A reaffirmation agreement is a contract between you and the creditor that you will pay all or a portion of the money owed, despite the bankruptcy filing. In return for keeping your property after the bankruptcy, the creditor promises that, as long as payments are made, the creditor will not repossess or take back the property. Some people enter reaffirmation agreements to prevent a creditor from pursuing a co-debtor (co-signor), like a family member.
Before entering into such an agreement, ask an attorney to ensure that your rights are protected and that any reaffirmation is in your best interest. A copy of the reaffirmation agreement must be filed with the court. If you are not represented by an attorney in your bankruptcy case, the reaffirmation agreement will have to be approved by the bankruptcy judge. The judge will ask questions to determine whether the reaffirmation agreement imposes an undue burden on you or your dependants and whether it is in your best interests. Since reaffirmed debts are not discharged, the bankruptcy court will normally only reaffirm secured debts where the collateral is important to your daily activities (i.e., a car). You may have to demonstrate to the judge where you intend to get the additional funds to make payments on the reaffirmed debt. In any case, you’ll have a cooling-off period in which to cancel the reaffirmation agreement if you change your mind.
Reaffirmation agreements are strictly voluntary. They are not required by the Bankruptcy Code or other state or federal law.