What Is a Reaffirmation Agreement in Chapter 7?


A reaffirmation agreement is a legally binding contract between a debtor and a creditor that allows the debtor to retain possession of specific property securing a debt, such as a car or a home, in exchange for agreeing to continue making payments on the debt.

Essentially, it’s a voluntary agreement that removes the debt from the scope of the bankruptcy discharge, ensuring that the debtor remains personally liable for the obligation even after the bankruptcy case concludes.

While Chapter 7 bankruptcy offers debtors relief from overwhelming financial burdens, certain types of debts are not automatically discharged. Secured debts, such as mortgages and car loans, often require a reaffirmation agreement to remain enforceable even after bankruptcy.

Should I Get a Reaffirmation Agreement?

Deciding whether to pursue a reaffirmation agreement in Chapter 7 bankruptcy is a significant decision that should be carefully considered based on your individual circumstances. While reaffirming a debt may offer certain benefits, it also entails risks that could have long-term implications for your financial well-being.

Here are some factors to consider when determining if a reaffirmation agreement is right for you:

  • Importance of the property: Consider the significance of the property securing the debt. Is it essential for your daily life or livelihood, such as a car needed for transportation to work? If the property is critical to your well-being and its loss would significantly impact your ability to function effectively, reaffirming the debt may be worth considering.
  • Ability to afford payments: Evaluate your current and future financial situation to determine if you can afford to make the payments required by the reaffirmation agreement. Remember that reaffirming a debt means committing to ongoing payments, which could strain your budget if your financial circumstances change unexpectedly.
  • Terms of the agreement: Carefully review the terms of the reaffirmation agreement, including the principal amount, interest rate, and repayment schedule. Ensure that the terms are fair and reasonable, and consider negotiating with the creditor if necessary to secure more favorable terms.
  • Alternatives to reaffirmation: Explore alternative options for dealing with the debt, such as redemption or surrendering the collateral. Redemption involves paying off the debt in a lump sum for the fair market value of the collateral, while surrendering the collateral entails returning it to the creditor and having the remaining debt discharged in bankruptcy. Compare the pros and cons of these alternatives against reaffirmation to determine the best course of action.
  • Long-term financial goals: Consider how reaffirming the debt aligns with your long-term financial goals. Will it help you rebuild your credit and financial stability, or could it hinder your ability to achieve future financial milestones? Assess the potential impact of reaffirmation on your overall financial trajectory.

Consult with a Bankruptcy Lawyer to Learn More

Seek the advice of a qualified bankruptcy attorney who can provide personalized guidance based on your specific situation. An attorney can help you understand the legal implications of reaffirmation, evaluate the terms of the agreement, and represent your interests in court if necessary.

At Buchalter & Pelphrey, we can provide the legal support you need throughout the bankruptcy process. With our assistance, you can navigate the complexities of bankruptcy with greater ease and confidence, allowing you to make the decisions that are best for you.

For more information, contact us online and request a consultation.

Related Posts
  • Will My Bankruptcy Case Be Private? Read More
  • Is There a Limit to the Amount of Debt Chapter 7 Can Discharge? Read More
  • Which Debts Are Considered Priority Debts During Bankruptcy Read More