What is Reaffirmation?
You filed bankruptcy to get rid of debt, but there are some long term debts that constitute a lien on property that you may want to continue to pay so you can keep the property. The bankrutpcy discharge gets rid of your liability to pay off even these debts. In order to make sure you can keep the property and the favorable payment history can be reported to your credit report these debts have to be reaffirmed.
How do I reaffirm the debt and what does it mean?
The reaffirmation agreement is a form that is prepared by the creditor and mailed to your attorney. You have to be current with the payments for the property. Reaffirming the debt binds you to the debt once again. If you are late in your payments after the bankruptcy then the creditor can still sue you, even after you get your bankruptcy discharge.
Do I have to reaffirm the debt?
No. Reaffirmation is always optional. However, some creditors may try and take the property (car, house) if you do not reaffirm the debt because they will argue that their security in the property has been harmed. If there are co-debtors and they did not file bankruptcy this becomes more difficult for the creditor to do.
After I sign the Reaffirmation Agreement what happens?
Your attorney has to sign the agreement and decide if the reaffirmed debt constitutes and "undo hardship". Your attorney sends the signed agreement to the creditor who wrote it and they file it with the Court. The Judge then has to do the same analysis and if it is approved the Judge signs and files an Order granting the reaffirmation agreement.
Can I change my Mind after I sign the Agreement?
Yes! But hurry! You have up to SIXTY (60) days after it is filed with the Court to cancel unilaterally (by yourself, without the consent of the creditor). But don't wait that long if you are going to cancel! You may also cancel any time before your discharge is granted.
Do I have to reaffirm on the same terms?
The creditor cannot change what you owe, the payment or theinterest rate without your consent. However, you may want to negotiate with the lender after you file the bankruptcy to see if they will lower the interest rate or change other terms to benefit you.
When should I reaffirm?
People do not lose their homes and cars because the file bankruptcy. They lose their homes and cars because they cannot affird the payments. many times in my office people state that they want to keep things that are unaffected by the bankruptcy, but that they just cannot afford given their budget. The most important question when reaffirming is "Can I afford to make the payments?"