Reaffirmation Agreements and how they Affect Your Property

In bankruptcy proceedings such as Chapter 7 liquidation, the debtor must often surrender certain property that is subject to a lien. However in such circumstances that property may be of paramount importance to the debtor and their continuing well-being. An example of such property would be the debtor’s automobile. Like most Americans today accomplishing your daily duties is nearly impossible without proper transportation, which is why it is easy to understand how losing one’s car can completely de-rail one’s ability to earn a living. Under bankruptcy law it is normal for someone to surrender their personal property to the estate but in some circumstances debtors are offered the opportunity to keep possession of certain property.

A Reaffirmation allows the debtor to reinstate personal liability on a debt where the debt is secured by property that the debtor desires to retain. In return for such a reinstatement, the creditor promises that, as long as payments are made, the creditor will not reposes, or take back the property. However such an agreement is only enforceable only if it meets the requirement of section 524(c) of the bankruptcy code. Under this provision the agreements must be made before the granting of the discharge, contain very specific disclosures as allowed in section 524(k) of the code, be filed with the court accompanied by an affidavit reporting voluntary agreement  and no undue hardship, and  not have been rescinded prior to discharge or within 60 days after filing.

It is worth noting however that if a debtor does not reaffirm on personal property included in the statement of intention of the debtors bankruptcy petition within 30 days after the first meeting of the creditors, the automatic stay as to that property will terminate. Essentially the debtor is under a bit of a time limit to reaffirm if he wants to keep a certain piece of personal property. What all of this means is that reaffirmation agreements allow the debtor to retain possession of collateral which otherwise would be subject to repossession or surrender.