How Does a Reaffirmation Work?

A person in a bankruptcy proceeding who wishes to retain a motor vehicle or other property can elect to enter into a reaffirmation agreement with his creditor during the bankruptcy proceeding. Doing so “reaffirms” the debt owed to the lien holder of the car, for example. If you want to keep your vehicle or house, it is recommend to reaffirm the debt. However, you want to discuss the specific situation with your bankruptcy attorney. You are not under an obligation to reaffirm your debt. For example if you are not sure if you want to keep your house or you are not sure if you will be able to afford your ongoing mortgage payment is might be more beneficial not to reaffirm the mortgage. This kind of reaffirmation occurs only in Chapter 7 bankruptcy proceedings. In Chapter 13 bankruptcy proceedings, a car loan would be paid through the bankruptcy plan. Specific details of reaffirmations may be subject to different state laws. In Missouri and Illinois, where our attorneys practice, the creditor will send the reaffirmation agreement to our office and we will forward the reaffirmation agreement to our client. We then discuss the pros and cons about signing the reaffirmation agreement. If you are living in the St. Louis Metro area, please contact us with any questions you might have.

Represented by an Attorney


Several parties must agree to a reaffirmation in order for it to be approved as part of the bankruptcy proceeding. It is recommended to have your bankruptcy attorney represent you in handling the reaffirmation agreement even though there is normally an extra charge. However, the attorney fees for a reaffirmation agreement are well spent. The attorney will review the reaffirmation agreement and advise the client if it is in his best interest to sign it. We have seen cases in which clients did not hire an attorney to handle the reaffirmation agreement, signed it and sent to the creditor. The creditor might not have local representation and might not be able to file it with the court. When a debtor is not represented by an attorney, the court will schedule a hearing which debtor and creditor would have to attend. The judge will deny the reaffirmation agreement if the reaffirmation agreement seems to be an undue hardship for the debtor. When the debtor is represented by an attorney, no hearing is necessary. Debtor’s bankruptcy attorney will sign the reaffirmation agreement and certify that the agreement either does not impose an undue hardship or if the presumption of an undue hardship arises, the attorney will certify that the debtor is able to make the required payments. Before the reaffirmation agreement can be filed with the court, it must be signed by the creditor and debtor.

Reaffirming your mortgage

A creditor or lien holder will most often agree to the reaffirmation under the current terms. We have seen reaffirmation agreement which offered the debtor a better interest rate or lowered the loan balance. However, in most cases you just reaffirm the loan under the current terms. A creditor has in interest in having the debtor sign the reaffirmation agreement. Without reaffirmation agreement, the debtor can walk away from the house or motor vehicle without being liable for the balance. Reaffirmations are often used when a person in bankruptcy proceedings wishes to retain an automobile, but they can also be used to retain a house. Mortgage companies however, do not send out a reaffirmation agreement in 50% of all cases. If the mortgage company does not mail a reaffirmation agreement, you can contact your mortgage company to request one. We do not recommend reaffirming a second mortgage when the first mortgage has not been reaffirmed. In the case, the mortgage payment cannot be made in the future and you have to stop making payments, you want to have the option to surrender your house without any obligations towards your mortgage company. If you have not reaffirmed your first mortgage, your bank can’t sue your for any deficiency and demand payment. But if your second mortgage is reaffirmed, you still would be liable to the bank for the second mortgage.

Private loans, reaffirming unsecured debts

Sometimes, clients wish to reaffirm a credit or store card. This is not easily done because a credit card company does not a have a proceeding in place to reaffirm an unsecured debt. Normally, the credit card company will cancel the debt. If you want to have a credit card for emergencies, it is more advisable to get a secured credit card after filing for bankruptcy from your house bank with no balance.

Nothing prevents a debtor from voluntarily repaying a debt after the bankruptcy is over. We often see that clients wish to continue to pay their private doctor with whom they want to continue to go to. If the doctor is employed at a big hospital he/ she is not involved in billing issues and would not know whether you paid your bill or not. This makes sense only when your doctor is in private practice and his staff is doing the billing. A reaffirmation agreement is not necessary. The repayment is voluntary. The doctor can accept payments but would not be able to demand payments.

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