Thursday, August 4, 2016

What Is A Reaffirmation Agreement?

When you file for bankruptcy you have to make several key decisions about your case. One of the most important choices you will be required to make is what property you want to keep and what property you are willing to give up and give back to the lender. If you decide to keep something the lender is going to want to know how you will pay for the property, and will ask you to sign a reaffirmation agreement for the debt. A reaffirmation is like a new contract and it means the payments will still have to be made for the collateral, even after your case is finished. This means that you are not protected from collection efforts on debts you reaffirm and the lender can call you to ask for payment or even take steps to repossess the property if you do not pay. These are pretty harsh consequences, and may be things you were trying to put an end to when you file bankruptcy, so it is critical to understand the ins and outs of reaffirming debt. 

Reaffirmation agreements are something most usually seen in a Chapter 7 bankruptcy case. Here is how this type of agreement works:

          When you file your bankruptcy case you are required to state your intent with regard to secured debts, that intent being either to keep the property and reaffirm the debt or to stop paying and surrender the collateral back to the creditor.

          If you check the box that states you intend to reaffirm a debt, the lender will present your attorney with a prepared agreement called a reaffirmation agreement. The agreement with state the amount owed and that you will make the payments as they become due. It is just like signing a new contract for the debt.

          If you do not make the payments, the lender has the ability to make collection calls or initiate collection lawsuits in order to get paid. This is true even after your bankruptcy case is over and is permissible because a debt that is reaffirmed is not a debt that is considered discharged (eliminated) through the filing of bankruptcy.

 Because most people file bankruptcy to stop collection efforts and to have their debts discharged and considered no longer due, you might be wondering why anyone would ever sign a reaffirmation agreement. Well one reason is because sometimes the lender is willing to negotiate a lower interest rate or reduce the balance, but will only do so if you agree to reaffirm the debt. These reductions can lower your payments and make it worth your time to reaffirm. A second reason to reaffirm a debt is because it gives the lender the authority to contact you about the debt, and while contact in the form of a collection call or letter is not desirable, it can be helpful to be able to talk to your lender if you need to postpone payment or make other arrangements from time to time. If a debt is not reaffirmed the lender is not allowed to talk to you about it after your bankruptcy case is complete. We can help you decide if reaffirmation is best for you, and file your case accordingly.

For more information about what it means to reaffirm a debt in bankruptcy, call us today or reach us online at

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