What is a Reaffirmation Agreement?

In chapter 7 bankruptcy cases you may be asked to sign a reaffirmation agreement for a loan, secured by collateral, that you wish to keep such as a vehicle, furniture, etc. A reaffirmation agreement is an agreement that says you want to keep the vehicle or the furniture and you will continue to pay the debt after the bankruptcy is over.  The creditor must agree to the reaffirmation, but in most cases they will agree because they want you to keep the property and continue to pay them.  They don’t want the property back.

A valid reaffirmation agreement places a legal obligation over you to continue to pay a debt that would have been wiped out in the bankruptcy.  If you become behind on payments after the bankruptcy, the creditor can repossess or foreclose on that property and sue you for the deficiency balance on the loan.

The Bankruptcy Code has many requirements that must be met for reaffirmation agreements to be valid. You should think long and hard about whether to reaffirm a debt and discuss options with your bankruptcy attorney, as this limits the benefits of your bankruptcy discharge.