                     UNITED STATES COURT OF APPEALS
                          FOR THE FIFTH CIRCUIT

                    ________________________________

                              No. 99-10062
                    ________________________________

              In The Matter of: STEPHEN DALE SMITH, ET AL.,

                                                               Debtors.
                     _______________________________

                 CREDITOR’S BANKRUPTCY SERVICE, ET AL.,

                                                          Appellants,

                                 VERSUS

                       STEPHEN DALE SMITH, ET AL.,

                                                              Appellees.

      _____________________________________________________

           Appeal from the United States District Court
                for the Northern District of Texas
                           (5:98-CV-243)
      _____________________________________________________
                         February 11, 2000

Before POLITZ and DAVIS, Circuit Judges and RESTANI.*

PER CURIAM:**

     Paul Mason & Associates, Inc. d/b/a/ Creditors Bankruptcy

Service (“CBS”) and Bank One Private Label Credit Services, Inc.

d/b/a/ Service Merchandise (“Service” or collectively “Appellants”)

appeal the district court’s order affirming the bankruptcy court’s

order denying reaffirmation and enjoining appellant from enforcing

          *
          The Honorable Jane A. Restani, Judge, U.S. Court of
International Trade, sitting by designation.
     **
       Pursuant to 5TH CIR. R. 47.5, the Court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.

                                    1
its secured claim.    Appellants’ principal argument on appeal is

that because appellees failed to present a reaffirmation agreement

to the court, the existence of Appellants’ lien was not an issue

properly before the court.       We conclude that no reaffirmation

agreement was presented to the bankruptcy court and it had no

authority to enter an order denying reaffirmation.    We therefore

vacate the district court’s judgment.



                                  I.

     Debtors-appellees Stephen and Sherryl Smith (“Debtors”) filed

a chapter 7 petition under the Bankruptcy Code.    This case was a

no-asset1 liquidation and the official notice sent to all listed

creditors expressly instructed the creditors not to file proofs of

claim.   Because of this order, Appellants did not file a proof of

claim.   In their schedules, Debtors listed Service as an unsecured

creditor.   Pursuant to a written contract with Service, CBS acted

as Service’s collection agent.

     Several months after the chapter 7 petition was filed, CBS

wrote a letter to Debtors’ counsel asserting that Debtors owed

Service $1,720.78 and that the agreement for the account provided

Service with a purchase money security interest (“PMSI”) in durable

goods purchased.   The letter further inquired whether Debtors, in




     1
       “In no-asset chapter 7 liquidation cases, the filing of a
proof of claim serves no practical purpose since there will be no
distribution from the estate in which to participate.” 4 Collier
on Bankruptcy ¶ 501.01[3] (15th ed. rev. 1999).

                                  2
their Statement of Intentions2, planned on reaffirming the debt, or

whether the collateral would be redeemed or surrendered.             In

response, Debtors’ counsel responded to CBS acknowledging receipt

of   a       “Reaffirmation   Agreement”   and   indicating   that   the

“Reaffirmation Agreement” would be forwarded to Debtors if proof of

a purchase money security interest was sent within twenty days.

CBS did not respond to this request and had no further activity in

the bankruptcy case until after discharge.

     At Debtors’ discharge hearing, Debtors’ counsel represented to

the bankruptcy court that Service, acting through CBS, “requested

reaffirmation agreements” and did not provide “the proper security

documents.”      Without Appellants’ knowledge, Debtors’ counsel filed

the Letter and then asked the court to enter the “standard order”

denying reaffirmation.        The bankruptcy court granted Debtors’

request and entered the order.

     According to the terms of the order, the bankruptcy court: 1)

denied the Reaffirmation Agreement ‘proposed’ by Appellants; 2)

determined that Appellants’ claim was unsecured; and, 3) enjoined

Appellants from interfering with the Debtors in the possession of

their property.

     Appellants filed a joint motion for rehearing, challenging the

propriety of the bankruptcy court’s entry of the Order.          On the

date of the rehearing, the bankruptcy court, without hearing


         2
        The debtor must announce in its Statement of Intentions
whether it will reaffirm a secured debt, redeem the collateral, or
surrender the collateral. In re Johnson, 89 F.3d 249, 252 (5th
Cir. 1996).

                                     3
evidence, denied the motion for rehearing because Appellants did

not produce proof of the PMSI.           CBS and Service appeal.

