What is Reaffirmation?

When you reaffirm a debt, you agree that you will still owe the debt after your bankruptcy case ends. Both the creditor’s lien on the collateral (which gives the creditor the right to take the property if you fail to pay as agreed) and your liability for the debt under the original contract (called a promissory note) essentially survive bankruptcy intact. In most cases, it will be as if you never filed for bankruptcy for that debt.

In a Chapter 7, you must elect whether you want to reaffirm your secured debt such as a car or home mortgage(s) and keep making your payments to avoid repossession (car) foreclosure (home). The creditor will typically send a Reaffirmation Agreement after you file bankruptcy. If you change your mind, you can rescind the agreement but you must do so prior to your bankruptcy discharge date.

Alternatively, you can elect to discharge the debt and “surrender” the property to the creditor if you do not want to keep up the payments.

The bankruptcy court can review the reaffirmation agreement to make sure it does not impose a financial hardship for you. The court can decide to hold a hearing on whether or not to approve the agreement. If your bankruptcy schedules (budget pages) show you can afford the debt, the court will approve the Reaffirmation Agreement and generally will not hold a hearing.