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What is a reaffirmation agreement and when do I need one?

If you are filing for Chapter 7 bankruptcy, you will face the liquidation and sale of all of your non-exempt assets. This process is presided over by a trustee who is appointed to your matter by the court. In some cases, you may desire to keep a non-exempt asset instead of having it sold to pay your debts, or instead of having a debt discharged and losing the property used to secure it. In this case, you may be required to sign a reaffirmation agreement.

According to the United States Bankruptcy Court in the District of Oregon, a reaffirmation agreement is the form the courts use to allow debtors who are in the midst of a bankruptcy to agree to pay all or a portion of an otherwise dischargeable debt. In most cases, the debt that you may agree to pay is secured with property that you do not want to lose. This can include a car, jewelry, or any other object of worth which you have tied to the repayment of a debt. Once your case is over, if there is a reaffirmation agreement in place, your debt, the lien on your property and your personal liability to repay the debt remains and is not discharged. This can be an ideal way for you to keep a vehicle you need for work, stay in your home, or retain some valuable keepsakes.

One of the advantages to reaffirming a debt is the opportunity to renegotiate the terms of your payments. Depending on your lender, you may be able to lower your payments, reduce your interest rate, or even decrease the total amount you will be expected to pay on the loan by the time payment is complete. This information is not intended as legal advice and is for informational purposes only. 

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