Reaffirmation Agreements in Chapter 7 Bankruptcy

 Posted on December 23, 2024 in Chapter 7 Bankruptcy

If you have filed for Chapter 7 bankruptcy, your nonexempt assets will be liquidated during the bankruptcy. But what if you wish to keep a certain asset even though it would normally be liquidated as part of the bankruptcy estate? In certain cases you may be able to do so by entering into a reaffirmation agreement with your creditor. In fact, sometimes a lender will ask you to sign a reaffirmation agreement. An experienced Maryland bankruptcy attorney can advise you on whether a reaffirmation agreement is the right option for you. 

What Is a Reaffirmation Agreement and Why Sign It?

A reaffirmation agreement is a contract between you and a creditor entered into during Chapter 7 bankruptcy in which you agree to keep a certain asset out of bankruptcy by affirming the obligation to pay. Practically speaking, the asset will not be liquidated in bankruptcy and the debt will not be discharged. You will continue paying the debt and remain liable for the unpaid balance. 

What Kinds of Assets May Form Part of a Reaffirmation Agreement?

You may only reaffirm a secured debt that is secured by collateral. As a result, reaffirmation agreements will usually involve assets such as a home, a car, or valuable personal property like jewelry, computers or furniture.  

What Are the Legal Requirements for a Reaffirmation Agreement?

Bankruptcy courts have strict requirements for reaffirmation agreements because they run counter to the benefit of filing for Chapter 7 bankruptcy, which is that debtors get a fresh financial start:

• The reaffirmation agreement must be approved by the bankruptcy court after a hearing or signed by your attorney.

• The reaffirmation agreement must not create a hardship for you or your dependents, and you must provide evidence that you are financially able to pay for the reaffirmed obligation. 

• You and the lender must sign the agreement before the bankruptcy court enters the final discharge order. 

Can a Reaffirmation Agreement be Cancelled?

You may cancel a reaffirmation agreement by the later of the date when the bankruptcy discharge is issued or 60 days after you file the agreement with the court. 

Contact a Prince George County, MD Bankruptcy Lawyer 

Whether you wish to keep a certain nonexempt asset in Chapter 7 bankruptcy or are being pressured by a lender to sign a reaffirmation agreement, an experienced Greenbelt, MD bankruptcy attorney can help protect your rights during bankruptcy. At The Law Office of Donald L. Bell, we have over 20 years of experience representing clients in bankruptcy. Contact our offices at 301-614-0535 for a free consultation today.