American General Finance, Inc. v. Bassett (In re Bassett)

Darlene Bassett bought two chairs and two ottomans, and financed the purchase with a secured loan from American General Finance, Inc. (Finance). Months later, Bassett filed a voluntary Chapter 7 bankruptcy petition. Before receiving a discharge, Bassett signed a reaffirmation agreement with Finance. Bassett kept up with her payments to Finance for a few months but eventually stopped. Finance sent a series of letters, first friendly and later pointed, asking to be paid. Bassett responded by moving to reopen her bankruptcy so that she could bring this putative class action lawsuit. Bassett argues that the reaffirmation agreement she signed is unenforceable and that Finance’s collection letters were therefore illegal. Under a number of theories, she seeks damages and a declaration that the reaffirmation agreement is unenforceable.

The bankruptcy court concluded that the agreement is enforceable and granted Finance’s motion for judgment on the pleadings. The Bankruptcy Appellate Panel reversed, concluding that the reaffirmation agreement is not enforceable and that Finance’s attempted collection of the debt violated Bassett’s discharge. The BAP remanded so that Bassett could proceed…