53115-ASW.
    United States Bankruptcy Court, N.D. California.
    March 12, 2015.
    
      Deok J. Kim, Law Offices of Deok J. Kim, San Jose, CA, for Debtor.
   AMENDED ORDER REGARDING SANCTIONS AND CONTINUED HEARING ON REAFFIRMATION AGREEMENT

ARTHUR S. WEISSBRODT, Bankruptcy Judge.

The Reaffirmation Agreement (“Agreement”) between Ray David Romero (“Debtor”) and JP Morgan Chase (“Creditor”) was filed on October 30, 2014. Debtor and Creditor both signed the Agreement. The Agreement is attachment “A” hereto. Debtor was not represented by counsel during the negotiation of the Agreement. Accordingly, pursuant to 11 U.S.C. § 524(d), the Court must hold a hearing. At such a hearing, under 11 U.S.C. § 524(d)(2), the Court must “determine whether the agreement that the debtor desires to make complies with the requirements of subsection (c)(6) of this section.”

11 U.S.C. § 524(c)(6)(A) provides that a reaffirmation agreement is enforceable only if, “in a case concerning an individual who was not represented by an attorney during the course of negotiating an agreement under this subsection, the court approves such agreement as (i) not imposing an undue hardship on the debtor or a dependent of the debtor; and (ii) in the best interest of the debtor.”

A. Factors the Court Should Consider in Reviewing a Reaffirmation Agreement.

In order for the Agreement filed by Creditor to be enforceable, the Court must make these determinations. In considering whether or not the Agreement poses an undue hardship or is in the best interest of the debtor, this Court considers various non-exclusive factors, including: [1] the debtor’s income and expenses; [2] debtor’s ability to make the reaffirmation payments; [3] the debtor’s payment history; [4] the debtor’s equity in the collateral, if any; [5] the extent to which the vehicle is secured or undersecured; [6] the debt- or’s need for the vehicle, including the number of drivers in debtor’s household; [7] whether or not debtor owns other vehicles; [8] the interest rate on the loan on the vehicle; [9] the number of payments remaining under the reaffirmation agreement; [10] whether or not debtor is relying, in whole or in part, on other persons to make the reaffirmation payments and, if so, what evidence the Court has regarding such persons’ willingness and ability to pay; [11] and whether or not debtor or someone other than the debtor has had, or will have, the use of the vehicle. Additional very important factors include: [12] whether or not the creditor will allow the debtor to keep the collateral in the absence of a reaffirmation agreement if the debtor remains current on debtor’s payments (“Ride Through”); [13] the remaining balance on creditor’s loan; [14] whether or not, according to the creditor’s records, debtor is current on debtor’s payments; [15] debtor’s payment history — specifically, according to the creditor’s records; and [16] whether or not creditor has offered some concessions to debtor in exchange for entering into the reaffirmation agreement. See In re Claflin, 249 B.R. 840 (1st Cir. BAP 2000) (factors to be considered include: alternatives to reaffirmation where a debtor can still retain property; the threat of repossession; the amount of equity in the collateral; and debtor’s payment history on the collateral); In re Strong, 232 B.R. 921, 924 (Bankr.E.D.Tenn.1999); see also In re Caraballo, 386 B.R. 398 (Bankr.D.Conn.2008) (reaffirmation disapproved because debtor had a ride through).

B. Creditor’s Appearance at the Reaffirmation Hearing is Critical

Typically, the creditor is the party in the best, or only, position to present evidence regarding some of these factors. For example, only the Creditor can advise the Court and the Debtor whether the Creditor will accept a “ride-through” in this case. The debtor is usually unable to secure a binding promise of a ride-through from the creditor until the time of the hearing. In this Court’s experience, many creditors, and lawyers for creditors, will not promise the debtor or debtor’s counsel a ride-through unless and until the matter goes before the court for hearing. This issue of whether the creditor will accept a ride-through in the absence of a reaffirmation agreement is critical to a determination of whether the reaffirmation agreement is in the debtor’s best interest. Similarly, the creditor is in the best position to report whether the debtor is current to the creditor on payments and, if not, how far behind the debtor is. Often, the debtor does not know that the debtor is behind or how far behind debtor is. This too is critical because it makes no sense for a debtor to reaffirm a debt and then have that debtor’s vehicle picked up by the creditor because debtor is behind in payments. Then, the creditor will likely sell the vehicle at an auction and can come after the debtor for the difference between what the creditor received at the auction plus the cost of sale and the amount debtor reaffirmed (less any reaffirmation payments). The debtor is left without a vehicle and with non-discharged debt, a terrible result.

Also, in this Court’s experience, creditors will sometimes offer debtors concessions at the hearing to reaffirm that were not offered before, such as a lower interest rate, lower payments, and or reductions in principal. For these and other reasons it is very important that creditors appear at reaffirmation hearings — whether or not the debtor is in propria persona. Absent the creditor’s appearance, the Court would be unable to determine whether or not the Agreement complies with 11 U.S.C § 524(c)(6)(A) and the Agreement would remain unenforceable. Accordingly, in this case, the Court ordered both the Debtor and the Creditor to appear at the original reaffirmation hearing on January 14, 2015 at 10:30 A.M., so as to make the determinations pursuant to 11 U.S.C. § 524(c)(6)(A).

