The reaffirmation agreement is nothing new in bankruptcy law. It is basically an agreement that you will continue to pay on a debt, even though you have been discharged in bankruptcy. The debt normally addressed by a reaffirmation agreement is a secured debt. I have only done one for an unsecured creditor, but we later rescinded.
When you have a secured debt, it is important to explain in the statement of intention whether you want to reaffirm, surrender, or retain and pay for the collateral. In the 2005 bankruptcy code amendments the reaffirmation agreement took on a whole new meaning.
Now, if you have a secured debt, the law requires that the intention be carried out within 45 days of the petition filing date. That means if you say you want to reaffirm a debt, you must do so within this period. What happens if you do not carry out your intention within this time frame? Usually nothing. In fact most creditors will not even send out a reaffirmation agreement to review until after the meeting of creditors, which in Cleveland takes about 6 weeks. In other divisions of the Northern District of Ohio scheduling is a bit longer.
If you do not reaffirm a secured debt generally all will be well so long as you continue to make the required payments ON TIME. The one glaring exception is Ford Motor Credit. If you do not sign a reaffirmation agreement with them, they will repossess the vehicle, which secures the loan, often without any notice. The bankruptcy code allows this if you do not enter a reaffirmation agreement on a secured debt. Maybe that is one of the reasons that Ford Motor Company remained solvent when the others were failing and taking government handouts.
The potentially good thing about reaffirming a secured debt is that often it results in more favorable terms for you. It is not uncommon for creditors to reduce the principal balance due, and to even cut the interest to 0%. I have never seen a case where failure to reaffirm on a secured retail loan results on repossession of appliances, jewelry, or other personal property. It is rare that there is any real benefit to reaffirming a debt, except if you have a Ford, file bankruptcy, and want to keep the car.
Other lawyers playing the bankruptcy alphabet game.
- Omaha and Lincoln, Nebraska Bankruptcy Attorney, Ryan D. Caldwell Say R is for Reaffirmation Agreements.
- New York Bankruptcy Lawyer, Jay S. Fleischman claims R is for Redemptions.
- Bay Area Bankruptcy Lawyer Cathy Moran addresses Retirement.
- Colorado Springs Bankruptcy Lawyer Bob Doig talks about Repossession.
- Kona Bankruptcy Lawyer, Stuart T. Ing also addresses Repossession.
photo credit: christopher.woo
