Getting to Know Reaffirmation

September 1st, 2009 by Reed Allmand

Reaffirmation is where you consent to paying back all or part of a debt even though you may not have had to.

Before the 1978 Bankruptcy Code put an end to it, creditors used to trick debtors into reaffirming their debts.  The process of tricking debtors isn’t as complicated as you would think, because all the creditor had to do was get the debtor to admit knowledge of the debt.  Debtors can thank their lucky stars, because the 1978 Bankruptcy Code stated that reaffirmation agreements had to be in writing, that they could be canceled by debtors for 60 days, and, finally, that they had to be filed with the court.  Also, the court now has to decide whether the reaffirmation will be too hard for the debtor to follow.  If the court decides that it is, the court can get rid of it.

Now, you are wondering, “What is reaffirmation?”  This is simple enough.  Reaffirmation is the action in which you consent to paying back all or part of a debt that would have been forgiven through bankruptcy proceedings.

Now, it is obvious what you are thinking.  “Who in their right mind would agree to pay something back if they didn’t have to?”  Well, there are good reasons people choose to reaffirm debts, and a couple of them are as follows.

The first reason to reaffirm debt is so that you can maintain credit privileges with the creditor.  The creditors will likely then offer you more credit.  This often turns out to be not worth it monetarily, because most people get offered lines of credit from other creditors anyway.  Essentially you will be paying back the original loan as a finance charge for the new line of credit.

Next, in some areas you are forced to reaffirm in order to keep whatever property secures the debt.  In other places this isn’t necessary as long as you have paid on time and are current on your loan.  You really have to check into what the specifics are in your area, and a bankruptcy lawyer can help you with that.

Anyway, thanks to the 1978 Bankruptcy Code, you have a little while to change your mind once you enter a reaffirmation agreement.  If you write the creditor before your discharge is entered, or 60 days after the reaffirmation agreement is made, whichever comes last, you can cancel the agreement.

In conclusion, reaffirmation is a process that may or may not be for you in your bankruptcy.  The applicableness really depends on where you live and what your situation is.  Like with other rules, laws, and procedures of bankruptcy, understanding the details can be confusing.  This is why it is important to have a Dallas-Fort Worth bankruptcy attorney on your side.  They can let you know if reaffirmation is for you.