30 May Reaffirmation Requires More than Checking a Box
In spite of the fact that most of what you read about reaffirmation in bankruptcy is clearly negative, there are some times when I’ll gladly help my bankruptcy client through the process.
Madness or good lawyering? You decide.
Much has been written on this blog about reaffirmation in bankruptcy. BLN author Jed Berliner makes a compelling argument that reaffirmation in Chapter 7 is a bad idea – why should you assume personal liability for a debt and forgo up to 8 years of bankruptcy protection on the hope that timely installment payments will improve your credit report? BLN author Carmen Dellutri also dislikes reaffirmation, as does Gini Nelson and almost all of the authors and contributors of the Bankruptcy Law Network.
If you enter “reaffirmation agreement” in the search box of this blog, you will see numerous posts discouraging reaffirmation.
While I find the argument against reaffirmation compelling, there are instances where I will obtain and complete a reaffirmation for a client in bankruptcy.
That’s right, I’ll buck the trend by completing and submitting the paperwork. I’ll do it if I feel comfortable that my client can truly afford the payment, if I am concerned that my client’s collateral will be at risk if we don’t reaffirm, and if my client wants to use the process in bankruptcy as a tool to rebuild credit.
On more than one occasion, I have fielded emails from people who are unhappy that their lawyer did not explain that non-reaffirmed debts will not appear on their credit reports despite regular and timely payments. Further, there seems to be some confusion about the Chapter 7 reaffirmation process – simply checking a box on the Chapter 7 Statement of Intention is not sufficient to reaffirm a debt.
These agreements consist of about 10 pages of somewhat obtuse legalese that spell out details about the reaffirmed agreement. Further, your lawyer has to sign his name to a statement asserting that the agreement is in your best interest. If he or she is wrong or the judge disagrees, your lawyer is going to look incompetent or lazy. If you enter into the agreement and end up not being able to make the payments later on, your lawyer could be at risk for a malpractice suit.
Neither of these options is particularly enticing. Get the picture?
So, while the consensus opinion amongst my colleagues here at the Bankruptcy Law Network that reaffirmation is usually a bad idea, if you and your lawyer decide to pursue this course of action anyway, make sure that your agreement with your creditor is in writing and signed by you, your creditor and your lawyer.
Jonathan Ginsberg, Esq.
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