C. The Facts of this Case

The Order setting the original reaffirmation hearing was entered on December 31, 2014. The December 31, 2014 Order is attachment “B” hereto. The Agreement was filed by Creditor’s representative, Carrie Hillman; Creditor was not represented by counsel at the time the Agreement was made. The December 31, 2014 Order required Creditor or Creditor’s Counsel to appear at the January 14, 2015 hearing and to be prepared to respond to the Court’s concerns discussed in the December 31, 2014 Order. Several days prior to the hearing, the Court’s staff, Maryia Yahorava, contacted Creditor’s bankruptcy department to ensure that Creditor’s representative would be available telephonically to appear at the hearing. A representative from Creditor’s Bankruptcy Department stated that Carrie Hillman would be available to appear at the hearing and that the Court could contact her directly at (877) 905-0908, extension 2650017.

On the day of the January 14, 2015' hearing, 30 minutes before the hearing started, the Courtroom Deputy, Anna Rosales, attempted to contact Carrie Hillman directly, but no one answered the phone. The Courtroom Deputy attempted to leave a message; however, Carrie Hillman’s voice mail was full. During the January 14, 2015 hearing, the Courtroom Deputy also attempted to reach a live representative by calling Creditor’s Office at (877) 905-0908, but was put on hold. The Debt- or appeared at the hearing in person and stated his appearance on the record.

The Court, by Order entered on January 14, 2015, continued the hearing to February 4, 2015 at 10:30 A.M. In that Order the Court cautioned the Creditor that sanctions will be imposed for failure to appear again. The January 14, 2015 order is attachment “C” hereto.

On January 28, 2015, the Court’s staff, Tri Pham, contacted the Creditor days in advance of the hearing in order to ensure that the Creditor’s representative would be available telephonically at the February 4, 2015 hearing. Mr. Pham spoke with Creditor’s Representative, “Doris,” who identified herself as employee I.D. No. V885290. Mr. Pham informed her about the Order entered on January 14, 2015 alerting Creditor that sanctions would be imposed if Creditor failed to appear again. Doris stated that Carrie Hillman would be available to appear at the February 4, 2015 hearing at 10:30 A.M. Pacific Time and confirmed that Carrie Hillman’s direct line is (877) 905-0908, extension 2650017. Moreover, Doris stated that Doris would be available as Carrie Hillman’s backup and that Doris’ direct line is (877) 905-0908 extension 2650012.

On the day of the February 4, 2015 hearing at approximately 10:30 A.M., the Courtroom Deputy, Anna Rosales, called Creditor’s Representative, Carrie Hillman, on her direct fine, but no one answered. The Courtroom Deputy then left a message for Creditor’s Representative to call back to the Court’s direct line into the courtroom at (408) 278-7533. The Courtroom Deputy then called Carrie Hillman’s backup, Doris, on her direct line. However, no one answered and the Courtroom Deputy left a message for Creditor’s representative to call back on the Court’s direct line into the courtroom at (408) 278-7533. The Courtroom Deputy then attempted to contact each of Creditor’s two representatives again, but, again, no one answered. Toward the end of the reaffirmation calendar at approximately 11:20 A.M., the undersigned Judge, on the record, attempted to contact both representatives again by telephone to give Creditor one additional chance to appear before the Court issued its order. However, no one answered at either telephone number.

Debtor was in court and stated his appearance on the record. Debtor stated that Debtor took one and a half hours off work to attend the January 14, 2015 hearing and one hour off work to attend the February 4, 2015 hearing. Debtor also stated that Debtor spent approximately 5 to 10 minutes to travel from work to the Courthouse for each hearing. Therefore, the total travel time Debtor spent to and from the courthouse in order to attend both hearings was- 20 to 40 minutes. The Court concluded from Debtor’s statements that Debtor took a total of approximately 3 hours off work to attend both hearings.

The Debtor also stated that he earned $38 per hour. Therefore, in accordance with the order issued on January 14, 2015, the Court sanctioned Creditor $114 as compensation for time Debtor took off work to attend both the January 14, 2015 and February 4, 2015 hearings. Additionally, in accordance with the order issued on January 14, 2015, the Court sanctioned Creditor $1,000 for failure to appear at the February 4, 2015 hearing, and continued the hearing again to March 18, 2015 at 10:30 A.M. Pursuant to the March 6, 2015 Order, the hearing is now continued to March 20, 2015 at 3:00 P.M. The Order is attachment “D” hereto.

