Reaffirmation Agreement in Bankruptcy, Should I Sign?

28 Jul Reaffirmation Agreement in Bankruptcy, Should I Sign?

A bankruptcy reaffirmation agreement is a new promise to pay an old debt. A reaffirmation agreement is enforceable if it is properly executed and approved by the court. There can be many reasons to reaffirm a debt. However, it is important to understand what happens if you reaffirm.

If you reaffirm a debt to one of your creditors, the debt will not be discharged in the bankruptcy proceeding and the creditor can sue you if you fail to pay. For the purpose of the debt you reaffirm, it is as if there was no bankruptcy at all.

It may be necessary to reaffirm the debt to keep your car. Since the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, reaffirmation has been necessary to retain a car with a secured debt if you are unable to pay the creditor the full value of the car and redeem it. A failure to reaffirm or redeem the vehicle within a short period of time automatically releases the creditor from the protection provided by the automatic stay. Once it is released from the automatic stay, your car lender can reposess the car if you fail to pay.

If you reaffirm your home loan, it may be easier to deal with your lender. While it is not necessary to do so, a reaffirmation agreement may help you communicate with your lender. In states that do not allow a deficiency judgment on foreclosure of a home loan it may not expose you to new debt to reaffirm.

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I was admitted to practice in 1978. I am certified as a Consumer Bankruptcy Specialist by the American Board of Certification. I regularly speak on tax and bankruptcy issues at state, regional and national conferences. Years of experience in practice before the Internal Revenue Service and Oregon Department of Revenue have given me the background to resolve a large variety of consumer tax issues.
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