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Bankruptcy in Michigan-Reaffirmation Agreement Based On Mutual Mistake Voided

Bankruptcy in Michigan -Reaffirmation Agreement.

After filing a Ch. 7 bankruptcy, a reaffirmation agreement was signed for two separate bank loan debts that would have both been dischargeable. 
The Debtors Jackie and Peggy Bailey abruptly stopped paying Salyersville National Bank, which tried unsuccessfully to repossess a truck pledged as security.  SNB filed a “wholly unsecured claim” against this. 
The Standing Trustee found SNB hadn’t perfected the mortgage lien.  Both parties reached an agreement to sell the real property.  The Bank bought it, then resold it to a third party at profit.   SNB filed an unsecured claim for the full balance owed on the mortgage.  They received payments from the bankruptcy on the two loans.
A reaffirmation agreement can be enforced only to the extent as non-bankruptcy or otherwise state law permits.   If there’s a genuine mistake the wronged party is eligible for relief. 
After the bankruptcy ended SNB sued the debtors in state court seeking the balance owed on the reaffirmation agreement .  The Debtors’ request that the Bankruptcy Court reopen their case to void the reaffirmation agreement was obliged.  This was done “on the ground of mutual mistake”.  All parties involved incorrectly believed SNB had held secured interests at the time of signing.
The District Court affirmed the action.  SNB appealed it to the 6th Circuit.  
From their review the 6th Circuit noted the Bank had received distributions from the bankruptcy assets.  Their “election to be treated as an unsecured creditor” was a waiver of any secured claim. 
The final unappealed agreement between the Standing Trustee and SNB, barred the 6th Circuit from revisiting the issue of whether the Bank was secured. 
Even if it’s illogical, reaffirmations “of unsecured as well as secured debt” is permitted, Kinion, 207 F.3d.  Excepting when state law does not. 
The Debtors entered into this reaffirmation agreement purposely to maintain possession of secured property
The Court explained, when a creditor’s interest is unperfected and the value of the property exceeds a debtor’s exemption, a reaffirmation agreement is meaningless to a debtor.  Then the Standing Trustee can sell the property to benefit the estate. 
Appellant SNB’s argument to uphold the reaffirmation agreement was soundly rejected.