Reaffirmations are voluntary agreements between a debtor and a creditor in which the debtor agrees to pay the debt at a later date. The agreement is formalized by filling out the Form 240A Reaffirmation Agreement. It requires the debtor and creditor to give their signatures and set a hearing date. A reaffirmation agreement must be approved by the bankruptcy judge. The judge can disapprove the agreement if it causes undue hardship for the debtor.

 

When deciding whether to accept a reaffirmation agreement, consider your situation. Are you current on your loan? Are you able to protect your entire equity in your property through a bankruptcy exemption? If not, the creditor can still repossess your property or obtain a judgment for the difference between the value of the property and the debt. If you are behind on your payments on your mortgage or car loan, your creditor can take the property and sell it to recover the debt.

 

Regardless of which option you choose, make sure you follow the timeline of the bankruptcy process. The First Meeting of Creditors is usually held within a month of filing, and the bankruptcy court enters a discharge order sixty days later. Most reaffirmation agreements are filed after the creditors’ meeting, so be sure to retain a copy. You should also keep a calendar showing the signing and filing dates of your agreement.

 

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