What is Reaffirmation?


A Reaffirmation Agreement is an agreement between you and a creditor. In order for this agreement to be valid it must be signed by you and the creditor, then filed in the Court. IT IS CRITICAL THAT THIS AGREEMENT BE FILED IN YOUR CASE BEFORE THE DISCHARGE ORDER IS ISSUED. This agreement is a binding contract that allows the creditor to sue you should you stop paying the debt after you receive your Discharge Order.

Be careful about signing too many agreements to keep lines of credit open as this maintains an amount of debt that you must repay. If you sign too many of these agreements and cannot fulfill your financial obligation you may be forced to file a Chapter 13 or be sued and receive a garnishment.

Generally for debts such as a vehicle or a home you will file a reaffirmation to keep that asset. Sometimes the creditor will negotiate a lower amount of debt or a better interest rate so you will sign. This is more common if you are going to reaffirm a line of credit.

Reaffirming a line of credit at a reduced interest rate or reduced principal provides you with an establish line of credit and it allows you to start rebuilding your credit right away.

The new section of the code regulating Reaffirmations is §524(c) Effect of a discharge:

An agreement between a holder of a claim and the debtor, the consideration for which, in whole or in part, is based on a debt that is dischargeable in a case under this title is enforceable only to any extent enforceable under applicable nonbankruptcy law, whether or not discharge of such debt is waived, only if--

(1) such agreement was made before the granting of the discharge under section 727, 1141, 1228, or 1328 of this title;

(2) the debtor received the disclosures described in subsection (k) at or before the time at which the debtor signed the agreement;

(3) such agreement has been filed with the court and, if applicable, accompanied by a declaration or an affidavit of the attorney that represented the debtor during the course of negotiating an agreement under this subsection, which states that--

(A) such agreement represents a fully informed and voluntary agreement by the debtor;

(B) such agreement does not impose an undue hardship on the debtor or a dependent of the debtor; and

(C) the attorney fully advised the debtor of the legal effect and consequences of--

(i) an agreement of the kind specified in this subsection; and

(ii) any default under such an agreement;

(4) the debtor has not rescinded such agreement at any time prior to discharge or within sixty days after such agreement is filed with the court, whichever occurs later, by giving notice of rescission to the holder of such claim;

(5) the provisions of subsection (d) of this section have been complied with; and

(6)(A) in a case concerning an individual who was not represented by an attorney during the course of negotiating an agreement under this subsection, the court approves such agreement as--

(i) not imposing an undue hardship on the debtor or a dependent of the debtor; and

(ii) in the best interest of the debtor.

(B) Subparagraph (A) shall not apply to the extent that such debt is a consumer debt secured by real property.

Under §521(a)(2) the code outlines the limit that the Reaffirmation must be filed with the Court:

(2) if an individual debtor's schedule of assets and liabilities includes debts which are secured by property of the estate--

(A) within thirty days after the date of the filing of a petition under chapter 7 of this title or on or before the date of the meeting of creditors, whichever is earlier, or within such additional time as the court, for cause, within such period fixes, the debtor shall file with the clerk a statement of his intention with respect to the retention or surrender of such property and, if applicable, specifying that such property is claimed as exempt, that the debtor intends to redeem such property, or that the debtor intends to reaffirm debts secured by such property;

(B) within 30 days after the first date set for the meeting of creditors under section 341(a), or within such additional time as the court, for cause, within such 30-day period fixes, the debtor shall perform his intention with respect to such property, as specified by subparagraph (A) of this paragraph;