Legal Question in Bankruptcy in California

Negative income is reflected as net monthly income on Schedule J line 20.c.

Schedule D would list secured debts, such as vehicle loans.

If you have negative income, then you may not be able to reaffirm a secured debt. Reaffirming a debt means reinstating the loan after your bankruptcy filing so that you remain liable on the debt notwithstanding your discharge. There are drawbacks and benefits to reaffirming a loan.

Now to your question: if you need to reaffirm a loan, then yes, you would have to demonstrate ability to pay on it. Otherwise, you're defeating the purpose of the bankruptcy. You have to refute any assumption that the reaffirmation would impose upon you an "undue hardship," which is the applicable term of art.

If you are in the red, then reaffirming a loan would impose an undue hardship. An explanation must address why the negative income shown on your filed schedules does not reflect your current ability to pay. For example, you might show that you've actually reorganized your budget and cut back on other expenses you can do without. Your budget at the time of reaffirmation may be different than the budget that is reflected in your bankruptcy petition. If you are represented by counsel, then your attorney can help get the reaffirmation approved if it is advisable to do so. If you are in pro per, then you would actually have to appear before the judge to get the reaffirmation done. Certainly seek legal counsel in this situation. It can be a big mistake to reaffirm a debt. Changing your budget can significantly impact your entire bankruptcy case. A lot of my clients are driven to bankruptcy primarily because of vehicle loans they cannot pay.