A reaffirmation agreement in bankruptcy is a new contract signed between you and a lender that reaffirms your debt and personal liability for the obligation. Such an agreement is usually executed for secure property such as an automobile, a boat, a recreational vehicle (such as a motor home) or an airplane. Before signing an agreement of this type, it is a good idea to have it checked over by your attorney as it is a binding legal document. The reaffirmation agreement must also be approved by the court. You can revoke it within 60 days after signing.
When must a reaffirmation agreement be signed?
The Bankruptcy Reform Act of 2005 states that any reaffirmation agreement(s) must be entered into prior to the filing of a discharge in bankruptcy and before the debtor actually receives the many disclosures required from his creditor. The document must also be approved by the court and not rescinded by the debtor prior to the discharge being filed. The court can also refuse to sign the reaffirmation agreement if it is of the opinion that the debtor cannot afford the payments called for under its terms.
Some creditors believe that the new 2005 bankruptcy law requires that a debtor sign a reaffirmation agreement if they want to retain the vehicle. However § 524(c) states that any obligation must be ‘enforceable under applicable non-bankruptcy laws, whether or not such a debt is waived.” As a result, if the debtor is current on his payments, keeps his vehicle insured and still refuses to sign a reaffirmation agreement, there appears no default that is enforceable under non-bankruptcy laws. Moreover, most bankruptcy judges are anything but eager to sign such an agreement if the debtor can’t or doesn’t want to afford the extra payment. Neither would most attorneys. Thus, the smart debtor doesn’t sign a reaffirmation agreement unless it includes better terms on a new contract and he is certainly permitted to do so.
The best advice
As a debtor, there seems little risk in signing a reaffirmation agreement provided that you feel you really need the property (such as a car to get you to and from a job) and unless you know you can’t afford the payment. Nevertheless, you have nothing to lose if you try to renegotiate your contract before you sign and don’t forget that if you’ve had the property for some time, its current value is less. The lender will very likely go along with your suggestions because it is to his advantage financially.
In the end, whether or not you sign a reaffirmation agreement comes down to how badly you want the property and whether or not you can afford to continue the monthly payments. If you need the property and the money is there, go ahead and sign. If not, let the property go and start over to rebuild your financial status with a really clean slate. Only you can make an informed decision.
{ 14 comments… read them below or add one }
Great post so many people do not understand what this means and just sign. This post will be a helpful tool to forward to on the countless questions I see about reaffirmation.
what if i signed and i thought i was signing because i was agreeing to continue to pay… for the mtg… i mean since i wanted to stay there, i thought i had to… its filed with the court, but the mtg company has never acknowledged it. on my statement, it says i am protected under bk and that htey are only excercising their right against the property. is it possible the mtg company never to the statement back? how does this work.. i cannot afford the home and i have to walk
will someone tell me how do reaffirmation agreement work with a mortgage. i am not pass do on it , but this never come up on court .. it has been over a year ,but the mtg.. company has never acknowledged it on my statement, it says this statement is for informational purposes only and is being provided as a courtesy should you voluntarily decide to makr your load payments. is it possible the mtg company or court never rec.. the agreement. how does this work and what can i do at this point. i can afford this home.
email is not 1sthenderson@gmail.com
it is 1sgthenderson@gmail.com
Help please, I signed a reaffirmation agreement (under Chapter 7 bankruptcy, 14 months ago) on my vehicle and now i can't afford it. If it goes back to the bank can they sue me for the difference after it's auctioned off?
My Chapter 7 was finalized on 01/2006. I signed a Reaffirmation Agreement to keep my car. I have never been late on the payments since I got the car. I ordered all three credit reports, and two out of three show the account status as being closed with a zero, or no balance. One of them shows the account as open and active with the current account balance. How is this affecting my score? Shouldn't they be showing as open and active since I'm still paying on the debt? Any good reporting on my records should be a good thing – should I dispute the record and state that it should be showing as open, active, and current??
