Reaffirmation Agreements

Individuals who file for bankruptcy generally do so to eliminate, or discharge, the obligation to pay certain debts and obtain a financial "fresh start."  In some circumstances, a debtor may wish to become legally obligated to pay all or some of a debt that could otherwise be discharged.  A contractual agreement to repay such a debt is called a reaffirmation agreement and is entered into between the debtor and a specific creditor.

Reaffirmation agreements are strictly voluntary. They are not required by the Bankruptcy Code or other state or federal law. A debtor may decide to voluntarily repay any debt without signing a reaffirmation agreement; however, there may be valid reasons for wanting to reaffirm a particular debt. If the debtor reaffirms a debt and then fails to make the payments as agreed, the creditor can take action against the debtor to recover any property that was given as security for the debt, and the debtor may remain personally liable for any remaining debt after the collateral is sold.  Because a reaffirmation agreement takes away some of the effectiveness of the debtor's discharge, a debtor is encouraged to seek legal counsel before agreeing to a reaffirmation.

A reaffirmation agreement must be filed within 60 days after the first date set for the Section 341 meeting of creditors, unless the deadline is extended by the court.  If the debtor is represented by an attorney, the attorney can certify to the court that the debtor has been informed of the risks and consequences of a reaffirmation agreement and that the reaffirmed debt will not create a hardship for the debtor and the debtor's dependents.  If the debtor is not represented by an attorney, a reaffirmation hearing is held and the judge will make a determination whether the reaffirmation agreement is in the debtor's best interests and whether the debtor can afford the payments. If a judge does not believe that a reaffirmation agreement is in a debtor’s best interest, the judge may refuse to allow the reaffirmation agreement to be entered as a binding agreement.The court will not take action on a reaffirmation agreement that is for a consumer debt secured by a mortgage, deed of trust, or other lien on real property, like your home.

Even if the debtor signs a reaffirmation agreement, and the agreement is approved by the court, the debtor has 60 days after the agreement is filed with the court (or the date of entry of discharge, whichever is later) to change his/her mind and rescind the agreement. To rescind a reaffirmation agreement the debtor must notify the creditor that the reaffirmation agreement is being rescinded.

Once a discharge is entered and a bankruptcy case is closed, the court will no longer take action on any request for reaffirmation of a debt.