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The Pros and Cons of Reaffirming a Debt in Bankruptcy

Posted by attorney Kristy Hernandez

When you reaffirm a debt, you sign a contract to continue making payments to the lender. Think of this contract as taking your vehicle loan or mortgage totally out of the bankruptcy. This means that if you ever stopped making payments on the debt, the lender would be able to repossess the vehicle and collect the balance owed from you. There are several pros to signing a reaffirmation agreement. First, since the debt does not show as discharged on your credit, you will continue to receive the positive impact on your credit from timely monthly payments. Also, since we are doing a great benefit to the lender by making it so that you cannot walk away from the vehicle in the future, lenders are often willing to negotiate better terms on your existing loan. We can often get interest rate deductions which help make your monthly payments more affordable, and can sometimes get principal balance reductions too. You also have the security of knowing you are complying will all laws, so the lender cannot repossess the vehicle unless you stop making your payments. The main down-side of the reaffirmation agreement is that you are stuck in the loan in the future if you later can't afford to pay. All reaffirmation agreements require our office to prepare an agreement reaffirming the loan which must be signed by your attorney, you, the lender, and a bankruptcy Judge. You must also attend a special court appearance with the attorney to get the agreement approved by the court, and must be able to prove to the Judge that you have the ability to pay this loan each month. These extra steps are why our office charges additional fees for this work. For more information about reaffirmation agreements of the bankruptcy process, please call Kristy Hernandez, California Bankruptcy Attorney for a free consultation at 510-456-7400 or visit her at

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