Reaffirmation Agreements Explained

Reaffirmation Agreements Explained

by | Jan 15, 2013 | Handling Debt

In some situations, a person filing bankruptcy may want to continue paying a particular debt, even if that debt can otherwise be discharged. In most circumstances, this debt is tied to either a home or car. In order for this debt to survive discharge, you will need to sign, and have filed with the court, a reaffirmation agreement.

How do Reaffirmation Agreements Work?


There are special rules that apply to reaffirmation agreements, and they are entirely voluntary. Reaffirmation agreements are not required. In order to establish a reaffirmation agreement in your bankruptcy case it must meet the following:

  • It must be in your best interests;
  • It cannot place an undue burden on you or your family; and
  • It must be cancelled prior to your discharge, or within 60 days after the agreement is filed with the court.

While reaffirmation agreements may seem like a good idea (and sometimes they are), they have serious consequences, and the court must approve the reaffirmation agreement. If the court does not approve the reaffirmation agreement, it will not have binding effect.


Should I Sign a Reaffirmation Agreement?

As I stated earlier, reaffirming a debt is a serious decision. If you reaffirm a debt and fail to pay it after you’ve received a discharge, you will still owe that debt. That particular debt will not be discharged. Furthermore, that creditor will have the right to take legal action against you to recover that property. That creditor can also take file a lawsuit against you, or ultimately obtain a judgment against you. So, reaffirmation agreements must be taken seriously, and need to be considered carefully in a bankruptcy case.

If you are interested in learning more about filing for Chapter 7 or Chapter 13 bankruptcy, I urge you to contact me at The Cherney Law Firm, LLC. I am proud to serve the residents of Roswell and the surrounding areas.


Considering a Reaffirmation Agreement

Signing a reaffirmation agreement during a Chapter 7 bankruptcy filing should be considered when you wish to retain possession of a specific asset, such as a car or home, that serves as collateral for a secured debt. This formal agreement between the debtor and the creditor legally obligates you to continue paying the outstanding debt, bypassing the bankruptcy discharge for the reaffirmed debt. It’s crucial when the asset is essential for your livelihood or has sentimental value, and you have the means to continue payments without enduring undue hardship.


Pros and Cons of Reaffirmation Agreements



Retain Valuable Assets: Allows debtors to keep essential assets that might otherwise be lost in a bankruptcy discharge.

Rebuild Credit: By continuing to make payments on a reaffirmed debt, debtors can start rebuilding their credit score sooner, as payments on the reaffirmed debt are reported to credit bureaus.

Maintain Relationships with Credit Unions: Some debtors choose to reaffirm debts to preserve longstanding relationships with their lenders, especially local credit unions or banks.



Personal Liability: If you fail to make payments on a reaffirmed debt, you could face repossession of the asset, plus remain liable for any deficiency balance.

Undue Hardship: Continuing to pay on a reaffirmed debt might strain your finances, potentially leading to undue hardship post-bankruptcy.

Court Approval Needed: The reaffirmation process requires bankruptcy court approval, which may not be granted if the court believes the agreement is not in your best interest or poses undue hardship.

Before deciding to file a reaffirmation agreement, consulting with a bankruptcy lawyer is advisable to ensure it aligns with your financial recovery plan. Your debtor’s attorney can help navigate the complexities of the bankruptcy code and reaffirmation process, including drafting the written agreement and seeking court approval on the official form, to protect your best interests and avoid future financial strain.

Matthew Cherney


At Cherney Law Firm LLC, clients can expect the highest quality legal representation alongside thoughtful counseling and attention to detail. Mr. Cherney dedicates his time to properly investigating every possible avenue of debt relief for his clients before simply stepping into bankruptcy. Seeking to make each consumer that comes to him for legal aid as comfortable as possible, he keeps his clients in the loop with every step he takes.

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