                                         II.

       Because the notice of the meeting of creditors ordered that no

claims be filed, Appellants’ purported security interest was not

subject to the claims allowance process, under 11 U.S.C. § 501 et

seq.      Nor   was   an    adversary    proceeding     commenced    pursuant   to

Bankruptcy Rule 7001 to determine the validity of appellants’

claimed    lien.      The   bankruptcy        court   nevertheless   ruled   that

Appellant had no security interest in Debtors’ durable goods when

it denied the reaffirmation.            We first consider therefore whether

the bankruptcy court was authorized to adjudicate the status of

Appellants’ lien as part of the reaffirmation process.

       Under § 524 of the bankruptcy code a debtor in a Chapter 7

proceeding may reaffirm a pre-petition debt that would otherwise be

discharged.     11 U.S.C. § 524(c).           “Because section 524 permits the

debtor to reassume debts of which he would otherwise be relieved,

it is in tension with the fresh start that the discharge of

indebtedness is intended to give the debtor.”                In re Turner, 156

F.3d 713, 718 (7th cir. 1998)(citing In re Duke, 79 F.3d 43, 44

(7th Cir. 1996)).       As a result, § 524 provides that a court may not

approve a reaffirmation, unless the following conditions, inter

alia, are met:

            • the agreement must be filed with the court;
            • the agreement itself must contain “a clear
            and conspicuous statement” advising the debtor
            that he may rescind the agreement within sixty
            days after it is filed or at any time prior to
            discharge;

                                          4
            • if an attorney represented the debtor during
            negotiation of the agreement, the filed copy
            of the agreement must include a declaration by
            counsel that the agreement is “fully informed”
            and “voluntary,” that it does not impose an
            “undue hardship” on the debtor or his
            dependants, and that counsel advised the
            debtor of the legal effect and consequences of
            both the agreement and any default under that
            agreement ....

Id.; 11 U.S.C. § 524(c).

      In Turner, the issue before the Seventh Circuit was whether a

debtor’s    unilateral        reaffirmation     of      a    pre-petition     debt

constituted a valid reaffirmation agreement under § 524(c).                   In re

Turner, 156 F.3d at 714.         Debtor’s counsel, who filed thousands of

bankruptcy cases annually and therefore had incentives to minimize

the amount of time spent on any one case, began to file form

unilateral reaffirmations drafted and executed without the consent

of creditors.      Id. at 715.    The court of appeals, noted that § 524©

made repeated references to an ‘agreement’ and held that unilateral

statements of intent to reaffirm did not constitute a reaffirmation

agreement under § 524.         Id. at 718.      The court emphasized that,

“[f]iled without notice, a unilateral reaffirmation may well give

rise to eleventh-hour (not to mention post-discharge) disputes when

an   unwilling     creditor    learns   that    a     reaffirmation    has    been

attempted without its prior consent.”               Id. at 720-21.

      We   agree    with   Turner    that     the     Code   plainly   does    not

contemplate that a bankruptcy court will enter an order permitting

or denying reaffirmation unless and until an agreement between the

debtor and creditor to reaffirm has been filed with the bankruptcy

court.     In the instant case, the letter the Debtors’ counsel

                                        5
presented to the bankruptcy court was not such an agreement.

     In the letter, the creditor simply inquired how Debtors would

treat   the   Appellants’    secured   claims    in   the    Statement   of

Intentions.      Counsel’s    response   indicated     that    Appellants’

“Reaffirmation Agreement” had been received and counsel would be

“glad to forward the Reaffirmation Agreement to [Debtors]” if

Appellants provided proof of their PMSI.        No further communication

took place between the parties.

     Notwithstanding counsel’s characterization of the letter as a

“Reaffirmation Agreement”, it is evident that this exchange of

letters did not constitute an agreement by the Debtors to reaffirm

the debt.

     Assuming, without deciding, that in a proper case a bankruptcy

court can adjudicate the existence of a lien ancillary to its order

denying reaffirmation, the court plainly cannot do so unless it is

presented with a valid reaffirmation agreement.             In the instant

case, no colorable reaffirmation agreement was presented for the

bankruptcy court to approve or disapprove. As such, the bankruptcy

court had no authority to enter the order.

                                  III.

     For the foregoing reasons, we VACATE the district court’s

judgment affirming the bankruptcy court’s order enjoining appellant

from enforcing its secured claim.




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