D. Civil Contempt Sanctions

The Court has power under 11 U.S.C. § 105(a) to sanction parties for civil contempt. In re Dyer, 322 F.3d 1178, 1190 (9th Cir.2003). The standard for civil contempt is clear and convincing evidence that the contemnors violated a specific and definite order of the Court. Id. at 1191. Here, this Court’s orders required Creditor or Creditor’s Counsel to appear at the January 14, 2015 and February 4, 2015 hearings, respectively. The Creditor’s representatives assured Court staff that Creditor would appear at each hearing. Neither the Creditor nor Creditor’s Counsel appeared at either hearing despite many attempts by the Court to ensure that the Creditor would appear. Additionally, the Court finds, in light of the attempts by the Court’s staff and the Courtroom Deputy to reach Creditor and the acknowledgment of Creditor’s representative that Creditor would be available to appear, that Creditor’s failure to appear at the February 4, 2015 hearing was willful and in bad faith.

Accordingly, the Court may issue civil sanctions to compensate Debtor for time Debtor took off from work to attend the hearings. Id. at 1192. Debtor stated on the record at the February 4, 2015 hearing that Debtor took off approximately 3 hours from work to attend both hearings and that Debtor earned $38 per hour. Therefore, the Court awarded sanctions of $114, to be made payable to the Debtor.

Civil sanctions may also be issued to coerce compliance with a Court Order. Id. Generally, sanctions are considered coercive civil sanctions rather than criminal sanctions if the contemnor has an opportunity to reduce or avoid the fine through compliance with the Court’s order. Moreover, civil sanctions to coerce compliance should be the least coercive sanction reasonably calculated to win compliance with the Court’s orders. United States v. Flores, 628 F.2d 521, 527 (9th Cir.1980).

Here, the Court warned the Creditor by Order entered on January 14, 2015 that failure to appear at the February 4, 2015 hearing would result in sanctions. Additionally, the Court staff, when contacting the Creditor telephonically to inform the Creditor’s representative about the February 4, 2015 hearing, also informed the Creditor’s representative that an Order had been issued warning of sanctions for failure to appear at the February 4, 2015 hearing. Therefore, the Creditor had the opportunity to avoid or reduce coercive sanctions by appearing at the February 4, 2015 hearing.

Moreover, as the Creditor is one of the major financial institutions in this country, the Court finds that at least $1,000 in sanctions is necessary to coerce future compliance with the Court’s orders. The Court has explained in this Order why Creditor’s presence is necessary for the Court to properly conduct the hearing that the Court is obligated to conduct under 11 U.S.C. § 524(d).

Therefore, at the February 4, 2015 hearing, the Court orally ordered on the record-that no later than February 20, 2015, Creditor shall issue a check for $1,114 payable to Ray David Romero and send it to Mr. Ray David Romero at 2856 Alwood Court, San Jose, California, 95148. The Court further ordered that no later than February 20, 2015, Creditor shall also file a declaration with the Court stating that the sanctions payment was issued and mailed as ordered. Creditor’s Counsel, Timothy Silverman, entered his appearance on February 17, 2015 and filed a declaration stating that Creditor has complied with the Court’s order. The declaration is attachment “E” hereto.

Accordingly, at the risk of incurring additional sanctions, Creditor or Creditor’s Counsel shall appear at the continued hearing on the Agreement on March 20, 2015 at 3:00 P.M. Creditor’s Counsel may appear by telephone by contacting Court-Call at 866-582-6878 and/or making arrangements with the Court’s Courtroom Deputy, Ms. Brook Esparaza, (408) 278-7564, at least three (3) business days prior to the hearing.

DEBTOR AND CREDITOR OR CREDITOR’S COUNSEL, MR. SILVER-MAN, SHALL APPEAR AT THE CONTINUED HEARING AND SHOULD BE PREPARED TO RESPOND TO THE COURT’S CONCERNS, AS STATED IN THE COURT’S DECEMBER 31, 2014 ORDER.

IT IS SO ORDERED.

Attachment A

Attachment C

Attachment D

Attachment E 
      
      . The hearing set on March 18, 2015 at 10:30 A.M. is now continued to March 20, 2015 at 3:00 P.M.
     
      
      . Debtor was represented by attorney Deok J. Kim in the filing of the Chapter 7 Petition. However, Mr. Kim did not represent Debtor in connection with the negotiation of the Reaffirmation Agreement and did not sign Part C, the certification by Debtor's attorney.
     
      
      . Creditor’s lawyers will sometimes say in Court that their clients decide to promise a ride-through on a case by case basis. The undersigned judge typically then asks the attorney to secure a binding promise from his or her client as to whether the creditor will accept a ride-through in this situation. In this Court's experience the creditors usually will make a binding commitment to the debt- or to allow a ride through in those situations.
     
      
      . Under this District’s Local Rule 9010-1, corporations, partnerships, and any entity other than a natural person may not appear as a party in an adversary proceeding or contested matter except through counsel admitted to practice in this District. This Court normally waives that requirement for appearances at reaffirmation hearings. Hence, the orders setting these hearings provide that either Creditor or Creditor’s counsel may appear.
     