A reaffirmation agreement is a legal agreement that allows you to keep paying a specific debt, and keep the property tied to it, even after your other debts are discharged in Chapter 7 bankruptcy. Without this agreement, your personal liability for that debt would normally be wiped out along with everything else.
Why Would Someone Reaffirm a Debt?
Chapter 7 bankruptcy discharges most unsecured debts and eliminates personal liability on many secured debts as well. But if you want to keep an asset tied to a loan, such as a car, you typically need to either reaffirm the debt or continue making payments under specific terms the lender agrees to. Reaffirming means you formally agree to remain responsible for the debt, and in exchange, you keep the property and the lender doesn’t repossess it during or after your case.
How Does the Process Work?
Reaffirmation requires a few specific steps:
- You and the creditor sign a reaffirmation agreement outlining the terms of continued payment
- The agreement is filed with the bankruptcy court before your case is closed
- In many cases, a court hearing may be required to confirm you understand the consequences
- Once approved, the debt is excluded from your discharge and you remain legally obligated to pay it
If you stop paying after reaffirming, the creditor can repossess the property and may also pursue you for any remaining balance, since the debt was not discharged.
What Debts Are Commonly Reaffirmed?
The most common example is a car loan, since most filers want to keep their vehicle. Reaffirmation can also apply to other secured debts where the filer wants to retain the collateral rather than surrender it. It’s less common with mortgages, since other options like loan modification are often used instead.
Is Reaffirming a Debt Required to Keep Property?
Not always. Depending on the debt and your state’s laws, you may be able to keep property by simply continuing to make payments without signing a formal reaffirmation agreement, an approach sometimes called the “ride-through” option. However, this option isn’t guaranteed to be available or accepted by every lender, so it’s worth discussing with an attorney before deciding how to handle a specific secured debt.
What Should I Consider Before Signing?
Before agreeing to reaffirm a debt, it helps to think through:
- Whether the property is worth what you’d continue paying for it
- Whether you can realistically afford the payments going forward
- Whether the interest rate or loan terms could be renegotiated as part of the agreement
- What happens if you’re unable to keep up with payments later
Because reaffirmation removes the discharge protection for that specific debt, it’s a decision worth making carefully rather than automatically.
How Law Offices of Terrence Fantauzzi Can Help
Deciding whether to reaffirm a debt is one of several important choices that come up during a Chapter 7 case. At Law Offices of Terrence Fantauzzi, we walk clients through their options for secured debts, including whether reaffirmation makes sense for their situation.
If you’re considering Chapter 7 bankruptcy and want to understand your options for keeping a car or other secured property, call Law Offices of Terrence Fantauzzi at (909) 552-1238 to speak with a bankruptcy attorney.
