The Decision on Reaffirming Debt While in Bankruptcy

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Reaffirming debt while in bankruptcy results in an agreement between a debtor and a creditor where the debtor excludes the amount owed to that creditor from the final outcome of the bankruptcy. The purpose of this type exclusion is to allow the debtor to enter into an agreement with a creditor to pay some or all of the balance owed as opposed to seeking a full discharge in a Chapter 7 or inclusion into a payment plan in a Chapter 13.

Why Reaffirm Debt?

In exchange for reaffirming debt with a creditor, the creditor agrees that it will not take back, repossess, or foreclose on the collateral securing the loans as long as the agreed upon payments are made on schedule.

An example of the type of debt which might be reaffirmed can be found in certain auto loans. While exemptions exist for vehicles, the value of a vehicle may exceed the cap on the exemption. If the car isn’t sold by the bankruptcy trustee, the car could be repossessed by the lender. A negotiated reaffirmation agreement could result in lower payments which would enable that person to avoid repossession and keep the vehicle as long as payments are made.

Reaffirmation Agreements

The reaffirmation agreement includes:

  • An extensive disclosure detailing the legalities of the reaffirmation including the amount of the balance being reaffirmed
  • Further disclosures stating the filer’s knowledge that reaffirmed balances are excluded from the discharges which will occur on non-reaffirmed debts
  • Proof that the reaffirmation will not impose too much hardship on the debtor
  • A sixty day grace period, after filing with the court or from the discharge date, for the debtor to cancel the agreement

Reaffirmation Hearing

Reaffirmation hearings can be done in either of two ways:

  • If the debtor has retained a bankruptcy attorney, the attorney must provide certification that the consequences of the agreement have been explained and were understood by the debtor, that the agreement was voluntary, and that the debtor will not experience severe hardship.
  • If the debtor does not have an attorney, the court will hold hearing in which the above mentioned disclosures are made by the court to the debtor.

Debtors should not enter into reaffirmation agreements without first consulting an attorney. Guidance through the process can ensure that a debtor’s rights are being protected and that the agreement is fair to both parties. If you are contemplating a reaffirmation agreement the attorneys at Zhou & Chini can make sure that your interests are protected. For a free consultation, visit or call (800) 972 9600.