How did The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 affect reaffirmations of debt?

Yes, but new limitations and requirements on reaffirmations were imposed by the 2005 amendments to the federal bankruptcy code.  But, be aware that your bankruptcy attorney may advise you not to reaffirm this debt before the bankruptcy court.

Among other provisions, the “new” federal bankruptcy code requires more information and notice to the reaffirming debtor.  The law now requires that all reaffirmation agreements contain extensive new disclosures detailing the rights of the debtor, specifying the amount of debt reaffirmed, rates of interest, when payments will begin, filing requirements with the court, the right to rescind, and a certification that the agreement does not impose an undue hardship on the debtor.  The words “amount reaffirmed” and “annual percentage rate” must be used where indicated, and must be conspicuously displayed.  Additionally, there is now a bright line test for “undue hardship” – you must file with the court a statement of income showing that your remaining disposable income, after the bankruptcy, is sufficient to make the payments required by the reaffirmation agreement.

However, when you sign a reaffirmation agreement, you deprive yourself of the opportunity to fully enjoy the protections provided by bankruptcy.  If you again find yourself unable to continue making your car payments after your bankruptcy discharge – and before the 8 years pass before you would be permitted to again file Chapter 7 bankruptcy – your creditor could still pursue you to collect the entire amount of the loan.  Usually, it is possible to continue to make payments on any property through and after the bankruptcy process; your attorney may even be able to ease the burden on you by re-negotiating your interest rate or other loan terms. Submit your case for a free review from a Bankruptcy Attorney in your area.