"Much of the time, if debtors do not have a reaffirmation agreement in place, even if they keep making payments on the car, they often lack the same commitment and responsibility toward the debt and feel free to walk away should something happen to the car or they do not wish to keep it insured," McLain said.

Both the members and Coastal appeared at first to be satisfied with the reaffirmation terms as originally negotiated. In one part of the couple's paperwork, which had been made part of the court record, the Hardimans–who are parents of three small children–wrote that they believed they could afford the car after bankruptcy since the judgment significantly lowered their other monthly expenses and they needed to keep access to their car.

"We need this car for our kids and because our other car is 18 years old and has 200,000 miles on it," the couple wrote. "We believe we will be able to make these payments because our other debts have been lifted off us," they added.

Although later in a brief their lawyer argued that while the couple could make the payments, they would only be able to do so with difficulty and that the couple currently owed more on the car than it was worth, a development which McLain observed is not that uncommon in car loans where the vehicle may depreciate faster than it is paid off.

The arguments hinge upon whether debtors should lose the stay of legal proceedings, leading to defaults and repossession, if they fail to enter into a reaffirmation agreement through no fault of their own. The Hardimans had filed for the reaffirmation in time and had no control over whether the court approved or disapproved the agreement. Why should they be forced to forfeit the car because the court, an organization they cannot control, did not approve the agreement, their lawyer asked.

"Appellant makes the long jump by equating a reaffirmation agreement to a binding contract," the Hardiman's lawyer contended in his filing. "Reaffirmation agreement is simply the title of a type of document. Just because the word agreement is in the title, it does not mean that it must be a valid contract. A reaffirmation agreement is a reaffirmation agreement before any parties sign. Throughout the code, and specifically Section 524, the document is referred to as a reaffirmation agreement before it has become enforceable by meeting all the subsections of section 524."

McLain argued that credit unions have a huge stake in the case because if more courts have similar findings, the credit unions would be on the hook for assets that debtors no longer had obligations to protect or pay for.

"To illustrate this point, let's look at the parties' respective interests following the disapproval of signed reaffirmation agreement. For the debtor, he or she is virtually guaranteed the risk-free right to operate a vehicle for which he has no incentive to care. He or she has no personal liability for the remainder of the debt owed to a creditor, so there is no sense of need to preserve the value of the vehicle because the debtor has no personal responsibility or accountability."

Should the district court decide for the debtor, McLain thought it likely that the CU might appeal further to the circuit court level. If so, it would be theoretically possible for the Hardimans, who have continued to make payments on the car, to have paid it off by the time the courts provide a final decision.

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