It is my understanding that if you DO sign the agreement, that from that point on you credit is to show closed with a Zero balance. It is not suppose to remain open or active with a current balace. So, one of the creditors has made a mistake, which only works in your favor. None of them should say ” open and active” because the agreement is made through the bankruptcy court, and the agreement means that from the day you sign it, it becomes a new agreement (a new loan). The old financing deal you made at the very beggining of purchasing the loan, becomes null and void. Also, if for some reason you should not be able to make your .payment from the time of signing the agreement, they will take the car and you will be responsible. It will not be picked up under the bankruptcy. There is no reason for you to dispute the record, because you will not win. In fact that may cause the third one to realize it’s mistake and change that one as well.
I was supposed to sign a reaffirmatin on my vehicle and come to find out the lawyer did not have us do this. The bankruptcy is discharged and on the credit report it shows we filed it in the bankruptcy.However we have always paid on this loan and been on time, they tell us that we will get the title as usual when paid in full,but will not send any papers saying this. Is this something I should worry about or should I just tell them to come get the vehicle. On our credit report it shows we are paying on time,but also notes that it was included in the bankruptcy. Chase bank told us that they would not report this on the credit fil because it was included in the bankruptcy.Please help!
To Jayme: To the credit report company that gave you the good new of showing as open, active and current; get two or three copies of this credit report, and send it to the other two most major credit report companies, TransUnion or Experian, Etc let them know of this so they can up-date their credit report record on you. Each time you get a notice that you cleared up something, send all three of these major credit report comancies a copy of your notice.
On november 09 my Bankrupcy case was discharge. My atterny did not send in my reaffirmation info. My mortgage company delayed everything needed to be done to this house, what can i do?
I had a 3-year ARM mortgage which was 6.5% at first, then changed to 3.5% in January.
When I signed my reaffirmation agreement in November 2008, it was still at 6.5%, as it was not scheduled to reset until January. I got my mortgage bill last week, which reflects the 6.5%. The mortgage company is telling me that when I signed my reaffirmation agreement, I promised to pay at the 6.5% and now I am locked in at that rate. This is a $400 difference. I am losing my job in June and cannot afford the 6.5% payment. Is the mortgage company lying to me about locking in at this rate? They are telling me that all I can do now is sell my house or refinance (can’t do that for 2 years now!). Pleaase help!
I’m filling chapter 7. Lots of c.c debt, motor home etc. I met the means test for chapter 7. My attorney did all of this for me. Creditors meeting today, none showed up. Need to keep my 2 trucks because they are used for my business. Also wish to keep a boat. I am up to date on all of these payments, never been late. All 3 are worth less than I owe on them. My attorney tells me today the creditor on the boat is balking about signing the reaffirmation letter. I assume if they do not sign it then they take the boat?? Why would they want to do this as its worth at least $5,000 to $10,000 less than i owe on it. Its only 2 yrs old and they depreciate LOTS the first few yrs. Like I said, I’m up to date on payments, without all the other unsecured debt the payments on the boat are no problem. I could understand if it was worth MORE than I owe.
I lent about $2050 to a friend (married couple), they still owe me $950. We had a signed contract and almost a year later, they decided to file a chapter 7 and included this loan in it. I still have text messages that they still will pay me back and only included it in the loan so it would add to their debt. Can I do reaffirmation of this? There’s no physical property involved. But I did take out $1500 from my 401K to lend to them with 6% interest (and they know this)and $500 cash. Again, they still owe me $950. Is there any chance of me getting the rest of my money back? Or is it gone forever?!
I just had my bankruptcy hearing this past Tuesday everything went well I think. I now need to sign a reaffirmation agreement for my vechile I am really concerned because my step dad co-signed on my car and I do not want my bankruptcy to affect his credit. I need to know if it will and how it works. Please help, I need clear answers as I feel so confused right now!