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Why a Chapter 7 Debtor Should Never Sign a Reaffirmation Agreement


For debtors in the Tampa Bay area who are thinking about filing for Chapter 7 bankruptcy, it is important to learn more about reaffirmation agreements and how they can affect your bankruptcy discharge. As you may know, Chapter 7 bankruptcy is also called liquidation bankruptcy, which refers to the fact that a debtor’s assets (or those assets that are not exempt) are liquidated in order to repay creditors. Once the debtor’s estate has been liquidated, she or he can be eligible to receive a discharge of her debts. In practical terms, this means that any non-exempt property is sold, the proceeds are used to pay off debts inasmuch as possible, and then the debtor gets a clean slate for any debts that are dischargeable.

While there are many things to be wary of when you are thinking about liquidation bankruptcy without an experienced Tampa bankruptcy lawyer on your side, we want to make sure you understand how a reaffirmation can hurt your ability to get a fresh start after a bankruptcy discharge. In short, a Chapter 7 debtor should never sign a reaffirmation agreement, and we will tell you why.

What is a Reaffirmation Agreement?

A reaffirmation agreement is an agreement in which a debtor who is filing for bankruptcy reaffirms his or her debt. What does it mean to reaffirm debt? In short, it means you tell the creditor that you will continue to pay on the debt you owe even after you file for bankruptcy and receive a discharge. The creditor will not be paid from the liquidation of the debtor’s assets, and instead the debtor will continue to make payments to the creditor. When a debtor signs a reaffirmation agreement, she or he typically still can receive a discharge of any other eligible debts.

The reaffirmation agreement essentially creates a new contract for the debt between the debtor and the creditor. It allows the creditor to continue collecting on the debt you owe—the debt will not be discharged as part of the bankruptcy. In order to enter into a reaffirmation agreement, the debtor cannot be behind on the loan. Typically debtors who sign reaffirmation agreements do so in order to retain property connected to a secured debt, such as a car or a home, or to prevent a cosigner from being solely liable for a debt after a bankruptcy discharge. While signing a reaffirmation agreement might sound like a good idea, you should know that agreeing to such an agreement means that you can be sued by the creditor for the debt late on even if the rest of your debts were discharged through bankruptcy. As such, a reaffirmation agreement often means that you will not get that fresh start you need.

Do Not Sign a Reaffirmation Agreement

Instead of signing a reaffirming agreement and opening yourself up to financial difficulties later on, you should look for other options and should avoid signing a reaffirmation agreement. If you want to keep your car, for example, you can continue making payments to the creditor without the possibility of being sued by that creditor. In addition, if you had a cosigner on a loan and want to prevent that cosigner from being responsible for your debt, nothing is stopping you from continuing to make payments on that debt—even without signing a reaffirmation agreement.

The key takeaway is this: a reaffirmation agreement binds you to the creditor after a bankruptcy discharge, and you should not sign such an agreement.

Contact a Tampa Bankruptcy Lawyer

If you have questions about reaffirmation agreements, secured debt, or co-signers, an experienced Tampa Bay bankruptcy attorney can speak with you today. Contact Samantha L. Dammer for more information.


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