What does it mean to Reaffirm a Mortgage in a bankruptcy filing?

In a Chapter 7 bankruptcy case, a debtor must disclose his intention with regard to any property which is the security (collateral) for a debt.  The debtor must complete a form called a Statement of Intention and indicate whether he will surrender, redeem or reaffirm.  Mortgage debts and auto loans are among the debts that debtors typically choose to reaffirm. 

Reaffirmation is voluntary.  A creditor cannot force a debtor to reaffirm a debt.  If a debtor opts to reaffirm a debt, he must sign a document known as a Reaffirmation Agreement which sets forth the terms of repayment.  The Reaffirmation Agreement may require the debtor to repay the debt according to the original terms or in accordance with modified terms negotiated with and agreed to by the lender. 

When a debtor reaffirms a debt, it will not be discharged in the bankruptcy.  This means that if the debtor later defaults on the debt, the lender may pursue all legal remedies against the debtor.  On the other hand, if a debtor chooses to make voluntary payments rather than reaffirming a debt, the debt will be discharged and if the debtor later defaults, the lender may only pursue efforts to regain possession of the property; the creditor cannot pursue collection efforts against the debtor personally. 

A debtor has the right to rescind (cancel) a reaffirmation agreement at any time prior to discharge or within 60 days of the date the agreement was filed with the court, whichever is later.  Rescission is accomplished by sending a written notice to the court and the creditor. 

Before signing a reaffirmation agreement, it’s best to speak with a qualified bankruptcy attorney.  A bankruptcy attorney can explain all the ramification of reaffirming a debt.