Reaffirmation: Agreeing to Pay Debts in Bankruptcy

You've filed for bankruptcy to get a fresh financial start. This usually means getting rid of your existing debts. Sometimes though you may want to pay a debt you could wipe out. In that case you would enter into what's called a reaffirmation agreement for the debt.

Reasons to Reaffirm Debts

There are several reasons why you may want to reaffirm a debt, even if you could be freed of it through your bankruptcy discharge.

You may reaffirm a debt because you want to keep property that is collateral for the debt, such as your car or house. You get to keep some property when you file for bankruptcy, including a certain amount of equity in your car and home. When there's no added equity to use to pay creditors, the bankruptcy trustee has no interest in selling the property. 

By reaffirming the debt, you keep the property, keep making payments, and the lender won't repossess loan collateral or foreclose on a mortgage.

Reaffirmation is also done when there is a co-signer or guarantor on your loan who will have to pay the debt if you don't. Or, you and the creditor may have a special relationship, such as family or other personal connection and you feel paying the debt is the right thing to do no matter what.

Finally, you might also reaffirm a debt if the creditor claims it is nondischargeable. This could be the case where the creditor says you misled it in getting the loan. So instead of risking having the whole debt remain after bankruptcy, you might reaffirm it in part to settle the dispute.

How to Reaffirm a Debt

Reaffirmation agreements have to meet strict legal guidelines and may require court approval. The reason? To keep creditors from abusing the bankruptcy process and undermining the fresh start.

Time to reaffirm a debt is limited. You need to reaffirm a debt before the court grants you discharge and closes your case. You have 60 days from signing the agreement or until discharge, whichever is less, to change your mind.

Steps to reaffirm a debt:

  • File the reaffirmation agreement with the court
  • Court approval isn't required if your attorney negotiated the reaffirmation agreement and filed supporting documents swearing that the agreement is voluntary, doesn't cause hardship on you or your dependents, and you can make the payments
  • You file a motion for approval if you don't have an attorney. The court reviews your motion and the agreement at your discharge hearing, and generally decides whether to approve the agreement at that time

Voluntary Repayment and Other Options

Voluntary repayment just means you pay a debt even though you're no longer legally required to do so. You might try to repay a family loan or something else you feel morally obligated to do. This requires no court approval. The bankruptcy laws make it clear the reaffirmation rules don't bar voluntary repayment.

It's important to talk with your attorney and understand why reaffirmation is needed in your case. Voluntary repayment may be enough, or converting your case from Chapter 7 to Chapter 13 may be a better option than reaffirming a debt. Creditors can't pressure you to reaffirm a debt, and it can't be a condition of offering you credit in the future.

Questions for Your Attorney

  • Which of my debts should I reaffirm?
  • Is a reaffirmation agreement required for every debt I should repay?
  • Will reaffirming some debts help me restore my credit?
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