Should a Chapter 7 Debtor Sign a Reaffirmation Agreement?

March 14, 2014

Bankruptcy, Newscasts

18128144_sWhen you file a Chapter 7 bankruptcy, your secured creditors may ask you to sign a document called a reaffirmation agreement. A reaffirmation agreement is essentially a new contract which provides that the debtor agrees to pay all or a portion of the debt owed to the creditor, despite the bankruptcy filing. In other words, if you sign this contract, you are waiving your ability to discharge the debt that is otherwise eligible for discharge in your bankruptcy case.

The authority for a reaffirmation agreement is found at 11 U.S.C. §524(c).  A typical reaffirmation provides that you can keep possession of the asset (car, house, boat, etc.) pledged as collateral to the lender as long as you continue to make timely payments under the terms of the contract.

The creditor’s attorney usually drafts the agreement and sets forth the terms of the new contract. In many cases, the terms remain the same as the original loan. The reaffirmation agreement may have blanks for the debtor to complete, including financial information that is used to determine whether the debtor can afford to reaffirm the debt. The debtor and his/her lawyer must sign the agreement.

How do you know if you should sign a reaffirmation agreement? The answer depends on your individual circumstances. Waiving your ability to discharge a debt is an important decision and you should seek the advice of an experienced bankruptcy attorney before you sign the document. Your attorney can help you understand all of your options and make the decision that is best for you.

The “defender of the little guy,” DeLadurantey Law Office. LLC. handles bankruptcy matters (Chapter 7 and Chapter 13) in Milwaukee, South Milwaukee, West Milwaukee, and Milwaukee County, including the municipalities of Bayside, Brown Deer, Cudahy, Fox Point, Franklin, Glendale, Greendale, Greenfield, Hales Corners, Oak Creek, River Hills, Shorewood, St. Francis, Wauwatosa, West Allis, and Whitefish Bay.  The firm also can handle your debt negotiations, debt relief, and mortgage loan modifications.   Contact DeLadurantey Law Office, LLC by phone: (414) 377-0518.  Like us on Facebook.

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Nathan DeLadurantey