A bankruptcy reaffirmation agreement is a formal, legally binding contract between a debtor and a creditor entered during a bankruptcy case. It allows the debtor to keep specific secured assets—such as a car, home, or financed furniture—by agreeing to continue payments on that debt despite the bankruptcy discharge that would ordinarily erase it.
These agreements are most common with secured debts where the creditor holds collateral. For example, if you want to keep your car after bankruptcy, reaffirming the car loan keeps you liable for the debt and prevents repossession. Similarly, reaffirming a mortgage helps retain home ownership, although some lenders allow “riding through” without reaffirmation if the payments remain current.
The reaffirmation process involves several legal steps: the creditor offers the agreement, the debtor reviews and signs it, and if represented by an attorney, the attorney certifies that reaffirming won’t cause undue hardship. The agreement is then filed with the bankruptcy court and often requires court approval, especially if the debtor is unrepresented. Approval ensures the debtor can realistically afford the payments.
Reaffirming a debt carries important risks and benefits. On the positive side, it allows continued use and ownership of valuable assets and may help rebuild credit through timely payments. On the downside, the debtor remains legally obligated, losing the fresh start bankruptcy offers, and defaulting can lead to repossession and further legal action.
Before agreeing to reaffirm, debtors should carefully evaluate their ability to afford payments, the value of the asset, and whether reaffirmation aligns with their financial goals. Consulting a qualified bankruptcy attorney is crucial to fully understand the long-term impact.
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For authoritative information, refer to the U.S. Courts official guide on reaffirmation agreements.